Madison Square Garden Sports Corp. (MSGS) Q4 2016 Earnings Report, Transcript and Summary

Good morning. My name is Christie and I will be your conference operator today. At this time, I would like to welcome everyone to the Madison Square Garden Company Fiscal 2016 Fourth Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Ari Danes, Senior 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 2016 fourth quarter and year end earnings conference call. Our President and CEO, Doc O’Connor, 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 Donna Coleman, 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 corporate website. 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 condition and the industry in which it operates as well as 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 maybe discussed during this call. Let me point out that on Page 4 of today’s earnings release, we provide consolidated and combined statements of operations and a reconciliation of adjusted operating cash flow or AOCF to operating income. I would now like to introduce Doc O’Connor, President and CEO of the Madison Square Garden Company. Doc O’Connor: Thank you, Ari and good morning everyone. At the time of our spin-off last September, we laid out a plan on how we would grow our new standalone live sports and entertainment company, both organically and externally. We are pleased with the significant progress we have made on executing this strategy and in positioning the company to deliver attractive long-term growth and asset value creation. We have taken a number of steps to enable our organization to maximize the opportunities in front of us. This has included bringing onboard new executives, such as our heads of productions, venue management, ticketing suites and hospitality, as well as sports, which includes everything outside of the on-court and on-ice operations of our teams. We have also implemented a new organizational structure highlighted by our product groups in sports and entertainment working hand-in-hand with our recently created centers of excellence in marketing, ticketing, venue operations, and marketing partnerships. The structure is designed to create efficiencies and to ensure that we are prepared for the evolving needs of the organization as we continue to explore new and better ways to grow the company. This includes driving organic growth by operating as efficiently and effectively as possible. This past year, one of the areas where we saw market improvement was in the increased utilization of our venues. On the entertainment front, we successfully grew the overall number of concerts at our venues, with record levels at the Madison Square Garden Arena, the Beacon Theatre, and the Chicago Theatre. We also generated strong growth in overall event related revenues and contribution with increases at nearly all of our venues this past year. This was driven by our continued focus on utilizing the strength of our venues, markets, and operational expertise to increase our multi-market and multi-night shows, which led to an over 20% increase in the number of concerts that played more than one of our venues and an over 15% increase in our multi-night shows. Another strategy we have used to grow our venue utilization is our successful residencies. Billy Joel at The Garden and Jerry Seinfeld at The Beacon, which are high-profile recurring shows that expand our base of events. In fiscal 2016, our venues also welcomed His Holiness Pope Francis, along with a number of special shows, including The Tony Awards, the Nickelodeon Kids’ Choice Awards, the American Country Countdown Awards, and the iHeartRadio Music Awards. In just 8 days, we look forward to The Garden hosting the MTV Video Music Awards for the first time ever for what we are sure will be an unforgettable night. We also successfully increased our number of other sporting events, which in fiscal 2016, range from longstanding staples like championship boxing, college basketball, and tennis to first-time events, including the popular eSports tournament, League of Legends at The Garden and UFC at the Forum. The Garden will welcome back League of Legends this fall, followed in November by New York State’s first ever UFC event. And then in March, the NCAA Basketball East Regional Finals, which returns to the world’s most famous arena for the second time in 4 years. On the production side, next week, we host our annual Christmas in August event, kicking off our promotion of the Christmas Spectacular Starring the Radio City Rockettes, which last season had its highest ticket revenue and attendance since 2007, the year we celebrated the show’s 75th anniversary. This upcoming season marks the 84th year of this beloved production. The enduring popularity of the Christmas Spectacular has helped shape our goal of leveraging these powerful brands to grow our portfolio of owned and operated content. Our ownership of content, whether it’s sports franchises or original productions, gives us control over how we manage our brands, creates flexibility in terms of how we monetize our content, and allows us to benefit from being both content owner and