Madison Square Garden Sports Corp. (MSGS) Q1 2015 Earnings Report, Transcript and Summary

Good morning. My name is Christie, and I'll be your conference operator today. At this time, I would like to welcome everyone to The Madison Square Garden Company Fiscal 2015 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Ari Danes, Vice President of Investor Relations for The Madison Square Garden Company. Please go ahead, sir.

Thanks, Christie. Good morning, and welcome to The Madison Square Garden Company's Fiscal 2015 First Quarter Earnings Conference Call. Our President and CEO, Tad Smith, will begin this morning's call with the discussion of some of the company's recent highlights. This will be followed by a review of our financial results with Sean Creamer, our EVP and Chief Financial Officer. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the Investors section of our website at themadisonsquaregardencompany.com. Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results, developments and events may differ materially from those in the forward-looking statements as a result of various factors, including financial community perceptions of the company and its business, operations, financial condition and the industry in which it operates, and the factors described in the company's filings with the Securities and Exchange Commission, including the sections entitled Risk Factors and management's discussion and analysis of financial condition and results of operations contained therein. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. Let me point out that on Page 4 of today's earnings release, we provide consolidated statements of operations and a reconciliation of adjusted operating cash flow or AOCF, to operating income. I would now like to introduce Tad Smith, President and CEO of the Madison Square Garden Company.

