Madison Square Garden Sports Corp. (MSGS) Q2 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 Second Quarter Earnings Conference Call. [Operator Instructions]. Thank you. 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 Second Quarter Earnings Conference Call. Our President and CEO, Tad Smith, will begin this morning's call with a 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 on 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. These include financial community perceptions of the company and its business, operations, financial conditions in 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 four 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. For our fiscal second quarter the company delivered a 7% increase in revenue and an 18% increase in adjusted operating cash flow, both as compared to the prior year period. These increases were primarily driven by our MSG Sports and MSG Entertainment segments, which benefited from the full availability of the Forum and the Garden as well as broad-based organic growth. With respect to the separation of our businesses we continue to explore this possible transaction and believe that the creation of two publicly traded companies will provide each with greater flexibility to pursue its own business plan, while enabling investors to evaluate more clearly each company’s unique assets and potential. We will continue to update you as appropriate. Let me focus now on MSG Media. We are more than halfway through the 2014-‘15 NBA and NHL seasons, with MSG networks serving as the exclusive local broadcast home to more than 395 telecasts of the New York Knicks, Rangers, Islanders, New Jersey Devils and Buffalo Sabres in the markets we serve. MSG Go, which you may recall is our live streaming and video on demand offering launched in mid-December for authenticated cable vision video subscribers who receive MSG networks. We have been pleased with the initial response from sports fans and continue to have discussions with other providers about offering MSG Go to their customers. MSG Networks maintains its commitment to delivering compelling original programming. Last month MSG Networks premiered Season 3 of Four Courses with J.B. Smoove and in two weeks will debut a brand new series featuring Henrik Lundqvist called The Mask. The half hour episode will feature the Rangers goalie and one-on-one interviews with celebrities as they design one of a kind Masks that Henrik will wear this season. This will be followed in March by the launch of the Garden’s Defining Moments which celebrates the greatest moments in the Garden’s 135 year history. Some of the biggest names in MSG history participated in this 20 part series, including Jon Bon Jovi, Paul Simon, Bill Clinton, Rudy Guillaume, Wayne Gretzky, Patrick Ewing and Mike Tyson. Let me turn now to MSG Entertainment. 2014 marked the 82nd year of the Radio City Christmas Spectacular, a testament to the show’s enduring popularity. This past season our customers at Radio City enjoyed the return of the Rag Doll scene and at select performances were treated to pre-show entertainment including special readings of Christmas stories by different celebrity such as Rudy Perez, Nick Cannon, Andy Cowen and Maria Fia [ph]. We saw increases in both average ticket price and the tenants selling over 1 million tickets in the New York production this holiday season. In fact, we sold out 73 shows this year, which is up from 56 sell outs during the 2013 holiday season. In addition, this year’s run ended on a strong note with 16th consecutive sell-outs. We are pleased with Christmas Spectacular’s financial results and Sean will discuss them in greater detail shortly. We are now looking forward to next month’s debut of the New York Spring Spectacular led by a creative team that includes Tony Award winners. New York Spring Spectacular will feature an all-star cast that includes co-star Tony Award-winning actress Laura Benanti and Emmy award-winning choreographer, Derek Hough. In addition to the Rockettes, the show will also include state-of-the-art puppetry voiced by Whoopi Goldberg and Bella Thorne as well as celebrity cameos by Carmelo Anthony, Donald Trump, Martha Stewart, Henrik Lundqvist and more. The show, which is produced by MSG and Weinstein Live Entertainment has generated significant buzz and encouraging ticket sales to-date. With our marketing efforts recently underway, we look forward to building on this early momentum in the weeks ahead. Turning to entertainment bookings, we had a busy second quarter across all of our venues. At the world’s most famous arena our partnership with Billy Joel continuous to be a huge success. Last week we announced that Billy had sold out all 23 shows through November and has added yet another performance in December, which brings the total number of shows to 24 since the start of his current residency at the Garden. As part of this extraordinary two year run Billy Joel will play his 65th show at the Garden in July setting a new record for the most performances by any artist at the world most famous arena. The garden also played host during the quarter to a diverse collection of artist and events including Fleetwood Mac, Aziz Ansari, Eric Church, Andrea Bocelli, Stevie Wonder, Usher [ph] and Z100’s Annual Jingle Ball as well as [indiscernible]. On the West Coast, the fabulous Forum welcomed many of the hottest artists on tour during the quarter including Tom Petty and the Heartbreakers, Phish, Luke Bryan, Lackeys, Hardwell, 5 