venue operator. As part of the strategy, last year, we launched a second Rockettes franchise now called the New York Spectacular Starring the Radio City Rockettes. Our goal is to create another annual tradition. And with this in mind, we made several key decisions with this year’s show that have established a foundation we can build on going forward. Those decisions included shifting the timing of the show to the summer to capitalize on New York seasonal increase in tourism bringing onboard a terrific new creative team and making the Rockettes, along with New York, the stars of the show. With this year’s show which opened in June, we were pleased with both the audiences and critics response, which speaks to the quality of the content. The resulting buzz around the show and the positive word of mouth led to improved week over week attendance through nearly all of the summer’s run. However, despite this positive momentum, the show’s ticket sales still fell short of our expectations. We firmly believe that the New York Spectacular is a great show, and we will use the insights we gain from our first summer run to drive improved results. We remain committed to the show’s success into creating a valuable long-term asset for our company and our shareholders. With respect to our sports franchises, there is tremendous anticipation for the next upcoming season after a very productive off season. In addition to naming Jeff Hornacek Head Coach, the team welcome new arrivals, All-Star point guard Derrick Rose, and free agent signees, Joakim Noah, Courtney Lee, and Brandon Jennings, who joined young star Kristaps Porzingis and All-Star Carmelo Anthony. We are also looking forward to the return of the Rangers, who just last month welcomed center Mika Zibanejad, along with free agent forwards, Michael Grabner and Nathan Gerbe , while signing forwards Chris Kreider and J.T. Miller resigning, excuse me. Meanwhile, the New York Liberty, who are off to their record-breaking 2015 season, are again having a great season, led by Olympian Tina Charles and Sugar Rodgers, the team is currently first in the Eastern conference and has tied its own franchise record for wins in their first 26 games. The Liberty is now in the midst of their Olympic break. The strength of our sports franchises continues to help drive a number of revenue streams across the company, including tickets, sponsorship and signage, and media rights. For example, thanks to our large and passionate fan bases, we grew our ticket revenue base this past year with both the Knicks and the Rangers again ranking in the top three for average gate receipts for their respective leagues. We expect our teams to again play to at or near capacity crowds this upcoming season. But this year, we think we will achieve this in a much better way for the company and for our teams’ fans. We have recently made changes to our ticketing policies, limiting the amount of tickets an individual can purchase. This strategy has yielded thousands of tickets in available inventory, significantly increasing the amount of individual, partial, and group tickets we can offer, which gives more of our fans, who may not be able to afford season subscriptions, the opportunity to enjoy their teams live and in person. And as we have done in the past, we are able to dynamically price this inventory. On the sponsorship and signage front, we had another record revenue year with solid year-over-year top line growth, a reflection of the continued value we bring as marketing partners and the growing and enduring strength of our brands. As we look ahead, we see multiple opportunities to grow this business. For example, we are approaching the start of the renewal cycle for some of our signature partners. While conventional wisdom had been that these partnerships were driven by The Garden transformation, we are optimistic given our innovative platforms, the unique and valuable exposure we provide and the positive feedback we have received from our partners that this will prove to be a catalyst for additional growth. We hope to have more to announce soon. In addition, local media rights revenue saw a significant increase in the first year, thanks to our new 20-year deals with MSG Networks. This will be followed in fiscal 2017 with a meaningful increase in national media rights revenue as we benefit from the NBA’s new media rights deal with Disney and Time Warner. In addition to generating organic growth across our entertainment and sports segments, we see ample opportunities to grow our business through both acquisition and development. One important area of focus for our company has been our venue expansion strategy. With the Forum in Inglewood, California, we introduced a brand new venue model that started with the creation of the first ever large scale music and entertainment focus venue. We then used our capabilities in venue management and bookings, along with our expertise in sponsorships, marketing, ticketing and promotions to deliver a differentiated experience for music fans, artists and partners. When the Forum reopened in 2014, it quickly became the number one in concert market share