Thank you, Ari, and good morning and happy Halloween. Our company began fiscal 2015 with a 12% increase in revenue and a 16% increase in adjusted operating cash flow. Our results were led by our MSG Entertainment segment which benefited from the fact that the Arena, the Forum and the Theater at Madison Square Garden were open for events compared to the renovation closings of the prior-year quarter. The full availability of the arena also benefited our Sports segment, as it hosted an array of sporting events in recent months, including Knicks and Rangers preseason games, 2 of which took place in the first quarter. Both MSG Entertainment and MSG Sports grew suite rental fee revenue and sponsorship and signage revenue in the first quarter due mainly to the prior-quarter renovation comparisons. This quarter represents the first time, we have provided standalone financials for MSG Networks. We successfully completed the sale of Fuse on July 1 for $232 million in cash, including a preliminary working capital adjustment and a minority stake in SiTV Media in a transaction that we believe created value for our shareholders. This week, we announced that our Board of Directors unanimously approved plans to explore a possible spinoff that would separate our entertainment businesses from our media and sports businesses, resulting in 2 companies, each with its own distinct value proposition for investors. The idea is to benefit both companies by enabling each of them to have a balance sheet, capital structure and return policy most appropriate for its business. One of the resulting companies would be a premier live event and venue management company that would capitalize on significant opportunities to grow rapidly within the changing entertainment landscape. The other company would field championship-caliber sports teams as well as distribute sports content on multiple media platforms. This company would enjoy steady growth and high cash flow that we expect will result in capital returns to shareholders. The transaction would be structured as a tax-free pro rata spinoff to all MSG shareholders. We have not set a timetable for completion of this process. Our Board of Directors also authorized the repurchase of up to $500 million of our Class A common stock. And I am thrilled to announce that Nelson Peltz and Scott Sperling, together with Dick Parsons, Alan Schwartz and Vincent Tese, have agreed to stand for election as independent directors at our annual meeting in December. These 5 world-class nominees have decades of distinguished business and investment experience, and we believe their combined insights will be essential to creating long-term shareholder value. In early October, the NBA announced a 9-year extension of its television and digital rights partnerships with ESPN and ABC and TNT. The deal underscores the growing importance and value of sports rights. The agreements began with a 2016, '17 season and ran through the 2024 through '25 season. MSG Networks will maintain the same local market rights with the same number of exclusive local market games under the new agreements. We're also pleased to report that MSG Go, our live streaming and video on demand offering is scheduled to launch in December. Sports fans will have access to Knicks games that appear on MSG Networks, along with the networks' line up of award-winning original content. Beginning with Cablevision, the service will be made available to authenticated video subscribers who receive MSG Networks. As part of our efforts to build robust capabilities in data and analytics, we've teamed up with Cablevision to provide us with meaningful audience analytics and insights based on its census-level audience data, which we will use across our company to optimize television viewing and ad placement and pricing as well as marketing campaigns for ticket sales, sponsorships and advertisers. We are also planning a pilot with Cablevision to test making MSG Network and MSG Plus addressable to the household for advertisers within the Cablevision footprint. And on the entertainment front, we announced last week that our new large-scale theatrical production at Radio City Music Hall, named the New York Spring Spectacular, will debut in March 2015. The production is led by an award-winning creative team that includes Tony and Drama Desk Award winner, Warren Carlyle, as director and choreographer; Tony Award-winning director and artistic director of the American Repertory Theater, Diane Paulus; and American playwright and Drama Desk Award winner, Randy Weiner, as co-creative directors; as well as the brilliant, young playwright Joshua Harmon. MSG and Weinstein Live Entertainment are producing this extraordinary new show, and we're excited about it. Focusing now on MSG Media. The 2014, '15 NBA and NHL season run play with MSG Networks serving as the local broadcast home to more than 380 exclusive telecasts of the New York Knicks, Rangers and Islanders, New Jersey Devils and Buffalo Sabres in the markets that we serve. MSG Media continues to produce original programming that extends our brands and further build our content library. Returning shows include our Emmy Award-winning series Game 365, new episodes of Beginnings, our critically acclaimed biographies series, The AV Squad, hosted by Rangers' Head Coach, Alain Vigneault, and the return of the popular Hockey Night Live. In late October, we debuted What Is The Triangle Offense: A Spike Lee Orange and Blue Skies Joint, a special program directed and produced by acclaimed filmmaker and lifelong Knicks fan Spike Lee that explains how the triangle offense works, a system Phil Jackson employed to win 11 NBA titles, more than any other coach in the history of professional sports. Turning to MSG Entertainment. Our bookings business was a solid performer this past quarter. At the world's most famous arena, we hosted a diverse collection of artists and events including Billy Joel, Bruno Mars, Katy Perry, Blake Shelton, Tom Petty and the Heartbreakers, Luke Bryan, The Eagles, Queen with Adam Lambert, and Enrique Iglesias, and Pitbull. We were also honored to hold a special event featuring the Prime Minister of India, Narendra Modi. The Forum kicked off the fiscal year in exciting fashion as the popular MTV Video Music Awards were broadcast live from the Forum in August. This event enabled us to present the arena to major artists, managers and executives in the music and entertainment industries. This past quarter, the Forum also hosted Queen with Adam Lambert, KISS, Steely Dan, Aerosmith, Luis Miguel and Arcade Fire. Other entertainment highlights this past quarter included NBC's America's Got Talent at Radio City Music Hall, which broadcasts live twice a week from the hall from late July into mid-September. Crosby, Stills and Nash and Tedeschi Trucks Band, both for multi-night engagements at the Beacon Theatre. The Voice Tour featuring artists from NBC's popular show at both the Beacon and the Chicago Theatre, and Jason Mraz at Radio City and the Wang Theatre in Boston. With regard to our second quarter that is to say our current quarter, the Garden has already hosted Billy Joel, Fleetwood Mac [indiscernible] for multishow performance. Upcoming shows include Cher for 2 nights along with Hardwell, Stevie Wonder and Z100's Annual Jingle Ball, featuring popular artists such as Taylor Swift, Maroon 5, Ariana Grande, Iggy Azalea, Sam Smith, One Republic and many more. The roster of artists playing the Forum in our second quarter, which is to say our current quarter, include Tom Petty and the Heartbreakers, 5 seconds of Summer and Fleetwood Mac, all for multi-night engagements, as well as Phish, Luke Bryan, Hardwell, Justin Timberlake and Stevie Wonder. Other highlights in our second quarter will include the Allman Brothers Band as well as Bob Dylan, both for sold out multi-show engagements at the Beacon Theatre. Family attractions Yo Gabba Gabba! Live! and Dr. Seuss' How The Grinch Stole Christmas, both for multi-show runs at the Theater at Madison Square Garden. The Grinch will also play a multi-show engagement at the Chicago Theatre while the Wang Theatre in Boston will host the Tony Award-winning Annie: The Musical and Irving Berlin's White Christmas: The Musical, both for multi-show runs. The 82nd Annual Radio City Christmas Spectacular debuts in New York next Friday and will run through December 31. We look forward to a successful holiday season. Turning to MSG Sports. The Rangers, led by coach Alain Vigneault, are looking to build upon last season's inspirational run to the Stanley Cup Finals. While the Knicks have returned under the leadership of President Phil Jackson, General Manager Steve Mills and new Head Coach Derek Fisher. For anyone who had the pleasure to watch the events yesterday evening in Cleveland or earlier this week in New York versus the Minnesota Wild, the underlying toughness and excellence of both our coach and our team should give us a great deal of optimism for the future. Meanwhile, MSG Sports continues to host a variety of memorable sporting events. Our first quarter was highlighted by a night of championship boxing at the Garden as rising superstar, Gennady Golovkin, successfully defended his WBA and IBO Middleweight World Titles. In our second quarter, we welcomed the return of college basketball, featuring top teams, including Syracuse, Duke, Villanova and Louisville, along with exciting annual tournaments such as the 2K Classic, the NIT Season Tip-Off and the Jimmy V Classic. We are indeed optimistic about our Sports division, and now it's my pleasure to turn the call over to Sean.