Seconds of Summer, Justin Timberlake, Fleetwood Mac and Stevie Wonder, as well as the 25th Annual KROQ Almost Acoustic Christmas show which feature performances is by No Doubt, Smashing Pumpkins, Imagine Dragons, [indiscernible] and many others. Other highlights this past quarter include Dr. Seuss’ How the Grinch Stole Christmas! which play multi-show engagements at the Chicago Theater and the Theater at Madison Square Garden, the Tony Award-winning Annie: The Musical and Irving Berlin’s White Christmas: The Musical, both for which play at the Wang Theatre in Boston. And at the Beacon Theatre highlights included multi-night engagements with Bob Dylan and Mariah Carey [ph] as well as the Allman Brothers Band which play their 238 show at the Beacon in October marking their last concert as a band. With regard to our third quarter, the Garden has already hosted Billy Joel, Sam Smith, Fleetwood Mac and Jack White and in the weeks ahead, we welcome the multi-night runs for Maroon 5, Ariana Grande and the Westminster Kennel Club Dog Show. The Forum was a venue of choice for Foo Fighters frontman Dave Grohl who celebrated his 46 birthday in January with a special concept that featured an all-star line-up of rock legends. Other artists and events at the Forum in our third quarter include Sam Smith, Bob Seger and the Kids Choice Award Show. In addition, over the last month more than 70,000 people bought tickets to see comedian Louis C.K., who played eight sold-out shows across three of our venues, three at the Garden, one at the Forum and four at the Chicago Theatre. Other highlights in our third quarter will include multi-night runs from John Mellencamp, John Oliver and Frankie Valli, multi-market shows from Pentatonix [indiscernible] and Alabama Shakes, comedy shows in multiple venues including Kris Tucker, Amy Schumer and Comedy Central’s Night of Too Many Stars and family favorite, The Fresh Beat Band and Sesame Street Live both at the Theatre at Madison Square Garden. Also at the Theatre we are hosting our second Garden of Laugh event on March 28 to benefit our Garden of Dreams Foundation which helps children in need across the Tri-state area. This night of comedy will feature some of the biggest names in standup, including Lewis Black, Bill Burr, Dane Cook, Billy Gardell, John Oliver and J.B. Smoove. It’s going to be a terrific night for a great cause and we encourage all of you to buy tickets. Other iconic venues were again ranked among the world's top grossing venues for 2014. Billboard magazine recently named Madison Square Garden Arena the highest grossing entertainment venue of its size in the United States and second highest grossing venue in the world. While Radio City Music Hall was ranked the highest grossing venue of its size in the world. In addition The Beacon Theatre, the Theatre at Madison Square Garden and the Chicago Theatre all ranked in the top 10 in the world in their respective classes for 2014. With respect to the Forum Pollstar data indicates that for calendar year 2014 the venue ranked number one in concert nights from a market share standpoint among comparably sized venues in the greater Los Angeles market, that's number one. In fact the Forum had nearly 80% more concert nights than the second ranked venue in its class in 2014. Let me turn now to MSG Sports. The Rangers led by Rick Nash, who was selected to play in last month's NHL All-star game and is currently tied with one other player to lead the league in goals scored this year have followed up last year's inspirational run to the Stanley Cup Finals with a strong season to-date. We look forward to an exciting second half of the season with the team currently in playoff position. While the Knicks record thus far is not what we hoped, we are optimistic about the outlook for the team given its leadership and flexibility with respect to the salary cap in the future seasons. Meanwhile MSG Sports continues to host a variety of memorable sporting events. Our second quarter was highlighted by the return of college basketball including tournaments such as the 2K Classic of the NIT Season Tip Off and the Jimmy V Classic. Next week we look forward to welcoming back the NBA All-star game for the first time since 1998. The Garden is set to host the 64th annual game on February 15th as well as the Sprint NBA All-star Celebrity game on February 13th. Other events taking place in the third quarter include the BNP Paribas tennis showdown featuring Roger Federer, Grigor Dimitrov, Monica Seles and Gabriela Sabatini and also the Biggies championship for the 33rd consecutive year. In addition, and we're very pleased with this one, the world heavyweight champion Wladimir Klitschko, who selected Madison Square Garden for his last two fight in the States will return once again to the mecca of boxing on April 25th to defend his WBA, IBF and WBO belts. So before I turn things over to my colleague Sean, I'd like to take a moment to welcome Greg Siebert whom we announced this morning has joined the company as Vice Chairman. I had the pleasure of working with Greg for five years at Cablevision where he made enormous contributions to the success of that business and I have no doubt that he will have the same impact at MSG. In a separate announcement this morning by AMC Networks, Greg was also appointed Vice Chairman at the Cable programming of that cable programming entertainment company and continues also to serve as Cablevision's Vice Chairman. Welcome Greg. I will now turn the call over to Sean.