in Los Angeles, while simultaneously helping to significantly grow the overall concert market in Los Angeles. At the same time, as Inglewood experiences a renaissance in commercial development including the construction of a future home for an NFL franchise just steps away from the Forum, we believe that the Forum becomes even more valuable. We have been actively exploring other select markets where we think we can replicate this success and in May, announced that we are joining with Las Vegas Sands to bring a new ground-making venue to Las Vegas. While Las Vegas attracts more than 40 million people a year, it does not have a state-of-the-art, large scale destination that is focused on music and entertainment. We are going to change that with the creation of a first of its kind venue that will rebuild from the ground up to deliver an unmatched experience for artists and fans. From the sound to the seating to the front and back of the house amenities, everything will be designed with music and entertainment in mind. Our company will own and operate the new venue which will be connected via pedestrian bridge to the Venetian and Palazzo complex, the largest resort under one roof in North America, which welcomes tens of millions of people each year. To ensure we achieve our goal of redefining the music and entertainment experience, we brought together a world class team, which in addition to MSG and Las Vegas Sands, includes Irving Azoff, who is responsible for cultivating this opportunity and who has played a critical role in helping us establish our venue strategy. Live Nation, the world’s largest promoter, which will be an important provider of content and service the venue’s exclusive ticketing partner and Oak View Group, led by sports and entertainment executive, Tim Leiweke, which will provide insights and access to premier entertainment for the new venue. We look forward to sharing more details on the design and plans for the new venue later this fiscal year. Another important growth strategy for the company has been the exploration of adjacencies that complement our existing business and broaden our portfolio of live experiences. Last month, we acquired a controlling interest in Boston Calling Events, the entertainment production company known for successfully creating and operating New England’s premier music festival, Boston Calling. Since it was started in 2013, the festival has earned the praise of more than 250,000 fans and we look forward to supporting the expansion of this unique event. Starting in 2017, the three day festival will take place annually on Memorial Day weekend and move to a new location in metropolitan Boston, which will help grow the event by more than doubling its capacity and by enabling the festival to expand its offerings with more and bigger music acts, along with other types of programming including comedy, visual art and a new film festival. This partnership expands our portfolio of live offerings, which also includes our 50% ownership in the Tribeca Film Festival, with a popular music festival that is poised for growth. In addition, it also provides us with access to up and coming artists that can go on to play our venues and enables us to explore joint cross promotion, sponsorship, marketing and bookings opportunities. Lastly, we have also continue to look for strategic opportunities to partner with companies who are recognized leaders in their fields, so that we can bring together the expertise and capabilities of each partner to benefit both companies. Early this week, we announced that we acquired a 12% stake in Townsquare Media, a leading media entertainment and digital marketing solutions company. Through the use of its radio stations, digital assets and live events, Townsquare creates compelling content that brings people together and builds communities. We understand and share their belief in the value of exceptional live experiences and believe that this new relationship, which is another opportunity that our partner, Irving Azoff brought to our attention, will provide an opportunity for us to work together to drive additional value and growth for both businesses. We will use our shared experience in music and live events to explore bookings, sponsorship and marketing opportunities, as well as the potential expansion of Townsquare’s live offerings. Townsquare also has a portfolio of popular music festivals, providing us with additional insight into this business which as we just talk about is part of a larger goal to strengthen and expand our position in the live experience space. We are excited about these new opportunities, but our work is far from complete. This past year, we reorganized the company and brought in new talent which has positioned us for better execution, better growth and better results. We are continuing to make progress on other opportunities, both organic and external. And looking ahead, are confident that we can continue to drive attractive long-term growth in asset value creation for the company and its shareholders. With that, I will now turn the call over to Donna, who will take you through our financial results.