Thanks, Tad, and good morning, everyone. I intend to walk through the financial results for the quarter and then we will open it up for questions. For our first -- fiscal first quarter on a consolidated basis, we generated revenue of $241.7 million, up 12%, and adjusted operating cash flow or AOCF of $76.2 million, up 16%, both as compared to the prior year first quarter. Turning to the first quarter results of our business segment for the prior-year period, MSG Media generated $142.7 million in revenue, a decrease of 14%, which primarily reflects the absence of Fuse. Affiliation fee revenue decreased $13.9 million, due again in large part to the absence of affiliation fee revenue for Fuse and, to a lesser extent, a favorable nonrecurring affiliated adjustment that, as we previously disclosed, was reported in the prior year first quarter. These decreases were partially offset by a small increase in affiliation fee revenue at MSG Networks, again, excluding the nonrecurring affiliate adjustment. This increase is primarily due to higher affiliation rates, partially offset by the impact of a small percentage decrease in subscribers. Advertising revenue decreased $10.1 million, again, in large part reflecting the absence of advertising revenue for Fuse. First quarter media AOCF of $81.1 million decreased approximately $400,000 as the reduction in revenue I just mentioned was largely offset by a decrease in direct operating and SG&A expenses. The decrease in direct operating expenses was associated with the absence of expenses for Fuse, partially offset by higher expenses at MSG Networks. While the reduction in SG&A expenses was attributable to the absence of expenses for Fuse and, to a lesser extent, a decrease in expenses at MSG Networks. Our MSG Entertainment segment generated $65.2 million in revenue in our first quarter. That's an increase of 128%. Higher event-related revenue, venue-related sponsorship and signage and suite rental fee revenues at the Madison Square Garden Arena, the Forum, and the Theater at the Madison Square Garden, all of which were closed in the prior year quarter due to the Arena transformation and Forum renovation drove the increase. These increases were partially offset by lower event-related revenue at Radio City Music Hall. Entertainment's first quarter AOCF loss of $4.4 million improved by $10.6 million in the quarter as the increase in revenue more than offset increases in direct operating expenses, and to a lesser extent, SG&A expenses. The increase in direct operating expenses was driven by higher event-related operating expenses and expected results of the increase in the overall number of events held in the company's venues. Our MSG Sports segment generated $53.5 million in revenue in the first quarter. That's an increase of 40%, as the segment also benefited from the Garden being opened this quarter. This increase in revenues stems from higher suite rental fee revenue, professional sports team preseason, regular season ticket-related revenue, event-related revenue from other live sporting events as well as professional sports team, sponsorship and signage revenues. Sports AOCF in the first quarter grew by $4.7 million, to $7.6 million, as a result of the increased revenue, partially offset by an increase in SG&A expenses, and to a lesser extent, in direct operating expenses. And finally, turning briefly to some balance sheet information. As of September 30, total unrestricted net cash and cash equivalents was approximately $321 million. This includes $232 million in pretax proceeds from our sale of Fuse. In addition, our $500 million revolver remained undrawn, with our borrowing availability at approximately $492 million as we have approximately $8 million in letters of credit outstanding. With that, I'll turn it back over to Ari, and then we can open it up for questions.