Thanks Tad and good morning everyone. I am going to provide some more detail and color on the financial results of the quarter and then we can open up the call for questions. As Tad noted for our fiscal second quarter we increased total revenue 7% to $542.5 million and generated consolidated AOCF of $149.8 million, up 18%, both as compared to the prior year second quarter. MSG Media generated $166.2 million in revenue, a decrease of 8% which primarily reflects the absence of Fuse offset by revenue growth at MSG Networks. Affiliation fee revenue decreased $10.3 million primarily due to the absence of affiliation fee revenue for Fuse partially offset by a small increase in affiliation fee revenue at MSG Networks. The affiliate fee increase at MSG Networks was mainly a result of higher affiliation rate and to a lesser extent, the favorable impact of affiliated adjustments partially offset by the impact of a low single digit percentage decrease of subscribers versus the prior year period which represents a slightly higher rate of decline since the end of fiscal 2014. Advertising revenue decreased $5.4 million largely due to the absence of advertising revenue for Fuse partially offset by an increase in advertising revenue at MSG Networks. I would also note that ratings for the Rangers are up 29% season-to-date on a total household basis, while Knicks ratings are down 28%, the latter of which is expected to negatively impact advertising sales results in the second half of this fiscal year. Other revenue increased $1.1 million due to the receipt of a retroactive royalty payment. Media AOCF of $89.1 million in the second quarter increased 4% as a reduction in SG&A and direct operating expenses was largely offset by a decrease in revenue. The decrease in SG&A expenses was primarily due to the absence of expense for Fuse, while the decrease in direct operating expenses was attributable to the absence of expenses for Fuse, partially offset by an increase in expenses at MSG Networks. Our MSG Entertainment segment generated a $194.1 million in revenue in our second quarter. That's an increase of $31 million or 19%. The increase results from higher event related revenues at the Forum, the Garden and the Chicago Theater, increased revenues from the Christmas Spectacular franchise and increases in venue-related sponsorship and signage and suite rental fee revenues. This was partially offset by lower event-related revenues at Radio City Music Hall excluding the Christmas Spectacular production. With respect to the Christmas Spectacular, the biggest driver of the franchise’s increase in revenue and ACOF this quarter was the production at Radio City Music Hall. As Tad mentioned over 1 million tickets were sold to the New York production this holiday season, which represents a low single-digit percentage increase over the last year. However, we ran 205 shows this year that's five fewer than the prior year yielding a mid-single digit increase in per show attendance. In addition the average ticket price for the New York production increased by a low single-digit percentage versus last year which reflects our ongoing efforts in the areas of pricing and inventory optimization. We also presented the Christmas Spectacular in three Theater markets outside of New York; Nashville, Omaha and Houston. As you know we regularly evaluate our touring shows. We've made the decision to end this tour as we continue to explore new approaches to best showcase the Christmas Spectacular and the Rockettes brand. MSG Entertainment AOCF of $56.1 million in the second quarter improved by $13.8 million or 33% driven by the increase in revenue, partially offset by higher direct operating 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 at the company's venues, noting that the Forum and the Garden were open for the entire quarter. Please note that the results for the New York Spring Spectacular which debuts on March 12 and runs through May 5th will be reflected in our fiscal 3rd and 4th quarter results. As Tad stated we are encouraged by ticket sales to-date for this year’s limited engagement run. That said our main objective for this show for this year is to build a brand that allows the production to be successful for years to come. Our intention is that the production over time can become a significant contributor to MSG Entertainment ACOF. Our MSG Sports segment generated $202.5 million in revenue in the second quarter, an increase of $19.1 million or 10%. This increase in revenue stems from higher professional sports team pre-season and regular season ticket-related revenue, suite rental fee revenue, inter-segment broadcast rights fees, food, beverage and merchandise sales and sponsorship and signage revenues. Second quarter Sports AOCF grew by $13.8 million to $14.9 million as a result of the increased revenue partially offset by an increase in SG&A expenses. As you know, the Knicks recently executed multiple player transactions while the teams roster could still change, the current roster would result in the luxury tax expense significantly below last season on a year-over-year basis as well as low in absolute dollars for fiscal 2015. This decrease would be reflected in our results over the next two quarters. However it bears repeating the team’s roster could still change. Turning to some other noteworthy items in the quarter, Media Segment operating income this quarter includes a $23.8 million increase through the gain on the sale of Fuse. As part of the Fuse transaction we've received a 15% equity interest in CTV Media the parent company of which is Fuse Media. This consideration was subject to certain performance goals and during the second quarter we met those goals and as a result recognized the value of this ownership interest and the corresponding additional gain on the sale. In addition, during the quarter we recorded an impairment charge of $23.6 million for Brooklyn Bowl, Las Vegas which represents the equity caring value of our investment. This accounting charge, along with our $2.8 million share of the net loss of Brooklyn Bowl Las Vegas recorded in the quarter represents the primary driver of the year-over-year increase and the loss of non-consolidated affiliates in the second quarter. With regards to the company’s previously announced $500 million share repurchase authorization through yesterday the company has repurchased the total 883,000 shares or over 1% of the shares outstanding for $65.7 million. And finally turning briefly to some balance sheet information, as of December 31 the total net cash and cash equivalents was approximately $379 million with now most of the taxes related to the Fuse sale having been paid. In addition, our $500 million revolver remains undrawn with our borrowing availability of approximately $492 million as it remains approximately $8 million in letters of credits outstanding. With that I'll turn the call back over Ari, so that we can begin our Q&A.

