The world's most famous arena?

The world’s most famous arena is the Garden in New York City. Madison Square Garden (MSG) no surprise is the owner. What is surprising about MSG is that they do not just own the venue. MSG owns the content, the New York teams Knicks and Rangers (basketball and hockey) and the distribution rights. Management likes to think of themselves as a content company not as a sports team. MSG owns two media networks that distribute the content, one focused on sports and Fuse which is focused on music and entertainment. These two networks generate nearly all of the operating profit for the company.

If you can make it here you can make it anywhere

Madison Square Garden has been estimated to have cost to build $1.1 bn in todays dollars and this number does not include the recent transformation underway which costs another $1 bn.  According to totalprosports.com it is one the most expensive stadiums in the world. The Garden is arguably a lot more valuable than its cost given MSG has ownership of the air rights an extremely valuable asset for a skyscraper given its central location.


Knicks worth one bilion dollar$

They also own the New York Knicks, the New York Rangers and the New York Liberty. According to Forbes the New York Knicks alone are worth $1.1 billion alone topping the National Basketball Association as the most valuable team.

 

Doing the math just for the Knicks and the venue equals about $3bn (not including the media networks) below the enterprise valuation of the entire business of $4.1 billion.
At the moment the Garden is undergoing a transformation, the final phase to be completed in 2013. The upside to all this is that the Garden has been shut for up to 5 months of the year in order to complete renovations. Also with the NBA’s new collective bargaining agreement running costs will decrease with players now receiving 50% of revenue down from 57% previously.

Sports here there and everywhere

The value of sports rights are increasing dramatically due to smartphones and the need for cable companies to differentiate their content. Having a smartphone in your pocket means subscribers have the ability to watch sport live no matter where you are. Personally taping games to watch later never seems to work, with all the media around today its too hard to escape the result.

Some of this value has been illustrated through recent purchases by cable companies, it is the main way that they can differentiate content from competitors. Late last year NewsCorp bought 49% of the New York Yankees baseball channel valuing the network at $3 billion. This follows Time Warner Cables deal for the Los Angeles Lakers paying $3 billion for 20 year of rights. These transactions showcase the inherent value in teams are the media rights. Buyers are not buying the team but the regional sports networks. The networks make the money the teams spend it (though both are needed)!

 Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has no position in MSG

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