Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2018
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number: 1-36900
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12417412&doc=18
(Exact name of registrant as specified in its charter) 
Delaware
 
47-3373056
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
Two Penn Plaza New York, NY
 
10121
(Address of principal executive offices)
 
(Zip Code)
 
 
 
Registrant’s telephone number, including area code: (212) 465-6000
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
 
Name of each Exchange on which Registered:
Class A Common Stock
 
New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant has been required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether each Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Exchange Act Rule 12b-2.
Large accelerated filer þ
 
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
 
Smaller reporting company o
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Aggregate market value of the voting and non-voting common equity held by non-affiliates of The Madison Square Garden Company as of June 30, 2018 computed by reference to the price at which the common equity was last sold on New York Stock Exchange as of December 29, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately: $3,897,326,309
Number of shares of common stock outstanding as of July 31, 2018:
Class A Common Stock par value $0.01 per share
 —
19,136,976
Class B Common Stock par value $0.01 per share
 —
4,529,517
Documents incorporated by reference — Certain information required for Part III of this report is incorporated herein by reference to the proxy statement for the 2018 annual meeting of the Company’s shareholders, expected to be filed within 120 days after the close of our fiscal year.
 




TABLE OF CONTENTS
 
  
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Table of Contents


PART I
Item 1. Business
The Madison Square Garden Company is a Delaware corporation with our principal executive offices at Two Pennsylvania Plaza, New York, NY, 10121. Unless the context otherwise requires, all references to “we,” “us,” “our,” “Madison Square Garden,” “MSG” or the “Company” refer collectively to The Madison Square Garden Company, a holding company, and its direct and indirect subsidiaries. We conduct substantially all of our business activities discussed in this Annual Report on Form 10-K through MSG Sports & Entertainment, LLC and its direct and indirect subsidiaries. Our telephone number is 212-465-6000, our Internet address is http://www.themadisonsquaregardencompany.com and the investor relations section of our web site is http://investor.msg.com. We make available, free of charge through the investor relations section of our web site, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). References to our web site in this report are provided as a convenience and the information contained on, or available through, our web site is not part of this or any other report we file with or furnish to the SEC.
The Company was incorporated on March 4, 2015 as an indirect, wholly-owned subsidiary of MSG Networks Inc. (“MSG Networks”), formerly known as The Madison Square Garden Company. All the outstanding common stock of the Company was distributed to MSG Networks shareholders (the “Distribution”) on September 30, 2015 (the “Distribution Date”).
On June 27, 2018, the Company announced that its board of directors (“Board”) has authorized the Company’s management to explore a possible spin-off that would create a separately-traded public company comprised of its sports businesses, including the New York Knicks and New York Rangers professional sports franchises. We refer to the potential spin-off as the “Sports Distribution.” If the Company proceeds with the Sports Distribution, it would be structured as a tax-free transaction to all MSG shareholders. Upon completion of the contemplated separation, record holders of MSG common stock would receive a pro-rata distribution, expected to be equivalent, in aggregate, to an approximately two-thirds economic interest in the sports company. The remaining common stock, expected to be equivalent to an approximately one-third economic interest in the sports company, would be retained by the Company. There can be no assurance that the proposed transaction will be completed in the manner described above, or at all. The Company has not set a timetable for completion of this process. Completion of the transaction would be subject to various conditions, including certain league approvals, a private letter ruling from the IRS, receipt of a tax opinion from counsel and final Board approval. The Company may file a Form 10 registration statement with the SEC which would contain additional information about the proposed Sports Distribution.
Overview
The Madison Square Garden Company is a leader in live experiences comprised of celebrated venues, legendary sports teams, exclusive entertainment productions, and other entertainment assets which include dining and nightlife venues and music festivals. Utilizing our powerful assets, brands and live event expertise, the Company delivers premium and unique experiences that set the standard for excellence and innovation while forging deep connections with diverse and passionate audiences. We manage our business through the following two operating segments:
MSG Sports: This segment includes the Company’s professional sports franchises: the New York Knicks (the “Knicks”) of the National Basketball Association (the “NBA”), the New York Rangers (the “Rangers”) of the National Hockey League (the “NHL”), the New York Liberty (the “Liberty”) of the Women’s National Basketball Association (the “WNBA”), the Hartford Wolf Pack of the American Hockey League (the “AHL”) and the Westchester Knicks of the NBA G League (the “NBAGL”). Our professional sports franchises are collectively referred to herein as “our sports teams.” The MSG Sports segment also includes Counter Logic Gaming (“CLG”), a premier North American esports organization, and Knicks Gaming, MSG’s franchise that competes in the NBA 2K League. CLG and Knicks Gaming are collectively referred to herein as “our esports teams,” and, together with our sports teams, “our teams.” In addition, the MSG Sports segment promotes, produces and/or presents a broad array of other live sporting events, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports, tennis and college wrestling.
MSG Entertainment: This segment features the Company’s live entertainment events — including concerts, family shows, performing arts and special events — which we present or host in our diverse collection of venues. Those venues are: Madison Square Garden (“The Garden”), The Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, the Forum, The Chicago Theatre and the Wang Theatre. Our MSG Entertainment segment also includes our original production — Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”) — as well as Boston Calling Events, LLC (“BCE”), the entertainment production company that owns and operates the Boston Calling Music Festival, and TAO Group Holdings LLC (“TAO Group”), a hospitality group with globally-recognized entertainment dining and nightlife brands.