Thank you, Doc and good morning everyone. As you know, the company has now completed its first fiscal year as a standalone live sports and entertainment company. On a reported basis for fiscal 2016, we generated $1.1 billion in revenue, an increase of 4% over the prior year. In addition, we generated AOCF for the year of $68.3 million. Excluding the impact of $41.8 million non-cash write-off recorded during the fiscal 2016 third quarter and $6.9 million in reorganization costs recorded during the fourth quarter, fiscal 2016 AOCF would have been $117 million. The remainder of my comments will primarily be focused on our fourth quarter results. I would first remind you that results for this fiscal 2016 fourth quarter reflect MSG’s financial results on a standalone basis including the company’s post-spin cost structure and actual corporate general and administrative costs. Fiscal 2015 fourth quarter results reflect the allocation of corporate, general and administrative costs based on accounting requirements for the preparation of carve out financial statement. As a result, fourth quarter results do not reflect all of the actual expenses that the company would have occurred had it been a standalone public company in the prior year quarter. With that said, now let’s go to our reported results as compared to the prior year period. For the fiscal 2016 fourth quarter, the company generated total revenues of $217.8 million, a decrease of 15% and an AOCF loss of $13.8 million, half of which reflects the impact of the reorganization costs. At MSG Entertainment, revenues of $84 million decreased 10%. This decrease was primarily due to our revenues for the New York Spectacular and the absence of a $3.6 million insurance recovery recorded in the prior year quarter related to the Christmas Spectacular. This decrease was partially offset by higher overall event related revenues led by The Garden and The Beacon Theatre, along with higher venue related sponsorships, signage and suite rental fee revenues. MSG Entertainment’s fourth quarter AOCF loss of $13.2 million increased by $8.6 million. This primarily reflects higher selling, general and administrative expenses, an increase in the direct loss for the New York Spectacular and the absence of the $3.6 million insurance recovery partially offset by higher event related contribution at our venues and other net increases. Let me spend a few moments on the New York Spectacular. The decrease in revenue this quarter was primarily due to a shift in the timing of the production’s run from the spring in fiscal 2015 to the summer this year. We ran 21 shows this quarter as compared to 51 shows in the prior year fourth quarter. Of the $16 million year-over-year decrease in New York Spectacular revenues during the quarter, over 70% was due to the change in timing. The remaining portion was due to lower per share revenue primarily as a result of lower average attendance. I would also note that we ran an additional 56 shows during the fiscal 2017 first quarter versus none in the first quarter of 2016, which will impact the year-over-year comparison at the MSG Entertainment segment. At MSG Sports, fourth quarter revenues of $133.5 million decreased 17%. The decrease in revenues was primarily due to lower playoff related revenues and to a lesser extent, lower event related revenues associated with other live sporting events. The decrease in playoff related revenues was primarily due to the Rangers playing two home playoff games this past season as compared to 11 in the year ago quarter when the team advanced to the Eastern Conference Finals. The overall decrease in revenue this quarter was partially offset by higher local media right fees, a result of the new long-term media rights agreement between the Knicks and Rangers and the MSG Network. The impact from the new advertising sales representation agreement with MSG Networks and higher ticket related revenue for our professional sports teams, MSG’s fourth quarter AOCF decreased by $23.5 million to $18.4 million. The decrease was primarily due to lower revenues, and to a lesser extent, higher selling, general and administrative expenses partially offset by lower direct operating costs. The decrease in direct operating expenses was due to lower playoff related expenses and to a lesser extent, event related expenses associated with other live sporting events partially offset by higher team personnel compensation costs, other team operating costs, net provision for NBA and NHL revenue sharing expense and NBA luxury tax and other net increases. For both MSG Entertainment and MSG Sports segments, the increase in SG&A expenses includes the impact of higher corporate general and administrative costs. We would again note that for both segments, SG&A expenses for the prior year fourth quarter do not reflect all of the actual expenses that the company would have incurred had it been a standalone public company during that period. Other AOCF loss, which primarily reflects unallocated corporate G&A expenses, increased by $12.1 million for a loss of $19 million in the fiscal 2016 fourth quarter. This increase includes the reorganization costs recorded during the fourth quarter. Turning to our balance sheet, as of June 30, total unrestricted cash and cash equivalents was approximately $1.44 billion. In terms of the company’s share repurchase program, we did not make purchases during the first 2 months of the fourth quarter as we neared an agreement and announcement of our partnership with Las Vegas Sands to build a large scale venue in Las Vegas. Once this announcement was made, we entered into a 10b-51 plan and resumed buying back stock during the month of June. Since then, we have repurchased 509,000 shares for $89.2 million at an average price of approximately $175 per share under the 10b-51 program to-date. This brings the total under our current authorization to 1,025,000 shares for $167.2 million at an average price of about $163 per share. This amount represents approximately 4.1% of Class A shares outstanding. With that, I will now turn the call back over to Ari.