Thanks, Sean. Christie, we're ready to open the call for questions.

[Operator Instructions] Your first question comes from the Vasily Karasyov of Sterne Agee. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: Tad, I had a couple of questions. One is, could you give us any idea about what the pace of buybacks will be, as you understand the model is sensitive to it now? And then I have a question on the subscriber numbers.

Sean, do you want to handle the buyback pace? And Vasily, I'll come back to you in subs in just a sec. How's that? Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: Sure.

. Yes, relative to the repurchase authorize, we intend to begin that as soon as we can. Obviously, consistent with any of the rules and regulations around our ability to do so, but intend to do it as quickly as we possibly can. In terms of timing, we haven't set timing other than to start as soon as we possibly can. We want to be thoughtful and prudent in executing that while we continue the expiration phase of the spin to make sure those 2 parallel path exercises are at least considered in conjunction with each other to ensure at the end of the day, the capital structures for both organizations are appropriate for executing these strategic plans going forward. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: Tad, I was wondering if you could give us any idea what you think the reason for the decline is. Is it accelerating versus previous quarter or not and whether you see any difference by different test periods [ph] in terms of subscriber trajectory?

Yes. Okay, first of all, the headline, Vasily, at least the way I think about it and the most recent reported quarter that we're talking about, is that we continue to see steady core affiliation revenue growth at the network, with the year-over-year growth rate in our first quarter nearly matching the growth rate, frankly, in the fourth quarter of 2014. Obviously, impacting the quarter was a decrease in viewing subs and was in fact more than offset by affiliation rate increases. So that to me is encouraging. The year-over-year percentage decline in viewing subs -- this is viewing subs, Vasily -- in our first quarter increased slightly, meaning the viewing year-over-year percentage decline was slightly greater as compared to the fourth quarter year-over-year change. Now we believe the driver of the year-over-year decrease in viewing subs has primarily been a small migration of subs, our viewing subs, to lower-priced tiers that do not include MSG Networks. And we do a very contractual protection in that regard, as I think I've mentioned in prior calls. More recently, however, Vasily, we have also observed a small year-over-year percentage decrease in basic subs.

Thanks, Vasily.

Your next question comes from Michael Morris of Guggenheim Securities.

I have a couple of questions related to the press release about the potential spin, specifically as it pertains to your growth objectives and really the difference of the 2 businesses. You said the first company, the entertainment company, can capitalize on significant opportunities to grow. And I'm curious if you could expand on where you see the growth opportunities, whether it's your expertise in venues and it would be a capital-intensive growth opportunity or whether it's some of the other services you provide that you think you can expand those. So that's the first question, where that growth would be. And then the second question is just, you spoke about the sports and media company as a steady-growth, high-cash flow business. And I'm curious whether that implies that you wouldn't look to make a major investment in either another sports team or another network if it were available.