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Our Strengths
Ownership of legendary sports franchises;
Iconic venues in top live entertainment markets;
Marquee entertainment brands and content, including the Christmas Spectacular and the Radio City Rockettes (“Rockettes”);
Powerful presence in the New York City metropolitan area with established core assets and expertise for strategic expansion;
Strong industry relationships that create opportunities for new content and brand extensions;
Deep connections with loyal and passionate fan bases that span a wide demographic mix;
First-class experience in managing venues, bookings, marketing, sales and hospitality in multiple markets;
Ability to forge strategic partnerships that utilize the Company’s assets, core competencies and scale, while allowing the Company to benefit from growth in those businesses;
Established history of successfully planning and executing comprehensive venue design and construction projects;
Extensive range of proprietary marketing assets, including a customer database that allows us to drive engagement with our brands; and
Strong and seasoned management team.
Our Strategy
The Madison Square Garden Company pursues opportunities that strengthen our portfolio of live experiences and capitalize on our iconic venues, popular sports franchises and exclusive entertainment content, as well as our expertise in venue management, bookings, marketing, sales and hospitality. We believe the Company’s unique assets and capabilities, coupled with our deep relationships in the sports and entertainment industries and our strong connection with our diverse and passionate audiences, are what set the Company apart. We continue to look for ways to improve our core operations, while we explore new opportunities to grow and innovate. Specific initiatives we are focused on include:
Developing championship caliber teams. The core goal of our sports strategy is to develop teams that consistently compete for championships in their leagues and support and drive revenue streams across the Company. We continue to explore new ways to increase engagement and revenue opportunities across the teams’ broad consumer and corporate customer bases.
Monetizing our exclusive sports content. The Company has media rights agreements with MSG Networks that provide a significant recurring and growing revenue stream to the Company, subject to the terms of such agreements. In addition, these agreements and our relationship with MSG Networks provide our fans with the ability to watch locally televised home and away games of the Knicks and Rangers, as well as other programming related to our teams, on MSG Networks’ award-winning regional sports networks.
Utilizing our integrated approach to marketing and sales. The Company possesses powerful sports and entertainment assets that can create significant value for our business. For example:
Our integrated approach to marketing partnerships allows us to use and sell our broad array of assets together in order to maximize their collective value, both for the Company and for our marketing partners. Our ability to offer compelling, broad-based marketing platforms, which we believe are unparalleled in sports and entertainment, enables us to attract world-class partners, such as our “Marquee” marketing partner, JPMorgan Chase, and our “Signature” marketing partners, which include — Anheuser-Busch, Charter Communications, Delta Airlines, DraftKings, Kia, Lexus, PepsiCo (beginning September 1, 2018), SAP and Squarespace.
We continue to forge deep direct-to-consumer relationships with customers and fans, with a focus on understanding how consumers interact with every aspect of the Company. A key component of this strategy is our large and growing proprietary customer database, which drives revenue and engagement across segments, benefiting the Company through ticket sales, merchandise sales and sponsorship activation. This database provides us with an opportunity to cross-promote our products and services, introducing customers to our wide range of assets and brands.

