Yet Another Value Podcast - Jon Boyar on the Dolan Discounts at $MSGS and $MSGE

Episode Date: August 26, 2022

Jon Boyar returns to the podcast to talk about his investment thesis for MSGS and MSGE, including why he thinks investors are underrating James Dolan and just how wide their discount to asset value has become.You can find more on the Fresh Looks here: https://boyarresearch.myshopify.com/products/2022-opportunity-issue-edition-with-bonus-content?utm_content=216760092&utm_medium=social&utm_source=twitter&hss_channel=tw-963533512887406593Chapters0:00 Intro3:45 MSG History8:10 Do the Dolan's actually create value for minority shareholders?13:15 MSGS SOTP15:55 Can someone actually write a check for the Knicks21:15 What happens when the NBA rights renew?24:20 Could the Knicks and Rangers backstop a new Garden at some point?29:30 MSGE spin overview31:10 Why not do a full spin at MSGE?33:20 MSGE bull thesis (SOTP) versus bear thesis (Sphere)37:00 How bad was the MSGN deal40:15 Sports betting47:00 What are the Rockettes worth?49:20 Will James Dolan actually sell the team?53:30 Please don't trade for Donovan Mitchell

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listen rate subscribe review it wherever you're listening to it uh with me today i'm happy to have on john boyar john is the cio at where about boyar research john how's it going thanks for uh thanks for having me things are going really well hey thanks for coming on. I'm excited to have you on. I think this is your fourth appearance, actually. But I'll get to that in a second. Let me start the podcast the way to start every podcast. First, a disclaimer to remind everyone who's listening, nothing on here is investment advice. Please do your own research, consult a financial advisor. We're going to talk about two of my favorite companies to follow. One of my favorite sports out there today. So it would be a little more fun

than normal, but please remember all of that. And then second, with the pitch for you, my guess, You know, people can go listen to your prior three appearances for a whole pitch, but you're kind of on today because for people on YouTube, I'm holding up right now, you came out with a fresh looks, which has about 15 or 20 stocks, companies that kind of just reviewing them. And the thing that was interesting to me, I put it in my monthly note last year, and we were talking about before. The last time you did like an intra-year fresh looks, I believe was April 2020. And then you come out with one, you know, towards the end of July. 2022, which I think the market's up like 10% since then. Obviously, the market's just raced since April 2020. And I was kind of joking, hey, when John puts out a fresh looks, read it, don't read it, whatever you want to do, but just go buy stocks because that's when things are getting

pretty hairy out there. But I read through the fresh looks, really enjoyed it. The thing I wanted to talk about the most in it, and I think the thing you want to talk about the most in it was the Dolan discount stocks, two of my favorite stocks, MSGE and MSGS, and. I've rambled a lot. I'll just pause there. Why should investors be paying attention to MSGE and MSGS right now? One again, thanks for having me on. This is a lot of fun. And in terms of why should they be paying attention on MSGE, MSGS, stocks are cheap. There's catalysts. They're really high-quality assets that they're the definition of assets that really can't be replicated, which is something we like a lot at the Boyer Value Group.

I mean, just a quick step back, for those of you don't know, the Boyer Value Group really has two arms. We manage money as an RIA. We also sell research. The Fresh Looks is one of the pieces that we recently did. And these are stocks that we like. MSG just by way of background is a company. that we have been following for years really since, literally since it was before it was

born. And the reason why I say that is MSGS and MSGE were part of a company called Cable Vision, which was one of the largest cable companies in the U.S. and it was sold to Altis in, I think, 2016, at a price we never thought we would get. But, you know, as I said, it was part of that conglomerate, I guess, for lack of a better word. And in 2010 or so, they decided to spin out MSGS, MSG, I'm sorry, from Cablevision. And what's really interesting to note was I was looking back, you know, we profiled it. And Andrew, I'm happy to send you the report. we profiled MSG in March or so of 2010.

The enterprise value of MSG at the time was $1.5 billion. And it essentially consists of what is now MSGS and what is MSGE. And the enterprise value of those two businesses now are roughly $8 billion. So there's been a lot of value that's been created. I still think there's a long runway to go. And one of the reasons why these stocks are cheap, and I guess I probably should take a quick step back and just explain what those assets are. MSGS owns the Knicks and the Rangers, essentially. That's their main assets. MSGE owns, and we'll talk about this because it's a little more nuance, owns what is Madison Square Garden,

it owns the air rights above Madison Square Garden. It owns regional sports networks. It has long-term leases and things like the Radio City Music Hall. It has the Rockettes franchise and something called the Sphere in Las Vegas. So that's just putting everything kind of on the table. And both of these companies are selling at significant discounts to what we perceive that they're actually worth due to something that people on Wall Street call the Dolan discount. And that is they're perceived to be the Dolan family extremely unfriendly to minority shareholders.