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

Sure. [Operator Instructions] And your first question comes from Alexia Quadrani of JPMorgan.

Good morning. This is David Karnovsky on for Alexia. Just a few questions around your Las Vegas announcement. First, can you provide any details around total capital investment and timing expenditures? And then on the market itself, can you talk about why this was the right city for expansion and is there any risk of oversupply after both your venue in the T-Mobile Arena are at full operation? And then finally, can you just talk about the lineup of events you are planning there and whether you see a large portion being residencies, where MSG is the promoter? Thanks. Doc O’Connor: Okay, I will take them one at a time. In terms of cost timeframe and the first part of your question, we are still working through our plans, including design, timeline, financing options. And as I mentioned earlier, we are planning to share the details on many of those aspects of our new venue later this fiscal year. So, we will have more to say on that momentarily. As is the case with every investment we make, we take into careful consideration the potential risk and reward with the ultimate goal of creating long-term asset value for the company and our shareholders. On the issue of strategic rationale and why we believe this will lead to asset value creation for our shareholders, let me start by saying that Las Vegas is one of the few entertainment destination marketplaces in the world. The city attracts more than 40 million people a year, yet it does not have a state-of-the-art large scale venue that is focused solely on attracting major concerts and touring shows to the city. Up to now, it’s not been a major stop for major national tours, because the buildings that exist were dated and mostly smaller in capacity, providing few opportunities for artists to make real money when coming to Las Vegas. So, we believe there is an opportunity with a state-of-the-art venue to make Las Vegas a key stop with national and international tours. And we believe that the contents there, according to Pollstar in Vegas in 2015, there were 48 concerts in venues with a seating capacity of more than 9,000. In that same year, LA had over 180 concerts in buildings of that same size. So, there is content in the region, it’s just not coming to Las Vegas currently despite the proximity. So, we think a new state-of-the-art, large scale music and entertainment focused venue will fill a need that’s not being met. And yes, the T-Mobile Arena is brand new, but it was built as a multipurpose sports arena, not with a focus on music and entertainment. So, there are various requirements, suites, high ceilings, scoreboards, locker rooms, etcetera that make it less than ideal for concerts. And the three other MGM properties, the Mandalay Event Center, the MGM Grand, The Orleans are smaller venues built in the ‘90s, UNLV’s, Thomas and Mack Center, where the college sports teams play is an older building located far off the strip. These venues are all dated and not optimum. We also believe that this is a market where people come looking for things to do, and we have already learned a lot from our new partner, Sands. They told us that when The Venetian was being built in the late ‘90s, they had plans to include 15 restaurants and were told with Spago and Emeril Lagasse’s restaurants being in existence, that there were already too many high end restaurants in the city, but today there are 122 restaurants and there are no tables available. They also said that when they set out to build a convention center during a time – as they set out to build a convention center at a time when people were saying that Vegas didn’t need a convention center. Today, there are four major convention centers in Las Vegas and Vegas is a major center for large scale conventions. They built $1 million – excuse me, 1 million square feet retail space and people asked where will the customers come from? There are now 6 major malls in Las Vegas. So, we believe that in the case of our venue, if you build it, the events and the people will come. And we come to the table with great partners to ensure our success. We have the immediate benefit of proximity and connection to Las Vegas Sands’ Venetian and Palazzo complex, the largest in North America, which welcomes tens of millions of people a year. And by working with Irving Azoff, Live Nation, Tim Leiweke’s Oak View Group, we are confident we will bring the biggest and best events in music and entertainment to Las Vegas, so we think we have the right mix, right venue, right market, right team to take what we did with the Forum in Los Angeles to a whole new level. And like LA, we believe the result will be in taking market share – in us taking market share and growing the overall concert market in Las Vegas. Lastly, with respect to your question in terms of how we will program this new venue, we are in the planning stages on that. You can imagine that with the date flexibility, by not having non-resident sports teams – excuse me, by not having resident sports teams, we have date flexibility in which case we can potentially program long-term residencies. But it is not the primary focus of the arena. We are looking at, with our partners Live Nation, booking and bringing in major national and international tours. And currently, we are not looking necessarily to promote that content.

Thanks for the question, David. Christie, we will take the next caller.

Your next question is from Brandon Ross of BTIG.

Hi guys. Thanks for taking the questions. I wanted to cover two topics, first on the New York Spectacular, so the performance was not up to expectations this year, at least so far despite the changes you guys made to the content and your excitement over the content, can you give a little bit more color on why it fell short and how long it may be before we see the New York Spectacular contribute to the bottom line and then how long you give it, if it doesn’t. And then secondly, your sports teams are obviously, the crown jewels of your portfolio, but there has been a shift among millennials and younger generations away from sports and towards eSports, is eSports a place of interest for you guys and would you consider buying eSports teams or doing something with eSports besides just hosting tournaments in the venues? Thank you. Doc O’Connor: On the New York Spectacular, as we said, ticket sales are not what we hope for, but again we believe we made a number of decisions with this year’s show that have established the foundation that we can build on going forward. We think we have a clear path to where we want to be. Remember, this was essentially a new offering with a largely new show in a new time period. As I mentioned, we were very pleased with the audiences and critics response. I will speak to the quality of the content. We feel we made a really good show. The buzz around the show, the social media data, positive word of mouth led to consistently improved week-over-week attendance throughout nearly all of the summers run, a trend we think bodes well for next year. Nearly 50% of the attendees said they wanted to come back next year. We also saw real improvements as compared to last year in terms of how our customers rated the experience at the show and the likelihood that they would recommend the show to others. For example, in the last week of the show’s run, we outsold Book of Mormon and Aladdin and every other broad way show other than Lion King, Wicked and Hamilton. We also gained really valuable insights over that run that we will use to grow the show’s audience and to build a production that will become a popular perennial in the city. Summer is a unique selling season. It has its own rhythms and idiosyncrasies and we learned a great deal about the show’s audience and its ticket buying patterns. So we will learn what we use – excuse me, we will use what we learn to inform our decisions next year, ranging from how we better leverage our assets and effectively time our marketing spend to better targeting those sales. We will also look to more effectively structure the shows calendar by using those insights, on which days perform better than others and the drivers behind this. At the end of the day, we are committed to the show and we continue to believe will be a valuable long-term asset for our company and our shareholders. This will be a build that will take time, but we expect, in the not too distant future for this to be every bit as valuable to us as the long running Christmas spectacular is. I hope I covered every part of your question with respect to the New York Spectacular in that answer. On the second question that you ask with respect to eSports, we are very interested in the eSports category and we are exploring aggressively and actively opportunities in that space. We agree with you that eSports is an important and growing category and we will be participating in that category beyond just hosting events.