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Utilizing a unique strategy for our performance venues. The Company has a collection of performance venues through which we deliver high-quality live sports and entertainment. In addition to our New York venues: The Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre, our portfolio includes: the Forum in Inglewood, CA and The Chicago Theatre, and we have an exclusive booking agreement with respect to the Wang Theatre in Boston. These venues, along with our venue management capabilities, effective bookings strategy and proven expertise in sponsorships, marketing, ticketing and hospitality, have positioned the Company as an industry leader in live entertainment. We intend to leverage our unique assets, expertise and approach to drive growth and stockholder value, and to ensure we continue to create unmatched experiences for the benefit of all our stakeholders.
Maximizing the live entertainment experience for our customers. We use our first-class operations, coupled with new innovations and our ability to attract top talent, to deliver unforgettable experiences for our customers — whether they are first-time visitors, repeat customers, season ticket holders, or suite holders — ensuring they return to our venues. We have a track record of designing world-class facilities that exceed our customers’ expectations. This includes our renovations of Radio City Music Hall, the Beacon Theatre, The Garden and the Forum to deliver top-quality amenities such as state-of-the-art lighting, sound and staging, a full suite of hospitality offerings and enhanced premium products. In addition to better onsite amenities, we continue to explore new ways to utilize technology to improve the customer experience and create communities around our live events. From the way our customers buy their food and beverage; to how we market and process their tickets; to the content we provide them to enhance their sports and entertainment experience, we want to give our customers the best in-venue experience in the industry.
Leveraging our live entertainment expertise to increase productivity across our performance venues. Part of what drives our success is our “artist first” approach. This includes our renovation of the Forum, which set a new bar for the artist experience by delivering superior acoustics and an intimate feel, along with amenities such as nine star-caliber dressing rooms and dedicated areas for production and touring crews. This talent-friendly environment, coupled with more date availability and our top-tier service, is not only attracting artists to our West Coast venue, but also bringing them back for repeat performances. We will continue to use our “artist first” approach to attract the industry’s top talent with the goal of increasing utilization across all our venues through more multi-night and multi-market concerts and other events, including more recurring high-profile shows that help expand our base of events. Examples of this strategy include our residencies — which feature legendary performers playing our venues each month, and have included Billy Joel at The Garden and Jerry Seinfeld at the Beacon Theatre.
Selectively expanding our performance venues in key music and entertainment markets. With the renovation of the Forum, we created the country’s only arena-sized venue dedicated to music and entertainment, which quickly established a strong presence in the market. We believe that, similar to Los Angeles, there are other select markets where our proven ability to develop music and entertainment-focused venues — coupled with our unique capabilities, expertise and “artist first” approach — will deliver a differentiated experience for artists, fans and partners. In May 2016, the Company announced plans to build a state-of-the-art new venue in Las Vegas focused specifically on music and entertainment. In February 2018, we further unveiled our vision for these venues, which will be known as MSG Sphere. We believe MSG Sphere venues will change live entertainment by pioneering the next generation of immersive experiences. The first MSG Sphere venue will debut in Las Vegas, one of the world’s most important entertainment destination cities. In February 2018, we also announced the purchase of land in Stratford, London, which we expect will become home to the Company’s first large-scale international venue and the second MSG Sphere. MSG Sphere venues will utilize advanced, cutting-edge technologies to create an entirely new platform that is expected to redefine how immersion and storytelling come together in live experiences. Because of the transformative nature of these venues, we believe there will be other markets — both domestic and international — where MSG Sphere can be successful. The design of MSG Sphere will be flexible to accommodate a wide range of sizes and capacities — from large-scale to smaller and more intimate — based on the needs of the individual market. Controlling and booking a network of world-class venues provides the Company with a number of avenues for potential growth, including driving increased bookings and greater marketing and sponsorship opportunities. As we explore selectively extending the MSG Sphere network, we will be open to multiple types of transaction structures, including owned, operated, and joint ventures. As we work with various companies to develop the technologies needed for MSG Sphere venues, we are focused on obtaining appropriate strategic rights with respect to intellectual property.