Thanks, Sean. Christie, can we open up the call for questions?

Sure. [Operator Instructions]. And your first question comes from Vasily Karasyov with Sterne Agee.

Thank you. Good morning. Tad, I think the third quarter that you are reporting or highlighting the subscriber decline. So I was wondering if anything new emerged, any details or color that you could share with us, acceleration-deceleration and the rates of decline. Do you expect the declines to stop once we lap that and then I have a quick follow-up.

Yeah, quick question for you, Vasily. You are asking me to comment based upon the quarter that we are currently in, yes.

Right and the trends you see because hopefully you -- not hopefully but you probably know more now about what's going on than a couple quarters ago.

No, unfortunately the latest month for which we have data is November. So in fact as we report there is a running lag already embedded in the reporting. So we don't actually have visibility on the current quarter. And buried in Sean remarks I think is where we are, which is if you look at -- just stepping back on what's going on, in the past quarter we continue to see steady core affiliation fee revenue growth that was positive and was approximately the same as the prior quarter and it was offset by a low single percentage decrease in subscribers. That low single percentage decrease in subscribers in the quarter most recently, the one we are reporting on, the second quarter, was just a little bit higher than the prior quarter and both of those were a little bit higher than the 10-K of a year -- for the six-eight months ago. And as you might expect a significant portion of that is what we believe is tearing and we have a lot of contractual protections in that regard. But there was also some erosion in underlying basic subs that was very small.

Okay, thank you. So we shouldn't be concerned in this level of erosion that this will be impacting your revenue growth going forward. Do you understand you correctly? The contractual protection comment.

I said we have some contractual protections in that regard and I don't I went much beyond that.

All right. Thank you, very much. Thank you.

Thank you. Our next question comes from Ryan Fiftal with Morgan Stanley.

Hi, thank you. Good morning. Two questions, if I can. First on the separation process. You guys have called out now two specific structures, one was splitting off entertainment and the other was splitting off media. Is one or more reasonable base case assumptions at this point and I guess how are you thinking about the relative merits of those two structures?

Well, let me begin by saying on the spin we are pursuing it diligently and with enthusiasm in its exploratory phase with the Board. At the same time it is a thoughtful and it's a process that required a lot of nuance and thought and care and so therefore I think the best time to have a clear discussion with you all about that is should we choose to file a Form 10 and proceed and then everything would out in the open and we could discuss it in great detail. So don't infer from that essentially deflection of your question that we lack enthusiasm for the process that's not true, but we think the best time to do that is if and/or when we file a Form 10.

Okay, fair enough. And then I wanted to follow up on Vasily’s questions on the subscriber losses. So you mentioned contractual protections, can you say whether you're hitting any of your guarantees at this point with any of your MSO partners. And then…

Go ahead.

Oh, sorry. I was just going to say maybe stepping back and thinking about it, longer term, if we see these industry trends continue and we see consumer trading down to skin your bundles without sense [ph] and maybe broadly in the industry they start kicking in, how sustainable do you think those are long-term? Do you think there is going to be more pressure in the negotiations with the MSOs and does that impact how you think about MSG being -- the media business, cable, that being a standalone organization, thanks.