Thanks for the questions, Brandon. Christie, we will take the next caller.

Your next question comes from John Janedis with Jefferies.

Hi, good morning. Doc, can you talk about the strategic rationale behind the Townsquare investment, meaning as you know the vast majority of their events are small rather than music festivals, so is this the gesture considering a shift to smaller events and go for volume, is there a pass for a majority stake there and there is some speculation in the press, so can you confirm what you pay it? Thank you. Doc O’Connor: I will take the last part first. We purchased 3.2 million shares, which represents a 12% stake on a fully diluted basis for $23.1 million. As for strategic rationale, we think that this investment makes both strategic and financial sense. We believe in the management team first and foremost and in many ways, we share a strategic perspective with them. On the issue of the size of their events and their live events, we see a really saturated market in the large scale live music concerts and we like their niche approach to the festival business, something that Boston Calling, which I am sure we will talk about in a minute, shares that prospective in some of their other assets. But we think that Madison Square Garden and Townsquare have a lot of similarities. We have unique assets and expertise, we have deep industry relationships, we have strong connections with diverse and passionate audiences and we will use each of these to build valuable communities whether that’s sports fans, concertgoers, radio listeners, festival attendees and so on. We chose an investment as opposed to any other type of relationship because we think it better aligns our businesses and we can – so that we can explore our collective strength and build and drive opportunities for both companies. While we have nothing to announce right now, those possibilities include block booking artists across Townsquare festivals, Boston Calling events and Madison Square Garden venues, posting Townsquare events at MSG venues and working together to create new live content. Gaining additional insight into the festival business is important to us. We think that they have a lot to offer us in that regard and we will be sharing best practices. And we can use each company’s class platforms for cross-promotional and marketing opportunities. Is there anything else as part of that question that I am missing. We have no current plans to increase our stake. The investment in the company is a shared belief in music, live events and creating community.

Thanks for the question, John. Christie, we will take the next caller.

Your next question comes from David Miller with Loop Capital Markets.

Yes. Hey guys. Doc, just a question on the Knicks, what are your targets for – or how should we think about the Knicks’ payroll for fiscal ‘17 and perhaps even fiscal ‘18 if you are willing to talk about it, what kind of increases and/or decreases in the Knicks’ payroll should we be thinking about versus fiscal ‘16 and what are your targets for profitability for the team if you are willing to reveal that? And then I have follow-up. Thanks. Doc O’Connor: I am going to hand that over to Donna, if I might.

Sure. Well, as you know we are firmly committed to fielding championship caliber teams and that supports many of our revenue streams. In fiscal 2017, we are going to benefit from our one-thirtieth share of the significant increase in the NBA national media rights revenue. Related to the increased in revenue, we will also expect a significant increase in player compensation costs, primarily as a result of the increase in the league salary cap threshold, which will increase from $70 million in the 2015, ‘16 season to $94 million in the 2016, ‘17 season. We also will expect an impact on revenue sharing among the team. So you will kind of expect to see an increase in both revenue and player comp expense in the coming year.

Thanks for the question, David. Christie, we will take the next caller.

Your next question comes from David Joyce from Evercore ISI.

Thank you. I was wondering if you could help us understand your decision process of how to invest in these entertainment opportunities between going straight into MSG versus to equity line and what was driving the bigger loss in the equity investments this quarter?