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Expanding our entertainment dining and nightlife venues. The Company owns a controlling interest in TAO Group — a leader in the hospitality industry. TAO Group currently operates 25 entertainment dining and nightlife venues in New York City, Las Vegas, Los Angeles, Singapore and Sydney, Australia with globally-recognized brands that include: TAO, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal. TAO Group is actively developing opportunities in select markets — both domestically and internationally — to expand and, in June 2018, announced that it plans to open new entertainment dining and nightlife venues as part of Moxy Chelsea hotel in New York City, as well as TAO Chicago and Marquee Singapore.
Growing our portfolio of proprietary content. We continue to explore the creation of proprietary content and attractions that enable us to benefit from being both content creator and venue operator. This includes opportunities to develop theatrical productions for our existing and planned venues. For our planned MSG Sphere venues, we are developing a set of tools that will allow both MSG and third parties to create content for the platform, making content creation an intuitive experience — whether someone is adapting existing content or developing original creations that maximize the potential of the venue’s technologies. MSG expects to use these tools to create our own catalogue of content and original productions, establishing a library of unique and compelling material that can be used across MSG Sphere venues.
Exploring adjacencies that strengthen our business. As part of our commitment to creating unmatched experiences, we explore adjacencies that strengthen our position in sports and entertainment. Potential opportunities include new types of events and festivals, and new opportunities in hospitality, clubs, and food and beverage. Examples over the last several years include the Company’s purchase of a controlling interest in BCE, the entertainment production company known for creating and operating New England’s premier music festival — the Boston Calling Music Festival; TAO Group, a hospitality group with globally-recognized entertainment dining and nightlife brands; and CLG, a premier North American esports organization.
Continuing to explore external strategic opportunities. We continue to seek strategic opportunities to add compelling assets and brands that resonate with our customers and partners, fit with our core competencies and allow new opportunities for growth across the Company. One of the ways we try to capitalize on our unique combination of dynamic assets, established industry relationships and deep customer connections is through strategic partnerships that bring together the expertise and capabilities of each partner, and enable us to team with recognized leaders in their fields and benefit from growth in those businesses. For example, we own 50% of Azoff MSG Entertainment LLC (“AMSGE”) which is backed by one of the music and entertainment industry’s most respected and influential executives, Irving Azoff. The joint venture owns and operates music, media and entertainment businesses, which allows us to pursue various businesses in the entertainment space. In addition, we own 50% of Tribeca Enterprises LLC (“Tribeca Enterprises”), bringing together two of New York’s cultural and entertainment icons to enhance the reach and impact of both brands, while allowing us to partner with one of the most respected teams in the film and entertainment industry.
Our Business
MSG Sports
Our Company is synonymous with some of the greatest sporting events in history. Today that tradition continues with our commitment to delivering a broad array of world-class sporting events that create lasting and indelible memories for sports fans. Our MSG Sports segment includes some of the world’s most recognized sports franchises, as well as a diverse selection of other live sporting events, that the Company promotes, produces and/or presents, primarily at The Garden, The Hulu Theater at Madison Square Garden and the Forum.
Our Sports Franchises
The Knicks and Rangers are two of the most recognized franchises in professional sports, with storied histories and passionate, multi-generational fan bases. These teams are the primary occupants of The Garden, playing a combined total of 82 regular season home games, often to at or near capacity attendance. The Liberty currently play 15 home games at the Westchester County Center, located in White Plains, NY, in addition to two regular season home games at The Garden. For all of our sports teams, the number of home games increases if they qualify for the playoffs.
New York Knicks
As an original franchise of the NBA, the Knicks have a rich history that includes eight trips to the NBA Finals and two NBA Championships, as well as some of the greatest athletes to ever play the game. In May 2018, the Knicks introduced a new head coach, David Fizdale, who will lead a young and exciting franchise into the 2018-19 season focused on fielding a championship-caliber team over the long-term. The Knicks ranked in the top three in the NBA for ticket sales receipts for the 2017-18 regular season.