And there are certain aspects of that that are 100% true. But over the long run, investors who have invested alongside the Dolans have been rewarded. They just have to be patient, which is a problem. problem that most people on Wall Street seem to have. And I went on Bloomberg this morning. I was just kind of curious. So I looked, it looks like Cablevision won public in 1986. And it was sold, as I mentioned earlier, in Altis in 2016. If you include dividends, that's cable vision stock increased in value by 3,585% roughly versus the SMP, which increased in value by 1900% roughly.

So it's been a significant outperformer. And I'm not saying the SMP is necessarily the best gauge of, you know, I guess I could have done a media index or whatnot. But it shows that over the long run, value has been created. But let me just hop in there because I think this comes to, I want to talk about all aspects MSGE, MSGS. MSGE has been a popular topic on this podcast. Chris McIntyre came on with a very concentrated pitch on them. You and I talked about when MSGE was buying MSGN and how that deal made no sense. So we can talk about that. But I want to start with that

first point you made, right? Like people give MSGE and MSGS a Dolan discount. And investors who have invested in the Dolans over time, have done very well. You mentioned CableVision, which, I mean, that performance is insane. MSG since 2010 to 2021 has done great. So I think it's easy to look up and say, hey, if we just invest and close our eyes and forget that James Dolan is horrifically mismanaging the Nix on the court product, like we will make money over time. And yes, that has worn out. But there is a part of me that also wonders, like, well, Cable Vision was mainly James Dolan's dad, right? and I also wonder if the assets are just so good.

You know, Warren Buffett's got the thing, you want to have assets that are a company that's so good that even a monkey can run it because one day a monkey will be running it, right? And or in crew it was, there's this ham sandwich joke in crew, but I won't go into it. But I do wonder if these assets were just so good that they've just overcome how bad the Dolans are and kind of blinded us to that.

And I'll give two examples, cable vision. Like, guess what? having the, having the cable rights in the greatest cable boom of all time from the 80s to the early 2010s in the like kind of tri-state area, the richest, one of the richest areas in the country. Yeah, that's probably going to be a really good business. And, you know, for the Knicks, like, okay, 2010 to today, the stocks up about 10x, I think. And that's great. But I'm just looking like the average NBA franchise value in 2010 was 350 million in 2020. to it was about $2 billion, I believe.

So it's like it hasn't really outperformed like the average franchise, 5x, and the league's flagship franchise kind of 10x. Like it doesn't seem like it's really outperformed just how good these assets are. Does that make sense? Absolutely. But yet it's really the only way to buy those type of assets and play that trend, at least in the public markets. I guess if you had money,

You can, that's in a company called Arcos, which is a P.E. firm that buys these things. I'm not saying that they, that this is John Malone slash Warren Buffett. That is not. I'm just saying they're not. I've got some problems with John Malone these days. Yeah, no. You can talk about that another time. I'm not saying he's Barry Diller. I'm not saying he's, what name your really good capital allocator. But I don't think he's as bad as people think. And, you know, one of the things that is really worth noting is, and myself included, have been saying sell the teams, you'll create value.

That has been, you know, I did a hashtag sell the team or whatever. That creates some traction on Twitter. But the best move he could have made or he did make is not selling the teams. And he could have taken that check at getting three billion. dollars or whatever for the Knicks, whatever he would have gotten in in 2013 or 14 or 15. But, you know, he saw the value of sports media rights. Obviously, you know, he couldn't see, he couldn't have seen sports gambling. I mean, that kind of came out of nowhere to some extent.

But that's got to bring, I think that's the sports media rights of the 2020 kind of decade. I think that's going to, you know, really increase value. So there's, yes, it's the only real way to buy these franchises. If we had a different owner, would there be this discount? I highly doubt it, but that's the opportunity. Sometimes we found that I'm not saying he is, but some of our best investments have been investing in companies that are horribly managed because that leaves an opportunity.

Yeah, and not to go on a sidetrack, but just for example, I mean, we've talked about Warner Brothers discovery right now. Well, yeah, I don't want to get started. But one of the opportunities there is Warner Brothers has been mismanaged for, I don't know, is part of AT&T. They don't know how to run a cable company. They don't run a media company. and when they were part of Legacy Time Warner, they were being propped up for a sale.

So that creates opportunity for Zazolv and company who I think know how to run a media company. They've done it. And again, I don't want to get sidetracked. I know we can go on. I can get very easily sidetrack and Warner Brothers Discovery. It's just an example of, you know, obviously an ideal situation is to get something really cheap, great asset with a great cap allocator. And how many times do you really get that? You have to kind of be willing to give on one of those things.

Well, let's dive in. I think if it works for you, we're going to talk about both MSGS and MSG, but let's start with MSGS because I think the story is there simpler. I just have two questions on MSGS, actually, because I think it's a very, I'll make it three questions. I think it's a very simple story we can talk about. The first, I mean, let's just do quickly. again, for the forgotten 40 people, there's a nice little chart here that I can cheat off of,

but let's just quickly talk to MSGS some of the parts, right? Basically, MSGS owns two things. They own the Knicks and the Rangers. They have a very little bit of net deck, but they own the Knicks and the Rangers, right? At today's share price, they're trading around $170 per share. We can say the enterprise value there, market cap, low $4 billion, right? let's say $4.3 billion to make it a nice even number. When I buy $4.3 billion, I'm paying for the Nix and Rangers.