Okay. Well, let's start with the second part of your question. First of all, I think, our chairman was on a panel during Adweek called The Curtain Rises. And I think he said it really well. He said, "We're not going to be buying another hockey team. We can't buy another basketball team." If you look at -- he thought it was -- and I think he said it out loud. It was improbable that we would build a new regional sports network. And so I think it's not a big surprise to find that our legal structure prohibits us from buying a football team. So when you look at that, you step back and you say, "The sports and the media part of the business is going to be reliant principally, I think, going forward on organic growth," just inferring from that comment alone. If you turn to the entertainment side of the business and he said also on the panel that there were a lot of opportunities there, and I think that, that as a result of our strategic review, he largely confirmed it. Some of those are ones that we have only alluded to in the past. I think the New York Times earlier this week reported on some interesting ones in performance rights. But as we look at venues, it's not clear to me that to participate actively and in exciting ways in finding areas for venues you need, necessarily, to have huge capital intensity. I think the capital intensity can be thought through on a project-by-project basis, and we can bring great skills and expertise in ticketing, marketing, venue management, operations, the understanding how to differentiate the value proposition for the customers, all of those things as well as, by the way, from my perspective, creating a talent-friendly environment that differentiates us. When you think about those things, I feel quite excited about the growth opportunities on both sides of the business, one of them organic and the other one organic and potentially more than that.

And, Tad, I would just add. I don't think steady growth and high cash flows is inconsistent with growth that obviously provides the opportunity, should the right acquisition opportunity present itself, that we're positioned to execute on it. And that's consistent with what we're doing now relative to evaluating capital structures. We need to put in place the capital structure that allows both companies to execute on opportunities that we may not envision today. And that's what the exploration is all about.

Your next question comes from Ben Swinburne of Morgan Stanley.

It's actually Ryan Fiftal from Morgan Stanley. I think follow up more on the proposed spin. You guys called out one of the benefits that you can properly capitalize and do a capital return profile for each of the 2 businesses, which, naturally, those 2 should look pretty different, I think, given the growth objectives. So my first question is how are you thinking about appropriate leverage on each of those 2 businesses? Are there comps you're looking at in the space or, if not, what are the puts and take you think about on where the appropriate leverage should be?

It's Sean. I'll take the first cut at that. Certainly, from my perspective, it's difficult to answer a question like that in a vacuum. I'm very much a use-of-proceeds guy, so leverage is dependent on what high risk-weighted return investment opportunities are out there. Certainly, cash flow characteristics support significant leverage, but the -- a point in time where we are at right now, we're not prepared to stay at what level that will be, because we're still exploring what the businesses will look like. What I will tell you, those capital structures will support the individual companies in their ability to fully execute on the strategic plans we envision for them.

Okay. And then, I guess, maybe a follow-up on the $500 million buyback, and which is one of those [indiscernible] uses of proceeds. Depending on where you set that leverage target, you could see return of capital potential potentially decently in excess of that $500 million. So can you talk about how you guys arrived at that $500 million number? And do you think from the outside looking in, do you think that it's appropriate for us to try to infer anything from that as far as the capital structure? Or do you think there are potential for other things, like special dividends or other returns, that you would be thinking about?

The only inference I would suggest you make is that at a $500 million share repurchase, I think we are showing confidence that's a substantial amount relative to the shares outstanding in the neighborhood of 9% or 10%. I think it's inappropriate step, and we're not prepared at this point to talk about anything beyond that. I think that's, on its own, a pretty significant step.

Your next question comes from Bryan Goldberg of Bank of America.

Just got a couple quick ones. One on the spinoffs, one on addressability and advertising, and then one on the TV rights deal. So first, on the spins. There's been a number of reconvergences in the TNT space over the last few years and now that you're potentially creating an entity that will house your entertainment venues, is the REIT structure something that's under consideration for the entertainment spinoff? I recognize you're still early in the process, but are there any kinds of pros and cons you could provide with respect to that type of structure?