Yeah, well, let me step back and say if you look at the core elements of our business, we have tremendously valuable rights to content that are extraordinary and valuable and have enduring value with customers and that have many, many different ways to monetize them in a whole variety of ways. So I am very excited about the prospects of the value of our content as the world evolves in different way shape or forms. With particular respect to sort of multi-system operator type discussions I don't want to get into anything because we have a general point of view that we don't. So I really don't want to comment beyond that. But I would say the underlying asset value, the possibility to create cash and the types of businesses and the positions of this company at year-end give me a lot of enthusiasm for the future and I hope you share it.

And I would just add obviously Tad’s point is completely accurate relative to being in the content business. Importantly a significant part of our content is live sports content, and I think relative to certain trends there are some installations when it comes to live sports content that these are not really viable alternatives to consumption of that elsewhere.

Yeah, actually Sean while you are on the topic, I might just add something to that. It's not entirely clear to me whether live sports content gets more or less valuable in the near or medium term, and as scripted drama comes under more pressure with over the top options. I would argue there is a good case to be made that terrific high quality live sports content becomes even more or even stickier and even more valuable.

All right, thank you.

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

Thanks. Just a couple. I want to follow up on the discussions of sports rights. As we think about modeling the RSN [ph] over the next 10-12 years and upon their possible for separation from the company, are there certain areas where it makes sense to restructure or renew the Knicks, Rangers’ local TV rights upon separation, so we have long-term visibility that your marquee contents are secured. I only ask just because we're talking about assessing the durability of your ASCS margin from here. And I have a follow-up.

Bryan I want to say that, there was moment right in the middle of your sentence, I think was the verb of your question, they got lost you. We couldn't hear it in the room. Can you just repeat your question for us please?

Sure, so I guess the question is with the possible separation of the RSNs from the company, would it make sense to restructure or renew the Knicks and Rangers’ local TV rights, so we have long-term visibility that your marquee content is secured and also long-term visibility on the durability of your cost structure. And I guess there’s a few out there that there are would these rights ever be reset or renewed they might reset higher. And we're just trying to get -- assess what's possible over the next 10-12 years.

Yeah, well I'm not going to go beyond what I said about the separation or any sort of possible ancillary implications. But I will say your question is interesting and we will certainly take it on advisement.

Okay but thank you. I guess the other question I would have would be for Sean. I just want to make sure I understand one point of clarification on the Knicks’ luxury tax and the accrual, given the trades that you're undertook in early January. Just want to make sure in the December quarter results that you guys just reported were you accruing for what you thought your luxury tax bill would have been as of December 31st and if so, is there going to be some sort of reversal of your accrual in the March quarter.

The answer is our accrual as of December 31st reflected our roster as of December 31st. So yes we accrued on that basis. And to my scripted comments around the impact you will see in the third and fourth quarter suggest that the adjustment will come in those quarters to calibrate to the roster as of the end of each of those respective quarters.

Okay. And then do you actually have to unwind some of the accruing that you had done in the December quarter?

What we will do, we'll true up the amount to the projected amount as of that point in time into the extent there is an over accrual you would adjust it and catch up if it were an under accrual. So obviously those trades have created a benefit to us relative to luxury tax versus expectations as of beginning of the year and that will be reflected in our financials throughout the balance of this year.

Okay. Thank you very much.

Sure.

Thank you. Our next question comes from Michael Morris with Guggenheim Securities.

Thanks. Good morning guys. Two questions, one with respect to the non-cash charge for Brooklyn Bowl, Las Vegas, can you talk a little bit more about what happened there and also I understand when you look at the separation growth and the entertainment side of the business is something that you've been focused on. Is there anything, any learnings from that experience venue that impacts how you think about the types of investment you might make going forward? And then second Sean just with respect to the buyback, the pace has been pretty healthy, pretty strong I would say so far. How should we think about that being a trajectory on a go forward basis and/or what are kind of the factors, the impact, the timing amounts whether it's quiet periods or things like that that impact the pace there. Thanks.

Sure, I'll take both and Tad if you want to add anything, certainly jump in. But with respect to Brooklyn Bowl, Las Vegas just, I guess philosophically our view on investments, we obviously, not just with our joint venture investments but with any, we evaluate the success on the basis of the strategic values and the returns we'll generate over the long term. So with respect to the investments in the joint venture, it's pretty mature to draw any conclusions at this point. Those are early stage entities and with early stage investing comes generally outsized risks and outsized rewards and so we will continue to monitor each and every one of them. The specifics situation with Brooklyn Bowl, Las Vegas had to do with their liquidity position and based on that liquidity position we took an accounting charge to write down that asset. The management of that venture continues to remain engaged in that but overall our view is a long term view. And I think it's too early at this point to declare victory or defeat in any of our investments and I think that philosophy applies to virtually everything we do. You ask specifically about entertainment. I think across all of our segments we view investment opportunities based on risk weighted return opportunities and if there are high risk weighted investment opportunities in any of those divisions it's our duty to evaluate them. We feel strongly we have the capacity to pursue them. Should those returns satisfy our internal goals and hurdles and we're going to continue to operate in that same capacity and function.