What am I actually getting there? You're getting the Nix and the Rangers. And believe it or not, people pay attention to Forbes values. And now there's a rival company, I'm not the name of it. Basically, Forbes journalists went in and they valued the NICs at $6 billion. How they come up with that valuation is somewhat of a black box, but they, they come up with it. And as I said, this is actually used in negotiations. And in many, many instances, the Forbes value ends up being extremely conservative.

And so for $4.7 billion or whatever it is now, you get the next, which are worth well in excess of $6 billion, at least in mind. opinion or in our opinion. And then you get the Rangers, which Forbes values at $2 billion, I believe it's $2 billion, at you're basically getting paid to own the team. So it's a lot. There's some cost basis and tax issues there, which we adjust in our valuation. But it's essentially the way we look at it, it's pretty much a double from here. Maybe we're being a little aggressive. I don't know. Time will tell. But there are things that are going to help unlock that value, I think, sooner than we, sooner than we think. So it's a really kind of, you know, interesting situation. So I think, I don't disagree with you. The one thing, so I used to be very long

MSGS. And I kind of moved on, but I always still follow it just because I don't disagree with that math. But, you know, when I was longer, one of the things I did was exactly what you did. I took, hey, here's the Forbes value for every sports team that has traded in the past, I think it was 12 years at the time. And here's what they actually went for. And the average premium was around 28%. You mentioned 30%. And actually the really interesting thing was, the larger the city that it traded, the bigger of a premium it went for. Because, you know, if you had the option if you had unlimited money and somebody said, hey, you can own the Knicks or you can own the Oklahoma City Thunder. You're going to pay up more for the Knicks because then you're

the face of the league right now. The Thunder have a lot of draft picks though. So it might be a little more fun running them. But I think you see what I'm saying there. But I guess the question I would have on just a sales price is, look, if you're talking $5 billion plus a 20% premium, a $6 billion check, that's different than seven years ago when it was a $2 billion check. Like, there just aren't a lot of people who could write a $6 billion flat-out check. So I guess my one question would be, hey, on that premium, like, are there people around who can actually write checks that big and pay that premium? Or are they going to start running into a situation where, hey, the value is so big, like,

they just can't get the premium that they would kind of won and deserve because there's just not enough money out there. Yeah. No, that's a great point and a fair question. One, one of the things that could happen is that, you know, as I mentioned earlier, there are private equity firms that are involved and they can buy, I think up to 20% of a team in the NBA. I don't know what it is in the NBA.

I believe that's correct. So they could take a stake in the team, which would help, you know, put a marker on it, which I think would help unlock value. That's one thing that can happen. Fourth note, you look at the shareholder base. of Madison Square Garden sports right now. Silver Lake, the private equity firm owns 9% of the company. You have, I can't pronounce his name, but he's an Egyptian billionaire.

He owns 6% of the company. You have the Bill and Melinda Gates Foundation that up the stakes from 1.5% to 3%. And then you have KKR owns, I think, 1.5% of the company. There are people there who, as a group combined, maybe it's not one person who buys it. It's grouped the way I think the 76ers went about where you get a group of people who buy this. And, you know, I don't think there's any shame in, you know, going halvesies or thirds with, you know, two of your other. What was it, Jay-Z owned 0.1% of the Nets for a while and everyone would call him a Nets minority investor, even though he, his ownership rounded down to what you and I own. of the nets? Yeah. I mean, he, so I mean, these things could, could happen. These are clearly big

checks, but there are, I mean, there's also people who now just have massive amounts of wealth, you know, if Steve Bomber wanted to buy a team today, would he, I don't know his financial situation. He probably could do it. He's never said he showed a share of Microsoft stock, I think. Well, Balmer owns the Clippers. No, absolutely. I'm saying if he was going to do it again. Yeah. Yeah. And, you know, so there's, there are people out there who could do it or are you doing it as a group. And I'm not saying Bill Gates doesn't seem like that's his personality is going to buy the team. It's just, I think it's interesting to see that all of these long-term oriented investors who are not necessarily trying to beat an index, but are trying to make money.

silver light to some extent, but the Egyptian guy, the KKR and these others, and Bill Gates for the foundation's money, are taking these long-term views. To me, the hardest thing about investing is people, because their investors, force them to take short-term views. And that's why a lot of people get frustrated and put their hands up and will avoid the stock. But if you're able to, you know, have that luxury of time, you can make a lot of money. You know, again, I don't want to spend too long on MSGS because I want to talk MSCEE, but there's one question on, there's one thing that will transition this, but I do just want to ask the other question on MSGS is, the Big Ten over, I believe it was over this weekend,

just got a massive, massive contract from a bunch of different people. And if you listen to the most recent MSGS call, I'd encourage anyone to go listen to it. It's really interesting to talk about great business momentum. You know, renewals are up 9%, double digit increases and cap spending during the season. I think the Knicks will be better this year. The Rangers are coming off a deep playoff run. I think it's going to be really good.