It's really, I think you said it well. It's really early in the process. The board is exploring, and I certainly don't want to get out in front of the board. I would say though we are open to a variety of structures, but there are some complications and challenging issues with a number of them. And we'll need to look at those very carefully. And you shouldn't really infer anything on that from that answer. Meaning, I'm not trying to pump you up or tamp you down with that answer. It's just a very straightforward answer, which is I don't want to get out in front of the board. The board will look at whatever makes sense for the shareholders. And there's nothing other to say than that.

Okay, fair enough. And then on your press release this week with respect to the advanced advertising pilot with Cablevision. Just kind of curious, roughly how much of your inventory are you going to be trialing on this season and given your experience in this part of the business, can you help us think about the pockets of upside to the extent you have success, both respect to CPM uplifts or better selling your own products to the fans? Any way we could think about this would be helpful.

Yes, first of all, it's a pilot. We're going to try it with Cablevision at a measured pace. I'm optimistic we will get it into the season, but I'm not necessarily promising it. But certainly I'm optimistic that we will. And the rationale is interesting to me, because I personally am a Cablevision subscriber. When I watch the Knicks, most of the minutes that I'm watching advertising are sold by the MSG Networks team, and they do a very good job of it. And there's are also some spots in there that are sold by the Cablevision sales team, and they also do an excellent job of it. And interestingly, Cablevision sales team can sell a more targeted ad for me than, say, the MSG Networks team. So the question on the table is, teaming up with them, is it possible that more of those ads can be more targeted to my household and my needs than otherwise would be the case? And I think it's a very innovative idea that should bear a lot of fruit but, again, it's a new thing and we're going to -- it's a pilot. The way to think about it is definitely a pilot. However, let me step back and say, more generally, on the advertising part of the business, I would take the opportunity to say that, which is there's been a lot of conversation about advertising in cable and also broadcast, but cable is a particular area of focus in the news recently. In fact, just coming in this morning, Sir Martin Sorrell made -- mentioning comments about advertising this morning. One of them was that live sports continues to be a really attractive area. We're very excited about the advertising proposition we have. And the fact that people watch it live, it's a must-see-type event. To me, it gives us a lot of confidence in the underlying advertising opportunity for the Knicks and the Rangers. And in fact, as recently as a week ago, I asked how's the pacing, and it looks pretty good. I don't want to say we can't get out in front of the ratings. We're going to see other teams perform because that's an essential element of how we perform this year. But on balance, we're seeing a fair bit of enthusiasm for our products in this changing environment.

And then just finally on the new NBA National TV rights deal, I know it's going to phase into your P&L 2 years from now. It's little far away, but can you help us think about how that might impact the Sports segment in fiscal '17, maybe on a revenue basis, AOCF basis? Anything else we should be thinking about? How that might impact how you operate?

It's Sean. I'll share what I can, and that's not a lot in the way of the details other than obviously in the fiscal 2016-17 year, we will begin enjoying the 130 [ph] of the share of the increased NBA national media rights revenue. We expect that, that would result in increased to the league salary cap and the luxury tax threshold. In addition, under the current collective bargaining agreement, the players will continue to receive their approximate 50% share of the revenues. It's worth noting that with the new agreements, MSG Networks will continue to maintain the same local market rights, with access to the same number of exclusive local market games. Beyond that, for the NBA, we can't provide any real additional colors.

Your next question comes from Townsend Buckles of JPMorgan. Townsend Buckles - JP Morgan Chase & Co, Research Division: On your strategic review, can you say whether there was anything you looked at that may have ruled out, whether it's on a sports side doing something more aggressive with the teams or maybe bringing in a bigger partner on the RSM, like a Fox or Comcast? Or similar to your discussion on the REIT, can we take away there could be more across your asset base you might still consider down the road?