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New York Rangers
The Rangers hockey club is one of the “original six” franchises of the NHL, with 2017-18 marking the team’s 91st season. Winners of four Stanley Cup Championships and 11 conference titles over their history, the Rangers continue to be one of the league’s marquee teams, advancing to the playoffs in 11 of the past 13 seasons. The Rangers are known to have one of the most passionate, loyal and enthusiastic fan bases in all of sports, and ranked in the top three in the NHL for ticket sales receipts for the 2017-18 regular season.
New York Liberty
Established in October 1996, when New York was selected as one of eight charter members of the WNBA, the Liberty have won three conference championships and appeared in the playoffs 15 times. In the 2017 season, the Liberty finished with the best record in the Eastern Conference for a third straight season and qualified for the WNBA playoffs as the number three overall seed. In November 2017, the Company announced that it is pursuing the sale of the Liberty.
Westchester Knicks
The Westchester Knicks, an NBAGL team, plays its home games at the Westchester County Center in White Plains, NY and serves as the exclusive NBAGL affiliate of the Knicks. In the 2017-18 season, the Westchester Knicks had the best regular season record in the Eastern Conference.
Hartford Wolf Pack
The Hartford Wolf Pack, a minor-league hockey team, is the player development team for the Rangers and is also competitive in its own right in the AHL. The Rangers send draft picks and other players to the Hartford Wolf Pack for skill development and injury rehabilitation, and can call up players for the Rangers roster to enhance the team’s competitiveness. The Hartford Wolf Pack have reached the playoffs 15 times in 21 seasons.
Esports
The Company’s portfolio of live experiences includes a presence in the esports industry through a controlling interest in CLG, a premier North American esports organization. Founded in 2010, CLG is one of the most established and successful organizations in the industry, operating eight teams across several well-known esports games: “League of Legends,” “Fortnite,” “Counter-Strike: Global Offensive,” “Super Smash Bros.,” “Smite,” “H1Z1,” and “Clash Royale.” In 2018, Knicks Gaming, our franchise in the NBA 2K Esports League, made its debut as part of the league’s inaugural season and qualified for the playoffs.
The Role of the Leagues in Our Operations
As franchises in professional sports leagues, our teams are members of their respective leagues and, as such, are subject to certain limitations, under certain circumstances, on the control and management of their affairs. The respective league constitutions of our sports teams, under which each league is operated, together with the collective bargaining agreements (each a “CBA”) each league has signed with its players’ association, contain numerous provisions that, as a practical matter in certain circumstances, could impact the manner in which we operate our businesses. In addition, under the respective league constitutions of our sports teams, the commissioner of each league, either acting alone or with the consent of a majority (or, in some cases, a supermajority) of the other sports teams in the league, may be empowered in certain circumstances to take certain actions felt to be in the best interests of the league, whether or not such actions would benefit our sports teams and whether or not we consent or object to those actions.
While the precise rights and obligations of member teams vary from league to league, the leagues have varying degrees of control exercisable under certain circumstances over the length and format of the playing season, including preseason and playoff schedules; the operating territories of the member teams; national and international media and other licensing rights; admission of new members and changes in ownership; franchise relocations; indebtedness affecting the franchises; and labor relations with the players’ associations, including collective bargaining, free agency, and rules applicable to player transactions, luxury taxes and revenue sharing. See “Part IIItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsBusiness OverviewMSG SportsExpenses.” Additionally, CLG operates multiple teams that participate in several different esports leagues. The rights and obligations of each CLG team (and member teams generally) vary from league to league. The leagues are generally empowered to and have implemented rules with respect to our league participation, as well as operation, and monetization of the CLG teams and brand. From time to time, we may disagree with or challenge actions the leagues take or the power and authority they assert, although the leagues’ governing documents and our agreements with the leagues purport to limit the manner in which we may challenge decisions and actions by a league commissioner or the league itself.