Sports betting is just going to be, this is the first year where it's going to be there in full. But the most interesting thing to me is if you think back to win all of the NBA teams really inflected, It was in the mid-2010s when first Steve Balmer bought the Clippers for $2 billion, which was way more than anyone thought they would go for. And then within a year, the sports rights renewals came in with the TNC ESPN contract, and they like tripled and no one realized how high they were going to go. And if I remember correctly, MSGS's stock, it was MSG at the time, was up like 30 percent in three months or something on the heels of this news. And I do just keep wondering, big 10 just got that massive increase. sports rights are coming up in the 25, 26 season. They're probably going to get renewed in the next 18 months.

Everyone I listen to, you know, I'm a big NBA fan, thinks that it's going to be a big number. And I wonder if the market's a little bit sleeping on, you know, in the next two years, you get a massive renewal. And then Forbes comes out and says, hey, our value of the Knicks isn't $6 billion anymore. It's $9 billion because sports rights have gone through the roof. So I'll just pause there and let you comment on kind of that overall environment. Yeah, no, it's, it's, I believe, I mean, they get a share, I believe it's pro rata of the, of the leak deals, and they are, yeah, it's a prime beneficiary, and these are big, big, big numbers. You know, I think that, you know, sports and news are obviously what people, you know, watch live,

and that's extremely valuable for, for folks and they're paying up. or will content spending moderate? I don't know, but I don't, I think it probably will. I just don't know if it will for sports. I think the days of paying a comedian $40 million or whatever for a special or long gone, Netflix is not going to be doing that anymore. But, yeah, these things are really valuable. And that's one of the things that's going to drive the price of these things.

I think higher and higher. So that's also another cows. Yeah, I think it's 2025, 2026, but that will happen before then. Well, the number will be announced well in advance, et cetera, or there'll be whispers of what's going to happen. So it's going to be, I mean, look what happened

with the cricket stuff in India. I mean, these are huge numbers. Yeah, look, it's the last thing where you get it and people have to appointment view it. It's definitely the last thing where people were bothered to watch advertisements, right? Because you watch a game, there's natural breaks, you kind of have to sit through it.

Whereas if I'm watching Hulu, the other day it was at my in-laws house, and they have Hulu with ads, and I have Hulu without ads, and we were trying to watch something at night. And an ad popped up, and my wife and I were like, what is happening here? And it just totally just combined.

Only place you'll watch ads, only place monoculture only place you bring it and 10 million hardcore NBA fans are going to subscribe to your service day one. It's the best cost leader out there. All right, let me do a transition question for MSGS to MSGE. If you're, you mentioned Steve Bomber and you hear lots of complaints with Steve Bomber. His checkbook is so big, the clippers can spend way too much money. And the other thing is the warriors, like the warriors and the clippers do not care about the luxury tax apparently. And for the warriors, it's because they built the chase. Serena and apparently that thing just mince money. So my transition question from MSGS to MSG is

MSGE owns the garden, right? The garden, most of the value in it, it comes from it's in New York City, but a lot of the value has it's got the Knicks and Rangers everything. As you think longer term, I know we'll talk air rights. I know we'll talk all this, but at one day, will MS, will the garden, will it be like the Chase Center where they redo it and it's just this absolute money making, money printing machine. Not that it's doing poorly now, but is there that kind of optionality down the road? There's definitely an optionality down the road. And it's one, they redid it. In some ways, it's analogous to the sphere, which we'll talk about in a little bit, where they went massively over budget and people got all upset.

I think that was around the financial crisis. I could be wrong. They redid it 2010 into 2011, a billion dollar spend. and people were furious at the time. And I think nowadays they say, hey, it was probably like a 15% IRA and everybody's pretty happy with a 15% IRR. So they have experience in doing this. There's a lot of things that could happen. You know, it seems crazy now that people are not,

as with New York City and the state of it, that they may be building things around Penn Station. And it's a little too complicated or too much to probably go into the whole details of what's going on there, but there is the possibility of the garden potentially being moved at some point in time as part of a larger strategic move. So a lot of things could happen. So yes, you could have a, what is it called, a redo of the garden at some point in time,

I don't, the answer is I don't know, but it's certainly a possibility. and that will help, although it's worth noting, you know, the MSGE call talking about how food and beverage is really doing extremely well. All these things are doing really well. But, yes, it's now a 12-year-old arena, so it's not the shiny new thing anymore. And, you know, yes, there could be value. And MSGS call, another thing they call out is they talk premium. And I do think if you redid MSG today, especially in New York City, I think there would be like just kind of more devoted to the suites and the really high-end stuff where the money is really made.

I just don't think I'm no expert in stadiums. I think MSG is designed for a little bit of an older model. And yes, they've redone it. But I think you could do a lot more with suites, especially in a city just as rich with as much finance and media, as much entertainment spend as New York City had. that would be my thing. But let's turn over to MSG. Like, MSG, you and I are talking, is treating just under $60 per share. We can talk some of the parts. We can talk everything. The last time I think I had you on was we were decrying how crazy the MSG and MSGE

merger was. I still think it was crazy. But, you know, we were going to, we actually were going to record this podcast last week. And then we said, oh, earnings are coming up. Let's wait. It's a good thing we waited because MSG said they might do a spin-off coming up. There's all this stuff going on. I'll pause there. What's going on with MSG? How are you thinking about that these days?