The announcement this week about exploring spin to us is about very much finding the best way to pursue the growth opportunities and the capital structures in 2 different businesses that we think could potentially have a lot of opportunity in different ways and, moreover, providing a structure for investors to make choices in and enjoy that, the benefit of that effort. Beyond that, we really don't have a conversation currently under way about thinking about asset divestitures or bringing in partners in the way that you're describing it. And I don't think it makes any sense to even speculate on that.

I would just say, Townsend, that the -- a strategic review never ends, right? It's an ongoing process. We will continue to evolve that over time. What I think we've announced with the exploration is a real investment in evaluating the infrastructure to support and best execute on the strategic plan that's evolving and put ourselves in a position to opportunistically to take advantage of the opportunities that present themselves now and going forward. Townsend Buckles - JP Morgan Chase & Co, Research Division: Got it. And then on MSG Go, can we expect that you'll be receiving incremental fees from distributors for that? I think ESPN gets around $0.20 per month for its Watch app, so with that be at all a yardstick? And if you could characterize the receptivity from your other distributor partners aside from Cablevision for this?

Yes, we don't have any comment on our affiliate relationships. So I can't really help you with that one. But I would say, sure, there's a lot of enthusiasm from fans and customers about this kind of product. And honestly, in my mind, as a Knicks fan, it's long overdue. We're excited to provide it in the marketplace.

Your next question comes from Ben Mogil of Stifel. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: So one sort of on the spin and associated thoughts around it. Is the Garden going with the venues and the air rights -- are the Garden and the air rights going, I presume, with the venue side of the business?

Ben, we haven't really sorted that one out. It's a matter that the board will take very seriously and carefully and it's too soon to comment on. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: And then maybe -- and maybe this is also sort of too soon, given that that's obviously a big asset, but when you think about leverage at both entities vis-a-vis the capital requirements and earnings visibility and all those factors, conceptually, which part of the businesses do you think you can carry more leverage or buy or return more capital to shareholders?

Well, obviously, how it gets sorted out will have an impact on that, but if you look at our portfolio of assets today in our segments, the sports and media groups all have the cash flow characteristics that I think would very much align with a leverage profile that would be well perceived in the credit market. Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division: And then sort of following up, I guess, on Vasily's question, a little bit about the sub situation. Are you finding -- you see you got the numerator going down, you got the denominator going down as well. Are you sort of keeping the same share of video household or are you seeing actually a bit of an erosion on a share basis as well?

Well, it's an interesting question. If you believe, as we do, that viewing subscriber changes have been slightly greater than the underlying changes in basic subs, then you might infer, as we have, that it is largely an issue of some new tiering occurring and. And, as I think we've said in prior calls, we have significant contractual protections in many places in that regard. And so we feel fairly comfortable that where we have a revenue opportunity, we'll continue to be growing. But beyond that, I don't really want to comment on anything related to the underlying basic sub changes per se.

Your next question comes from David Joyce of International Strategy and Investment Group.

The first for Sean. If you could please explain the puts and takes in the cash flow from operations this quarter, why that was later than last year's comparable quarter. And then, secondly, probably for Tad, granted you just mentioned that the Garden, I'm not sure if that goes with the venues or with the media and sports, but how should we think about the financial makeup of the 2 companies? Or you have disclosed that there's been -- obviously, there's rights fees that go from media to the sports team, but how should we think about, say, the team being rented to the venue or the sharing of sponsorship revenue that -- and it's based in part on the sports business drawing consumer vendors. If you could provide some more thinking around that.

It's Sean, I'll certainly start with the cash flow question. And you'll see in the Qs we filed today that the biggest driver of the year-over-year reduction in cash flow from operations was associated with changes in the accrued and other liabilities. And very specifically, around the area of the payment of our luxury tax. As I'm sure you know, we were significantly higher payer last season and the season before. We accrued that in the prior quarter, as is our accounting policy, but the actual payment itself happened in our second -- in our first quarter, and that was a big driver. There was also an issue related to some accrued expenses stemming from the Rangers NHL Stanley Cup run. Those were accrued in the prior quarter but paid during this quarter. And then there were some geography issues. Frankly, there was roughly $10 million excess tax benefit related to our share based compensation that actually is reflected in cash flow from financing. So it shows in statement as a reduction in cash flow from ops, but it's neutral to the company as a positive in the cash flow from financing. So a lot of movement that I think you'll see in the cash flow statement but those are the primary drivers.