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Other Sporting Events
The Company’s MSG Sports segment also includes a broad array of live sporting events that the Company promotes, produces and/or presents, including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports, tennis and college wrestling. Many of these events are among the most popular in our history and are perennial highlights on our annual calendar, as well as some of The Garden’s longest-running associations.
Professional boxing, beginning with John L. Sullivan in 1882, has had a long history with The Garden. The Arena famously hosted Muhammad Ali and Joe Frazier’s 1971 “Fight of the Century,” considered among the greatest sporting events in modern history, as well as numerous bouts featuring dozens of other boxing greats. These have included: Joe Louis, Rocky Marciano, Sugar Ray Robinson, Willie Pep, Emile Griffith, George Foreman, Roberto Duran, Oscar De La Hoya, Sugar Ray Leonard, Lennox Lewis, Roy Jones, Jr., Mike Tyson, Evander Holyfield, Miguel Cotto, Wladimir Klitschko, Gennady Golovkin, and Vasiliy Lomachenko, one of the world’s best pound-for-pound fighters, who captured the WBA lightweight title at The Garden in May 2018.
The Company has also expanded its presence in the popular sport of mixed martial arts. In June 2016, the Forum hosted its first-ever Ultimate Fighting Championship (“UFC”) event with Michael Bisping capturing the middleweight title in an upset victory over Luke Rockhold at UFC 199. The Garden then hosted the historic UFC 205 in November 2016, the first professional mixed martial arts event in New York state since 1995, during which Conor McGregor knocked out Eddie Alvarez to become the first simultaneous two-weight champion in UFC history. In November 2017, UFC returned to The Garden, as mixed martial arts legend Georges St. Pierre made his much-anticipated comeback to the octagon to capture the middleweight title at UFC 217, one of three championship belts to change hands that evening. Bellator MMA has also hosted internationally-broadcasted events at both The Garden and the Forum, and Professional Fighters League has hosted events at The Hulu Theater at Madison Square Garden and The Chicago Theatre.
College sports have been a mainstay at The Garden for decades, with college basketball’s longest running holiday showcase, the Holiday Festival, first tipping off more than 60 years ago. In addition to St. John’s University calling The Garden its “home away from home,” this past year the highly-anticipated Big East Tournament celebrated its 36th year and the Big Ten Men’s Basketball Tournament held its championship at The Garden in March for the first time. Other college basketball highlights include visits from Duke University’s Blue Devils and the Villanova Wildcats, who played four games at The Garden on their way to winning the 2018 National Championships, as well as the annual Jimmy V Classic and the 2K Sports Classic.
In 2007, The Garden sold out its first college hockey game — Red Hot Hockey featuring Cornell University versus Boston University — which has become a popular biennial event that Cornell won for the first time in 2017. College hockey has continued to grow at The Garden and become a fan-favorite over the last decade, attracting top national teams such as Boston College, North Dakota, Michigan and Minnesota.
Other recent world-class sporting events have included the NBA All-Star Game, which The Garden last hosted in 2015, marking the fifth time the arena has hosted the illustrious professional basketball event and the NCAA Division I Men’s Basketball East Regional Finals, which The Garden hosted in 2014 and 2017, and will again in 2020. Additionally, The Garden has featured numerous tennis legends on its court, including Pete Sampras, Roger Federer and Rafael Nadal, and in March 2018, welcomed tennis luminaries Serena and Venus Williams back for Tie Break Tens, the competition’s first event held in the United States.
These live sporting events are not contemplated to be included as part of the possible Sports Distribution.
MSG Entertainment
Our Company delivers unforgettable entertainment experiences — including live events and spectacular productions — all in extraordinary settings that span some of the country’s largest entertainment markets. This creates a significant demand for an association with our brands — by artists, premier companies and the public. And with a foundation of iconic venues, our Company has a proven ability to leverage the strength of our industry relationships, marketing assets, customer database and live event expertise to create performance, promotion and distribution opportunities for artists, events and productions, and to increase utilization of our venues.
Specifically, our MSG Entertainment segment includes concerts, family shows, performing arts events and special events that we present or host at our venues, which are: The Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, the Forum and The Chicago Theatre. In addition, we have an exclusive booking agreement with respect to the Wang Theatre. With seating capacities and configurations that range from 2,800 to 21,000, our collection of diverse venues enables us to showcase acts that cover a wide spectrum of genres and popular appeal.