Yeah, it was very interesting. I think it was Thursday night. I was going to the city with my family. I get this alert, you know, saying MSGE is now looking to do a spin-out. And essentially, what they're doing, and I think it makes a lot of sense is, you know, you're having, basically what I talked about, the sphere, which I encourage anyone just to Google the sphere, Las Vegas, see what it is, but it's basically a state-of-the-art entertainment system, the greatest sound system and light system in the world that's coming out in Vegas, that'll come out in the second half of 2023, it looks like, at this point. It looks like it's going to cost $2 billion to build. I wrote an article many years ago saying I wish they never did this, but it is what it is.

This is what you get with the Dolan sometimes. So what they did was MSGE is separating the two companies. You're going to have the sphere and something called town nightclubs, which is going to be one company, which will actually, I believe, be the MSGE will be the MSGE company. I'm not 100% sure how they're. Tao and the sphere will stay in the sphere will stay in. the current ticker is my understanding. And then they'll spin out, and we can talk about this is an interesting start sure,

they'll spin out two thirds of the other assets, which is mainly the garden, the Rockets, and the long-term lease on the, on Radio City. I think those are the main assets that might be missing one. They'll spin out two-thirds of that to shareholders, and that will be in a new company that they're calling the, I think that's the live and entertainment company. Yeah, they haven't had a name on it. I don't know why they shouldn't call the other one, like, you know, MSG sphere and this MSG Entertainment, whatever it is, but you also, in what I consider MSG

entertainment would also be the RSN, the Regional Sports Network, is another kind of major assets. They did not, I don't think, I haven't seen where they're putting the air rights. Say that again? I don't, I haven't seen, or they haven't announced, I believe, where they're putting the air rights that MSGE. I would, I could not imagine that you would spin out. that you would spin out the garden and not include the air rights with the actual physical property. I just couldn't imagine you would do that, but I guess there's a chance they keep it

inside. Yeah, they just didn't specifically call that out. I would say that's the logical way, but it also wasn't logical them doing the MSGN deal. So I just, there are certain things. I just rather assume nothing and just see what happens. But yeah, so essentially everything in MSGE, except for the sphere and town nightclubs is one entity, and then the rest are, you know, the other assets is how they're structuring. Yeah. So let me just talk about the structure first. So they said, hey, we're going to spend two-thirds of garden, Rockets, off to shareholders, and we'll keep one-third at the sphere at the sphere and tau company and that's a strange that's a really strange way to do it right companies do two-thirds one-third spins it's more 80-20 sometimes but it's just strange to

spin two-thirds up am i remembering correctly that's that's originally how they were going to structure the msgs spin and then they called it off and just did a full spin i don't remember what the proportion was but you know i do look at it and we get we you know a researcher did a, you know, a big report on spinouts maybe five or six years ago. And, you know, companies that retain portions on the spinouts actually do significantly better. Oh, interesting. And I'm just remembering the big asset that they're going to spin out with the garden that we were forgetting was networks. They're putting networks in with the garden as well.

But yeah. Yes, yeah. Yeah. So, I mean, listen, I think maybe they're keeping it. One, they can always spin it out further later on, the optionality. If they need more cash later on, this is an asset that they could sell. I would hope that wouldn't be the case. But they're claiming that the MSG sphere, which, you know,

as I said, it's going to cost about $2 billion to build. They're exploring for future ones more cap-light ways of doing it. I don't know, a franchise model is the way I would put it. This is not a Burger King, but it's a, so I think it's just, it might be given some optionality. Well, let's stick with the sphere of them, because I know I've got a lot of smart friends who are long MSGE, and the math just hits you over the head, right? This is a $3 billion EV company.

A lot of the debt is at the MSGN level, not the corporate level. So, I mean, about, they've got about $1.7 billion of debt. About $1 billion of that is Network's debt, which, you know, I'm not even sure if networks covers the debt these days, but we can talk about that later. But the math hits you over the head when you say, hey, this is a $3 billion enterprise company. I mean, you know, they're going to spend $2 billion on the Garden, $1.5 of that's already spent, or sorry, on Sphere. The Garden's almost certainly worth $2 billion.