Thanks so much. With respect to the buyback.

Sorry, yes, what we will do is what we did today, update you on the status on a quarterly basis. I don't want to get into details about how we intent to execute on that, I think our actual performance speaks for itself and I am not going to give you any detail on what you should do to project from that other than to tell you next quarter, we'll give you an update.

For my own part on the -- it’s Ted, on the venture I don't want to say other than I concur completely.

Great, thanks guys.

Thank you. Our next question comes from Townsend Buckles with JP Morgan.

Thanks. On the plant separation, can you give any color on some of the key puts and takes that keeps the board still undecided on the structure you may pursue? Whether that's maybe the Garden, I’m sure is one of them. And do you think these are deliberations that could continue for a number of months or quarters.

Well first we're not providing a roadmap or timing on the potential completion of any process. So I’m going to deflect that. And secondly, I think, I’ve said in prior calls, that this is a complex thing. We are enthusiastic about it. The Board is exploring, the various elements of it to make sure that it gets it right and they create a lot of value for shareholders and we are diligently at the case. But there is really not much more to say than that. Did you -- since I sort of deflected both of your questions did you want to do another one?

Yeah, sure. I’m sure you will deflect this one too. But any sense you can give on MSG network, your affiliate renewal cycle over the next few years. I know it’s not something you guys talk about, but any general sense, you can give on how spread out or lumpy your sub base renewals are in the next few years?

Yeah, you’re right. It’s not something we like to talk about. And unfortunately I probably won’t depart from that -- this one either. I will say, we have ongoing conversations with distributors. They are indicating that they like our product and we’re excited about the prospects for the network.

And any thoughts on joining some of the new OTT cable bundles that are coming out are those players interested bringing in MSG network or any thoughts on going direct to consumer?

We’re very focused on our correct MSG Go product and making that successful. We view it as a great opportunity to open up what we do on the networks to other consumers, different ages, different groups and that is our primary focus in a moment.

Okay, thanks.

Thank you. Our next question comes from David Joyce with Evercore ISI.

I appreciate providing some of the color on the particular events that are coming to different venues. I was just wondering, if you could provide another aspect of looking at that. Granted there some nights where you couldn’t fill in events because of your setup down, but how much more capacity do you have in your various venues into add more events? And then secondly, I was wondering if there will be any rationale as you look for the future acquisition opportunities. Would you have any taste for going internationally in some form? Thank you.

Yeah. Let me tackle on the first one. Obviously the capacity is defined essentially by 365 days, but it’s not necessarily 365 events, because on some days we can bundle two events in the same facility. From that you would attract the required load in time and load out time. And moreover when you have a large and exciting venue that has a lot of demand and also have sports teams, there is some embedded uncertainty in it because you have to plan for playoffs. And then typically whether or not you get to playoff, you figure that out with relatively less time than you would like to have in order to book it. So that puts another sort of limit on the upper capacity. Offsetting that there all sorts of innovations that you can due to increase the utilization rate such as the Billy Joel count such as thinking through residency, such as working with artist in our currently touring such as, by the way creating opportunities for artists that differentiate you versus other, so that they want to come try something new in your venue such as thinking through ways cleverly the speed up the load in and speed up the load out. All of those things, we are, and then by the way also diversifying the types of events Louis C.K. the perfect example of that. So, we’re pulling all the levers we can to get around to sort of what I would say one is the fixed calendar oriented part of the utilization, excuse me at the capacity cap, because there is a lot of room underneath that where we can work to generate growth. And the second question I need one more time I’m sorry.

International?

International. I think that the company has tremendously great prospects and great skills and we do a lot of things really, really well here. And there are in my mind opportunities not only here, but elsewhere. And so yes, I don’t -- I wouldn’t rule out anything. This is a company with a very ambitious ownership and a very ambitious management team and we’re committed to pursuing where the opportunities go on behalf of our investors. And they don’t necessary stop at the Oceans edge.

Great. Thank you.

Thank you. Our next question comes from John Tinker with Maxim.

Hi, thank you. I notice that the national game the Knicks versus [inaudible] on ESPN was actually dropped, because with the lower rating there was less interest. I think, I should put a bowling event on. And I think MSG picked up that game. Can you go through sort of how that looks in terms of I assume it to be positive for you to get Knicks next game and how many games are at stake here?