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Our MSG Entertainment segment also includes the beloved holiday show, the Christmas Spectacular — created for Radio City Music Hall and featuring the world-famous Rockettes. The Company is also exploring opportunities for a second, streamlined show featuring the iconic Rockettes at Radio City Music Hall.
Over the past couple of years, the Company has been executing on its plans to build a robust, diversified portfolio of live experiences. In July 2016, the Company acquired a controlling interest in BCE, the entertainment production company that owns and operates the Boston Calling Music Festival. This was followed in January 2017 by the Company’s purchase of a controlling interest in TAO Group, a hospitality group with globally-recognized entertainment dining and nightlife brands.
Our Live Entertainment Bookings
Our Company is an established industry leader that books a wide variety of live entertainment events in our venues, which perennially include some of the biggest names in music and entertainment. Over the last several years, our venues have been a key destination for artists such as the Eagles, U2, Pearl Jam, Foo Fighters, Paul McCartney, Kendrick Lamar, Bruno Mars, Justin Bieber, Dead and Company, Madonna, Mumford & Sons, Phish, Fleetwood Mac, Adele, Eric Clapton, Bruce Springsteen, Rihanna, Justin Timberlake, Katy Perry, Kanye West, Stevie Wonder, Ariana Grande and Dave Chappelle.
Our efforts to find new ways to increase the utilization of our venues led to a unique partnership between our Company and Billy Joel that made the renowned performer a staple of The Garden, playing monthly performances since January 2014. This extraordinary residency has been a great success, with 54 sold-out performances through July 2018, and has cemented Billy Joel’s record for the most performances by any artist at “The World’s Most Famous Arena.” In December 2015, the legendary New Yorker and comedian Jerry Seinfeld began a two-year residency at the Beacon Theatre, with monthly appearances in 2016 and twice monthly appearances in 2017. All 36 performances — which concluded in December 2017 — were sold out.
Our venues also attract family shows and theatrical productions, which this past year included: PAW Patrol Live!, Sesame Street Live!, PJ Masks Live!, and Elf The Musical. In addition, we frequently serve as the backdrop for high-profile special events such as the 60th Annual Grammy Awards, which returned to The Garden for the first time in 15 years in 2018. Other significant events that have been hosted in our venues include the Tony Awards, “America’s Got Talent,” and the MTV Video Music Awards; appearances by luminaries such as His Holiness Pope Francis, His Holiness the Dalai Lama and the Prime Minister of India, Narendra Modi; graduations, television upfronts, product launches and film premieres.
Although we primarily license our venues to third-party promoters for a fee, we also promote or co-promote shows where we have economic risk relating to the event. MSG Entertainment currently does not promote or co-promote events outside of our venues.
Our Productions
One of the Company’s core properties, the Christmas Spectacular, has been performed at Radio City Music Hall for 85 years. The world-famous Rockettes, along with show-stopping performances, festive holiday scenes and state-of-the-art special effects, have played an important role in the critically-acclaimed show’s enduring popularity. This past year the show featured several new technology enhancements, including the ability to project content on all eight of Radio City Music Hall’s proscenium arches. This large-scale projection, along with a backdrop that now includes one of the world’s largest 8K resolution LED screens, visually transformed entire scenes of the production. During the 2017 holiday season, the Christmas Spectacular sold more than one million tickets.
We acquired the rights to the Christmas Spectacular in 1997, and those rights are separate from, and do not depend on the continuation of, our lease of Radio City Music Hall. We also hold rights to the Rockettes brand in the same manner.
The Company believes it has significant and unique assets in both Radio City Music Hall and the Rockettes, and is exploring the creation of a second, streamlined show that leverages not only these brands, but also the technology enhancements we have invested at the venue.
In addition, we continue to strengthen and broaden our Rockettes brand, targeting the most prominent and effective vehicles that elevate their visibility and underscore their reputation as beloved American cultural icons. The Rockettes have appeared or performed at high-profile events, including Presidential Inaugurations, the Macy’s Thanksgiving Day Parade, Macy’s 4th of July Fireworks event, the New Year’s Eve Times Square Ball Drop, the Tony Awards, and television shows (“America’s Got Talent,” “Project Runway,” “The Today Show,” “Live with Kelly and Ryan,” and “The Tonight Show with Jimmy Fallon”), among many others. We continue to pursue opportunities to generate greater brand awareness, including television and public appearances and dance education offerings.