Networks, you know, if we're giving them full credit for the debt, is worth probably 500 to a billion rock cats are worth 500 like the math starts hitting you over the head so i've got a lot of friends who are longer done just the math hit you over the head thesis right and we didn't even talk air rights there but then i've got a lot of friends who are shorted on hey these guys are putting two billion dollars into the sphere and they think they're going to be more spheres beyond this like what world are they living in this is this is awful capital allocation originally they thought it was going to cost 1.3 billion dollars and it would have been a bad investment there so So I guess I just want to ask, like, my two friends, some people look at asset value, some

people look, this is just lighting money on fire left and right. Like, how do you look at MSGE? I mean, when we did our valuation of the sphere, we value it at 50% of the construction costs. And then we put, I think we put a big haircut on the cash, I forgot what percent of it, to account for. As I said earlier, I actually wrote an article for Forbes, you know, three years ago saying I didn't like this thing. I wish they didn't do it. They have the best assets in the world minus the sphere. Why are they, for entertainment, why are they, why are they doing this? But let's take the contrarian article part of it. Maybe James is correct

building the state-of-the-art menu, 20,000 seats in Las Vegas that has the world's greatest sound, greatest lights, huge sponsorship opportunities, huge utilization. Maybe he's right. I mean, I don't know if it's officially announced, but it floated that U-2 is going to be the opening act for, and that do a residency there. you know, Vegas is, if you pick a venue for this would be the perfect one, you know, there's no ROI given, because I don't think they know what it is. I think this is not good capital allocation. I fully agree. But based on kind of what you said before, they just have so many great assets that it is, it's hard to ignore. And listen, you also, as a position, you put it kind of according way, you know, it doesn't have to be

your, you know, a 10% position in a portfolio. There's a lot of potential upside where it could become a 10% position if all things go well. So it's just, it's a different way kind of of looking at it. So I think there's certainly issues there, but as I said earlier, the issues create the opportunity. Yeah. Let's talk about another piece that has issues inside of it, and that's MSGN networks, right? So the last time you were on, they were merging MSCEE into MSGN, and I think both of us thought that was a terrible deal.

And the reason was, look, MSGN has been a standalone RSN for forever. And our argument was that makes absolutely no sense. They need to sell to a bigger company that's kind of got an umbrella, an umbrella where they can go negotiate and say, hey, you drop us, you're not just losing MSGN, you're losing ESPN, you're losing Disney, like something along those lines. There would have been massive synergies and said they sold it. They did a related party transaction, MSG, MSGN merge. I think they said on the Q4 call, they said, hey, MSGN's done its job. It got us a lot of cash flow that we directed into the sphere, which, oh my God, I can't believe they said the quiet part out loud.

But, you know, today, you look at MSG networks. Comcast dropped them in October of 2021. Once one person drops you, you're always worried that you're always worried that someone else is going to drop you. They say MSGN is going to release a direct-to-consumer standalone app, I believe in the second half of the NBA regular season, NHL regular season. And I just look at that and I say, the best time to release an app is before the season starts. I think there are some restrictions on why they can't do that. But I look at that. I look at Comcast dropping them and I say MSGN seems mismanaged these days. And it seems like a really terminal asset.

Yeah. Interestingly, I think MSGM was the first regional sports network. Going back to what you said, Charles, who's 95 years old, who, you know, the patriarch of the family was responsible for that. Yeah, no, listen, it's a... It's a challenge business, but I would say that sports gambling is, this will help them tremendously, both in terms of sponsorship opportunities. It's now, I believe, for MSGS, their largest kind of advertising is sports gambling. Even if the Knicks are terrible, which is a good assumption, people watch games. games that they bet on them. Higher advertising fees, I think they increased by $10 million this

past year. And it was a shortened season, because of last season was shortened. So there's a lot to like. I realize also, you know, the bear case will be that, you know, draft kings, et cetera, won't spend as much money going forward. But yeah, I think the sports gambling is going to be, is going to surprise people on the on the upside for them i i i you know we talked about it before i fully agree that uh msg uh and they should never have done it it was inappropriate it's a bad use of funds it's just different shareholder base but it is what it is i mean the only good thing to say is i own shares in both so i kind of uh got both but i i i didn't like it's kind of funny also. I don't know if you saw he, anyone who was involved, any of the

plaintiff's lawyers involved in that are not allowed at Madison Square Garden. Say again. Any of the plaintiff's lawyers who are suing them are actually banned from Madison Square Garden. Oh, that's hilarious. Them and Charles Oakley can't, you know what? The plaintiff's lawyer, banning the plaintiff's lawyers does make sense. No, MSCN, you know, I am worried that it is a terminal asset, but as you said, like sports betting is so huge for these guys. And we still haven't even started really touching into the sports betting where like the the real in-game stuff where you're watching where you're watching the game and you can just press hey I think Julius Randall is going to score a bucket on the next game and like once you start getting that

in there the fees can be so high and like look at as MSGN and guess what it's still called MSG network right every other RSN that I'm aware of I'm sure there's someone missing but the major Arsons, I'm aware of, have all rebranded to Bally's regional sports networks or whatever. Like, it seems like there's $100 million of very easy value going to Caesars, draft kings, and Fanduel, and saying, hey, right now, highest winner, we're going to rebrand MSG network to Fandul network for the next seven years. Highest bidder wins, let's go. It seems like there's $100 million of value easy there.

There's lots of value. And the one good thing that I've always liked about MSGN, every other RAN. RSN has about five-year contract rights. If I remember correctly, MSGN has the Nixon Rangers locked up till about 2035. That's still 13 years. That's a lot longer. It's in a major market. That's so great.