Yeah, certainly I would start with the statement that when you’re committed as we are to fielding Champ Chicago teams it’s great when you can exposure brand international level. So having those games and our teams presented to a national audience is something that we desire ourselves. That said, yeah your observation is absolutely correct. And the implications to us when games are given back to us is that we can air them on MSG networks on exclusive basis and obviously that affords us the opportunity to sell advertising on those games. There is incremental variable cost associated with production of that and there’s also some implications that are largely intersegment with respect to broadcast right that show up as an expense on media but revenue and sports that eliminate consolidation. But you’re absolutely right to the extent we have a greater number of exclusive games aired on MSG that provided us an opportunity an additional inventory to sell and we actively engaged in doing that.

Just a quick follow up the joint venture with Irving Azoff, is there any update on that and particularly his interest in getting artists that are paid for their royalties?

Well I’ll say a couple of things about it. First of all I think that the venture speaks best when the venture does the speaking. So what I'm going to describe you is why I'm enthusiast about it and the Azoff-MSG venture is doing great things. As you know it operates in four different lines of business. The one that you’re asking about is the performance right part of the business that has attracted a great deal of attention and press lately and we remained very optimistic about that not even remain we’re actually increasingly optimistic about it and excited about the future. I think what he’s doing is creating value by representing and advocating the interest of artists in a way that is disruptive and creates value, but not only increase value. It comes from a core of making sure that artists really keep their do and the practice covered extensively and we support them and are enthusiastic about their efforts and think that there’s a lot of value to be created there.

Thank you our next question comes from John Janedis with Jefferies.

Thank you. Just going back to the comments on MSG Go, can I ask are the MPPDs away from cable vision looking to wait until renewals to negotiate their distribution or should we expect those to maybe come earlier?

We’re continuing discussions with them now.

Okay and I know you said anecdotally I guess you don’t have the data going back before November, I guess given this rollout, but is the assumption that or anecdotally do you have any kind of the data that suggests that Cablevision is helping to improve retention on their subs?

I don’t.

Okay, thank you.

By the way the November, I think I heard you right, November is the rolling sub count and surplus service and basics that we get, that’s the most recent data for which we have sub counts.

Right, okay, thank you.

I know you understood just to be clear.

Yes, thanks.

Thank you. Our next question comes from Ben Mogil with Stifel.

Hi guys, good morning and thanks for taking the question. Do you think that having sort of an RSN that only airs sort of live content half the year sort of disadvantages you both on the sub numbers and anyway you look at it compared to sort of yes which has sort of full season content? I'm kind of curious or even some of the RSNs outside of New York market that have full season content. Kind of curious if you got a sense of whether your sub numbers sub number, sub erosion is any different than theirs?

Well I don’t have any visibility on anybody else’s sub erosion, but with respect to our content I’ll say we’re quite bullish about the underlying strength of product on the regional sports network that we provide. And we don’t see any lack of enthusiasm on the part of the people that carry it for us or in fact our viewers. So I step back and I say that’s a positive generally. We are also pleased with the uptake on the MSG Go product which is new and emerging. And that’s also something that gives me a lot of excitement about the future for the business. So I think on balanced it looks pretty good from where we sit.

Do you contractually have the ability to use MSG Go as a direct product outside of the MVPD framework?

Hold that thought, one thing I wanted to say is I realized that my comment, which was sort of largely specific to the sports might have created the inference that we don't think the things like J.B. Smoove and some of the other things that we've been adding and also working to enrich our product through MSE national, are either less important or not important. They are both and we are excited also about them and we think that they also create opportunities to generate a stickiness in our content if you will outside of the traditional season and the traditional sports content. And with respect to the question you just asked me that one too I think I'm going to deflect if you don't mind.

Okay, no problem. Thanks guys.

Sure.

Thank you. Your next question comes from Amy Yong with Macquarie.

Thanks Tad you previously mentioned, I mean spent some time talking about technology outside of MSG Go. Can you just update us on how you're thinking about digital or streaming, either on the media or the entertainment side.