With respect to your second question, listen, we're very excited about the announcement of the week. We -- our board is exploring the spin and how exactly the pieces and parts and the operations of it get worked through, is going to be something we take very seriously and diligently in the coming weeks and months.

Thanks, David.

Your next question comes from Amy Yong of Macquarie Capital.

This Andrew DeGasperi in for Amy. I was wondering if you feel you have enough scale on the entertainment side. And if not, can you maybe lay out some of the different opportunities out there?

Well, we're in the middle of the exploration process, obviously. Our starting point is a strong belief that we've got a very solid portfolio of assets and within the entertainment business, it certainly includes some rather iconic venues that we believe by themselves produce scale. So I think the answer, quickly, is yes, but we are continuing the analysis. So I'm not sure there's much more to add on that, other than that reality.

Great. And I know you've had said some personal changes earlier this year, now that with the announced spinoff, you're probably still reviewing. But should we expect some additional changes on the media sports support versus entertainment side?

Well, I think the organization, generally speaking, is performing very well. And it's also fluid, as you might imagine, whenever you're looking at something like this. I'm optimistic that we're on a good path, and I'm optimistic that we will continue to deliver excellent results.

Your next question comes from David Miller of Topeka Capital Markets.

I just have a few questions. Sean, you talked about the buyback and that you want to get back to it kind of ASAP. Do you have any constraints on how long it will last? Do you see doing that within a year, 18 months, 24 months? And then, also, I have a non-GAAP EPS number for the quarter of $0.26, excluding the Fuse sale. Can you confirm that? And then I have a follow-up.

Okay. So on the first point, I don't think we're going to provide any more color on the timing of the repurchase other than what you appropriately said I suggested, which is we want to get started as soon as possible. Our approach is to be thoughtful and prudent in executing it. And I think, outside of that, there's really no additional color we provide at this time. Relative to the non-GAAP EPS, I'm not going to confirm or deny that number. Certainly, there was a lot of movement and ups and downs with respect to our GAAP numbers, including the Fuse transaction, as well as some accelerated depreciation that was recognized, some executive transition costs. The long and short of that including, by the way, a significant increase that you'll note in the quarter on our tax rate that makes comparisons on an apples-to-apples basis difficult, I think depending on how you see the construct it, I would say that our EPS on an apples-to-apples basis was roughly flat to slightly up, and I am not providing any additional color than that.

Thanks, David.

Your final question comes from Rich Tullo of Albert Fried. Richard Tullo - Albert Fried & Company, LLC, Research Division: I guess my first question is in regards to the split up since you can't really talk about REIT. What is the timeline when we get additional information from the board on this? And then I have a question on MSG Go.

Yes, we -- I think in my prepared remarks, I said we currently don't have a timetable for the process that we choose to announce at this point. And we're going to take a measured and thoughtful approach to it. So I'm sorry, I don't really have anything more to add. Richard Tullo - Albert Fried & Company, LLC, Research Division: That's fine. On MSG Go, does MSG have the right to distribute the app as an OTC -- over-the-top platform to already-existing authenticated broadband subs in its regional footprint?

The only thing we're going to say about MSG Go is the current plan is to distribute Knicks' games to authenticated subscribers. And we're starting with Cablevision, and we are having active discussions with others. Beyond that, we're -- we really aren't going to say much.

Thank you. I will now like to turn the call over to Ari Danes for closing remarks.

Thank you for joining us. We look forward to speaking with you on our next earnings call. Have a good day.

Thank you. This does conclude today's conference call. You may now disconnect.