One thing I want to talk that I think you've done more work than most of we have talked on, the air rights for the garden. And I don't think we've really talked about air rights on this show. So, you know, the garden is on fire right now. They talked about Harry Sall is going to do a 15-day tour. I think it's the best. gross that they've ever done in 2022, they were having the best gross, just sell out every night.

So the garden's on fire. But nobody really talks or thinks about the air rights. So I just want to ask you, what are we talking about when we say, hey, the garden's air rights? Like, what's the value there? What's the plan to develop those? For those who haven't really seen it or whatnot, the garden is a relatively low building. They have the rights to build up. I forgot how many feet, but it's a, you know, they have 2.5 million, I think, of buildable feet.

So they have the rights to do that. Realistically, they're not going to do that. You're not going to have condos in top of Madison Square Garden. I think that'd be a little weird. It would be kind of cool, though, like, if you had the 30-floor apartment and, like, during games, you were feeling the crowd, like, scream as things are, that'd be kind of cool. Yeah. So you can, and the laws are convoluted, and I'm just doing this in a very basic sense,

but you can essentially transfer your right or sell your rights to other people. And, you know, there's a whole movement to develop that area. You know, the governor wants to do it. Vornado wants to do it. They want to build office towers. To me, it seems a strange time to build office towers. no one wants to go into the city, but maybe that's up being more forward thinking than I'm being. And these air rights are very valuable. You literally can sell air. And it's not like this is pie in the

sky. There's been transactions through the years on these things, especially churches and other places of worship have sold these. So that's something that, you know, you look at, I've looked at some of the cell side reports on MSGE, and this is one of my criticism of the cell side, they don't even, there's no word of air rights mentioned there. And they're valuable. They could be worth hundreds and hundreds of millions of dollars. You know, when they monetize them, I don't know. Will they? I'm not sure. But it's certainly possible. One of the things, I fully agree with you, I mean, I think the MGM, MSG network kind of has a somewhat nice ring to it, but, you know, they'll go to the highest bidder.

Not saying they would do this, but just think out what would naming rights of the garden go for? I mean, just think about just to how crazy, what do they pay for crypto.com? I hope they got paid in advance, by the way. Yeah, I think they got 300. Actually, when crypto went through, I did the math, and I was like, oh, the garden would go for, for, quite a bit but you know what i do think you never know but i'm not saying it's going to happen it's not i mean i i do think the garden they they like it kind of as a brand and rightly or wrongly

but it is madison square garden presented by something if i remember correctly right it's like msg presented by chase or something i can't they have they have big sponsored with chase in the delta i think uh but like as i said i think that's not north happening but it just shows the value Andrew, because I'm from New Orleans, I remember for years, it was the Superdome, right? And I could have never imagined, like, this was the Superdome, maybe from New Orleans, I was overbrew, but, you know, at the time it was the biggest thing. It hosted some of the biggest things. And then guess what, Mercedes came along with a really big check and they said, oh, now it's the Mercedes-Benz Superdome or something. Like, this could be the Vandul Madison Square Garden or something. So it can definitely

happen. It's just, there's just so many things that could go right. People are just focusing on the negatives. So that's where. When I look at your valuation, you've got the air rights for MSG, $2.5 million billable square rights at $300 per square foot. That comes out to $800 million, which that is a lot of money against, as I said, this is an enterprise value company of about $3 billion. So I just want to ask, where did that $300 per square foot number come? We just look at comparable transactions that happened. Obviously, it's a weird time to be in New York right now. And the way, you know, that might be aggressive, probably is.

But we also valued, as I said, the cash balance is 75% of the current cash balance. We valued the sphere at half of its, you know, basically half of it would have cost to build. So that's kind of, and put, you know, so. That part of it, who knows, but it's worth a lot of money. And it will one day, I think, be monetized, and it'll be pretty interesting. Just real quickly. So the other, we've talked networks, we've talked garden, we've talked to air rights. The other big piece, I mean, I don't think Tao is worth that much.

I know they like to say Vegas reopening. It's going to be an international business. I don't think Tal's worth that much these days. But the Rockettes are a real brand. Every down and then, we'll like glimpse a little bit of their financials. But what do you think the Rockets are worth inside of MSGE? I don't have, we don't have an exact value of it, but you're right, it is substantial. And part of their results, why they weren't nearly as good as they could have been for the year.

It seems like a long time ago, but like a large percentage of the Rockettes shows this year were canceled because of Omniqu I think it's so easy to forget. It feels like forever ago, but I remember when the press release came out. It was like December 7th or something and said, hey, we have to cancel the rest of the Rockett show for Omnichron. And that the Rockettes run from November to December. They don't run a huge amount of time. They make a lot of money in that time, but they don't run very long.

So if you cancel those shows, that's peak earning season gone. No, yeah, there's other things. I guess you put in other cities. I'm not sure what you would do. Obviously, you want to keep it special in New York. But the Rockettes are valuable. There's just so many assets under there. They own these, you know, they have a stake in Draft Kings.