I will just answer the second part of that second – the question. As you will see in our filing later, the increase in the equity loss this quarter was primarily due to an investment we had in Finding Neverland show, which was announced that it’s going to be closing on August 21 and as a result, we wrote off approximately $7 million, which was our remaining investment after the recouping some of our capital. Doc O’Connor: If I am understanding the first part of your question, it’s about taking minority interest in unconsolidated investments in the company. And if I am correct in that assumption, then what I have to say about that is that taking minority stakes in company’s unconsolidated investments, they are not the centerpiece, they are not the centerpieces of our investment strategy. We evaluate these types of investments on a case-by-case basis. And first and foremost, these types of investments need to make strategic sense for the company. With the Townsquare example, we believe first and foremost that strategically it made sense. We also happen to have gotten into that investment in a very attractive price. So we also believe that it made financial sense. But on an ongoing basis, we are not basing our investment strategy on taking minority or unconsolidated investments.

I guess what I was asking was the decision to put some of those into MSG as opposed to Azoff MSG joint venture? Doc O’Connor: Because again, it’s from a strategic level, it made sense in our opinion, to align them with Madison Square Garden as opposed to MSG in this example.

Great. Thanks David. Christie, we will take the next caller.

Your next question comes from Ryan Fiftal of Morgan Stanley.

Great. Good morning. Two, if I may. So first, we have seen this year a couple of minority stakes sale for NBA teams and the valuations or at least the ones reported in the press were pretty full, I would say surprisingly full, given that they are non-controlling stakes and we normally assume so much of the team value is tied up in control, so I am wondering have you thought about are there any opportunities along those lines, something like you could sell minority stakes and shrink the equity with the proceeds to potentially try to exploit your discounts to private market value? Doc O’Connor: We have no plans to sell minority stakes in any of our teams at this time.

And is that – you don’t think there is financial merit to it or it complicates the operations or any help with how you think about that? Doc O’Connor: All of the above. We have no plans to do anything of the kind.

Okay. And then just a quick one, any update on Penn Station redevelopment plans and are there any signposts we should be watching there? Thanks. Doc O’Connor: We don’t have any update on Penn Station. The potential to create and renovate – create a new entrance for Penn Station and renovate the station itself. The Governor said from the beginning there are number of different possibilities, some of which include us and some do not. And we stand with the Governor, as I have said before, and his vision for a re-imagined Penn Station and Moynahan train station and the value that they will bring to all New Yorkers in the whole region and we will continue to work with his office on a plan that’s beneficial to all involved, but we don’t have any specific update on those issues as of this moment.

Thanks, Ryan. Christie, we have time for one last caller.

Sure. Your final question comes from Robert Roth of FBN Securities.

Yes, thanks for taking my questions. Could you just update us a little bit as to why on May 27 you guys put in place a 10b5-1 plan related to stock repurchases and give us a little bit of a sense as to how we can expect to see those pace moving forward given that plan is in place?

Sure, absolutely. The 10b5-1 plan that we put in place gives us the ability to move forward on our share repurchase program while we continue to actively pursue growth opportunities. And that was particularly valuable to us in the last few months as we explored some of the opportunities that Doc has discussed on the call. As we said, we are very committed to our share repurchase program, which we believe reflects our confidence and the value of our assets and our growth prospects. We are very pleased with the way we are executing on the repurchase program and having now repurchased over 1 million shares in just over 4% of our Class A shares. And as we look ahead, we will continue to evaluate and assess how to best execute the programs. We may employ opportunistic open market purchases. We may put another 10b5-1 plan in place, but we will do it as we feel it’s most appropriate for the company.

Okay, great. And one follow-up if I may. Could you give us any sense as to what you are looking at in terms of season ticket prices going forward into the ‘17, ‘18 timeframe and looking ahead any sense as to what that might look like? Doc O’Connor: Sure. For current subscribers to the Knicks, there will be no price increase. For current Rangers subscribers, we will have a blended approximate 7% increase for again earnings subscribers. For our new inventory, whether it’s individual tickets, new partial plans or group sales, we will be dynamically pricing that inventory as we have in the past. And that, I want to clarify is for ‘16, ‘17 seasons and we are not in a place where we are extrapolating what ‘17 ‘18 will look like.

And thank you with that, I will return the floor to Ari Danes for any additional or closing remarks.

Thank you for joining us. We look forward to speaking with you on our fiscal 2017 first quarter earnings conference call. Have a good day.

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