On digital or streaming, let me start with the digital and I'll divide the two in just a minute. We have new apps for both the Knicks and the Rangers and I think we haven't made a lot of noise about them, because we're also very focused on improving the quality of our connectivity throughout all of our venues from where it is today, which is pretty good to outstanding. We like to be a differentiated leader in that area. And you're going to see overtime that we'll be increasingly promoting our apps and digital products with it. With particular respect to streaming, we have from my perspective inside the app, actually the opportunity when you're inside the arena to see replays and lots of different shots. And that also to me is pretty exciting. Our digital products, somewhat buried inside Sean's comments earlier are elements of technology that weren't called out. And what I mean by that is let me give you some examples. He made a reference in his remarks to an improvement in our optimizing of tickets. And that actually is really quite interesting, because what's really going on there, if you will is we're using excellent levels of analytics and data to think about how exactly we target using digital means, our consumers to increase the uptake and increase the yield on our tickets. We did on that on the Christmas Show in sort of a sort of trial fashion if you will. We're doing it much more aggressively on the New York Springs spectacular. We're also applying it in another areas of the concert. And we're certainly going to be applying it where it might need to be in the sports side. So that is an area sort of that's literally technology and new analytical tools being used. We also I literally just saw, I think two weeks ago that we have in fact scaled our audience. We now have propensity scales for large populations of the audience with consumer products to know exactly how and where they are going to do it. So we can reach them with the best possible digital product that we can. So from my perspective we're making great progress and there are lots and lots of way for this organization to take advantage of and in fact differentiated performance and using technology that are beyond just a more limited over the top streaming fashion.

And just to amplify relative to analytics, one of the things we have here is tremendous amounts of information and to the extent we can exploit technology to convert that data into information and the data and then analytics that Tad referenced, we're aggressively pursuing those opportunities and operationalizing them in things like inventory optimization and some of the other things.

And we have done some very good organizational work on the technology side, that has really gotten lot of attraction as well, I should point out.

Great and then Sean as you continue the strategic review, how should we think about leverage of just near term usage of cash.

Well I would clarify that I don't continue the strategic review, the company continues a strategic review. And that is a continuous and never ending process. So don't expect that we will come to a conclusion that says we've formulated the strategy that won't change. We're in a dynamic space and we need to have a dynamic approach to strategy implementation and execution and I think we absolutely do. Relative to capital allocation and deployment, it is something that supplements strategy execution, it doesn’t drive it. And so our goal is always to make sure we're making decisions that maintain maximum flexibility, utilize our assets and strengths and we consider our balance sheet to be both, to make sure we're positioning ourselves to be able to execute on the strategic plan as it continues to evolve overtime. And I think right now I would say we're in a very good spot there.

Thank you.

Christie we have time for one more caller.

Thank you. Your final question comes from David Miller with Topeka Capital Markets.

Hey, guys. Congratulations on the stellar results. Couple of questions, Tad or maybe Sean you can chime in, is the concept with MSG Go, are the marketing dollars that you intend to spend to kind of market the concept going more towards the subs that you've lost or does it not make a difference, I only ask this because it feels to me a lot like the HBO Go situation where Time Warner is attempting to sort of plug a hole if you will by marketing the new over the top product towards core cutters and/or core shavers [ph] and then I have a follow up. Thanks a lot.

I think we are very pleased with MSG Go. I think I said in prior calls, we like the TV everywhere business model and that's clearly MSG Go’s model from one perspective. It has the Knicks content, it has a range of other content and I think we'll be enriching that and I think it appeals to a range of people. Currently those people are Cablevision authenticated subscribers and we're interested in expanding it beyond that to other operators. But I'm not sure there is much to say other than that.

Okay, fair enough and then obviously the Billy Joel model has been a huge success and with regard to the audience coming to the artist if you will rather than the artist touring, are you in discussions with any other artist or artist groups or what have you about replicating that model and continuing it say once a month for a different artist or can you not do that, I mean is there a capacity utilization issue with Garden? It feels like the Garden’s just packed with something every day. Could you do that if you wanted to or is it just not possible? Thanks a lot.

Yes, the Garden could accommodate more residencies and remember we can also do and have done residency like products at the Beacon Radio City. We could them at the Forum and we could certainly do them at the Theater at Madison Square Garden and even the Chicago Theater. So and by the way residency doesn't need to be a program once a month thing with a multi month commitment. You could view it as something that is almost thoughtful but almost pop-up Louis C.K. is a perfect example of that. So there are lots of ways to do it and we don't think about it sort of a residency as anything other than a particular franchise that is phenomenal that we are invested in and with Billy Joel we think he is great and we love it and we would like to add more to it. But at the same time that doesn't necessarily mean it's either a franchise or we are doing the traditional tour. There are lot of things in between, we view it as a spectrum.

Okay, wonderful. Thank you, very much.

Thank you. At this time I would like to turn the call back over to Ari Danes for any additional or closing remarks.

Thank you for joining us. We look forward to speaking with you on our fiscal third quarter earnings call. Have a great day.