They have a stake in a kind of a microcap company called Toursquare. I know Townscare Media, yeah. Which we own full disclosure. And full disclosure, we own MSGE and MSGS. And I'd imagine after this conversation, you would think I do own it. But, you know, as I said, full disclosure. So this is a lot of assets there. And, you know, James, you know, there could be, you know, more sinister reasons for doing it,

but is, I think, help highlighting that value of some of these assets. And, you know, it'll be interesting to see what happened. And it was fascinating that post-market, the MSGE was up about 16% that Thursday night. it's now giving back more of those games and games and then some. Bottom line, it's a cheap stock. No disagreement there. Let me, let me wrap this up with one last question. Just switching back to MSGS side.

I know you caused a little bit of a serve. You went on CNBC and said, and you talked, and I think for years, people have kind of whispered, hey, Dolan's putting the feelers out that he's going to sell the team. And we went through MSGS and how much more. value there would be if they sold the team. But you went on CNBC and got a little bit of traction where you said, I think he might sell the team. A bunch of Nix fans said, hashtag sell the team. And I believe Dolan had to leak to the New York Post. We're not selling the team right now. But, you know, if I just said, if I asked you, what are the odds you and I are sitting

here talking in three years, five years, seven years? And the NICs and Rangers are still inside of MSGS as a publicly traded company with James Dolan control. What would you kind of say the odds of that are? I don't know what the family dynamics and how everything works in terms of estate tax, but Charles is 95 years old. He owns, you know, family owns a substantial amount. There could be estate reasons for him to, for them to sell it. There's certainly a chance, but I think if you give me a seven-year number,

I would say that it is well above 50%. that they would sell it. But it's hard to put this, you know, to put the, to put it probabilities on it. But I think there's a significant chance that they sell it. And I think there's even more of a significant chance that they sell part of the team to a private equity firm to put a value on it. And also it's not, you know, I realize at the end of the day, he controls everything. But what if someone comes in and then buys a real substantial stake of, you know, 15, 20% of the team or whatnot and tries to agitate for things? I mean, how does it, it makes it very uncomfortable for him?

I don't disagree with any of me, but the most interesting thing you said in there, which I hadn't really thought about is Charles is 95 and after he passes away, you know, the most common things in family ownership when you own a sports team is after kind of the Patriarch passes away, a lot of agitation for change. And especially, I mean, I think the Dolans have plenty of money after the cable vision sale, but that MSGS stake is going to be worth a lot and it doesn't pay out any cash flow, right? Well, the Dolans pay themselves pretty nice board fees, but that pales in comparison to what if they sold and they didn't have to have all their friends being like, you guys suck as owners behind their back all the time.

I'm like, there could be some really interesting family dynamics there. And I'd almost be curious to, like, go hire a, like, inheritance lawyer or something to go dig through and say, hey, how vulnerable is James going to be once the dad passed away? Because you see that a lot. I mean, the bus family had a lot of dynamics there. They managed to hold on to Lakers, but there were some weird dynamics there. Bronco sold or maybe will sell after the Patriarch died, even the Allen family. Like, rumors a lot of those assets for sale. And trust me, the Allen family was not hurting for money.

So, yeah. Yeah. No, there's a bunch of siblings there. I think James has, like, veto rights on it. I think the, I could be wrong, but I believe that's how it's set up. But, yeah, no, the family dynamics can create a lot of strange things. So there's a lot of optionality there. As I said, as I said before, this is not an instinct.

gratification stock, but for people who are patient, and you look at some of the investors in both MSG, MSGS, besides the ones I named, you have Mario Gabelli, you have the folks at Ariel, some of the best investors that I know, very long-term patient investors, those are the top shareholders in one or both companies. So I think it's worth, you know, if you have more than a year time frame, it's worth taking a look at. I think I've asked you this sport. Are you a basketball fan? I am, I mean, I watch, but not a huge fan.

I was just going to ask, do you want the Knicks to trade for Donovan Mitchell? And you can say I'm not super up to date on the trade. I'm not up to, I couldn't give you an intelligent answer. The only, you know, be nice if LeBron James was on the team. Besides that, I, he just re-signed with the Lakers, so I don't know that's happened. But I know my listeners only listen to me for my takes on basketball, I will be apoplectic if the Knicks trade all of the graphics and everything for Donovan Mitchell, who I think is very overrated. I'm willing to wait one more year and play out free agency next year, but that is just,

it wouldn't be bad to make a playoff run, but I just, I would not be a big fan of that. But cool. Hey, John, this was great. Again, John came on because he just put out a fresh looks. I'll include a link to it in the show notes. If anybody wants to check that out, everybody should follow John because he follows, especially if you like, as I've said many times, if you like quality companies at reasonable prices, is like, that is right in John's wheelhouse. That is what Boyer does all the time.

MSG, MSGS, they're more than quality, I would say, and they're probably more than cheap, but there are management questions. But John, thanks so much for coming on and looking forward to chatting to you soon. Great. Thank you for having me. It was a lot of fun. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.