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Our Entertainment Dining and Nightlife Offerings
The Company owns a controlling interest in TAO Group, which strengthens the Company’s portfolio of live offerings with a complementary, hospitality group with widely-recognized brands that include: TAO, Marquee, Lavo, Avenue, The Stanton Social, Beauty & Essex and Vandal. Since 2000, TAO Group has been creating some of the most innovative premium experiences in the entertainment dining and hospitality industry. Today, TAO Group operates 25 venues – 12 venues in New York City, six venues in Las Vegas, five venues in Los Angeles, one venue in Singapore and one venue in Sydney, Australia — and is actively developing opportunities to expand on their success with new venues. In June 2018, TAO Group announced that it will debut new entertainment dining and nightlife venues as part of Moxy Chelsea hotel in New York City, which is expected to open this Fall, as well as TAO Chicago restaurant and nightclub in September, followed by Marquee Singapore, located in the Marina Bay Sands hotel, in 2019.
A majority of TAO Group’s venues are leased, while the rest are managed. Essentially all of the venues have either long-term leases or long-term management agreements with options to renew for multiple years.
Our Festival Offering
The Company owns a controlling interest in BCE, the entertainment production company known for successfully creating and operating New England’s premier music festival — Boston Calling. The 2018 three-day festival took place over Memorial Day weekend at the Harvard Athletic Complex, and was headlined by Eminem, The Killers and Jack White. Additionally, the festival featured 54 performances from musicians, bands, podcasts and comedians across its three stages and indoor arena, as well as the first-ever Boston Calling Film Festival, curated by Academy Award-winning actress, producer and director Natalie Portman.
Our Performance Venues
The Company operates a mix of iconic performance venues that continue to build on their historic prominence as destinations for unforgettable experiences and events. Individually, these venues are each premier showplaces, with a passionate and loyal following of fans, performers and events. Taken together, we believe they represent an outstanding collection of venues.
We own or operate under long-term leases a total of six venues in New York City, Chicago and Inglewood, CA and have an exclusive booking agreement with respect to the Wang Theatre in Boston. Our New York City venues are the Madison Square Garden Complex (which includes both The Garden and The Hulu Theater at Madison Square Garden), Radio City Music Hall and the Beacon Theatre. Our portfolio of venues also includes the Forum in Inglewood, CA and the landmark The Chicago Theatre.
The Garden
The Garden has been a celebrated center of New York life since it first opened its doors in 1879. Over its 139-year history, there have been four Garden buildings, each known for showcasing the best of the era’s live sports and entertainment offerings. We believe that The Garden has come to epitomize the power and passion of live sports and entertainment to people around the world, with an appearance at The Garden often representing a pinnacle of an athlete’s or performer’s career. Known as “The World’s Most Famous Arena,” The Garden has been the site of some of the most memorable events in sports and entertainment, and, together with The Hulu Theater at Madison Square Garden, has hosted hundreds of events and millions of visitors this past year. In 2009, Billboard Magazine ranked The Garden the number one venue of the decade in its respective class based upon gross ticket sales. Music industry subscribers of the trade magazine Pollstar have voted The Garden “Arena of the Year” 19 out of the last 25 years. The Garden is the highest-grossing entertainment venue of its size in the nation and the second highest in the world based on Billboard Magazine’s 2018 mid-year rankings.
The Garden is home to the Knicks and Rangers and is associated with countless “big events,” inspired performances and one-of-a-kind moments. Highlights include: “The Fight of the Century” between Muhammad Ali and Joe Frazier in 1971; the 1970 Knicks’ NBA Championship; the Rangers’ 1994 Stanley Cup Championship; three Democratic National Conventions and one Republican National Convention; Marilyn Monroe’s famous birthday serenade to President John F. Kennedy; Frank Sinatra’s “Main Event” concert in 1974; the only U.S. concerts from the reunited Cream; the 25th Anniversary Rock and Roll Hall of Fame concerts and Billy Joel’s record-breaking 100 total performances at The Garden (through July 2018). In September 2015, His Holiness Pope Francis celebrated Mass at The Garden as part of his successful U.S. visit, which marked the first time a current pope has visited The Garden since Pope John Paul II in 1979. The Garden has also hosted four prominent benefit concerts, which galvanized the public to respond to national and global crises, including the first of its kind, “The Concert for Bangladesh” in 1972, as well as “The Concert for New York City,” following the events of 9/11; “From the Big Apple to the Big Easy,” held after Hurricane Katrina in 2005; and “12-12-12, The Concert for Sandy Relief” in 2012.

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The current Madison Square Garden Complex, located between 31st and 33rd Streets and Seventh and Eighth Avenues on Manhattan’s West Side, opened on February 11, 1968 with a salute to the United Service Organizations hosted by Bob Hope and Bing Crosby. From a structural standpoint, the construction of the current Garden was considered an engineering wonder for its time, including its famous circular shape and unique, cable-supported ceiling, which contributes to its intimate feel. It was the first large structure built over an active railroad track. The builder, R.E. McKee, had a national reputation and was later recognized as a “Master Builder” by the construction industry. Architect Charles Luckman had one of the largest firms in the country and designed such buildings as the Prudential Tower in Boston, NASA’s flight center in Houston and the Forum in Inglewood, CA.
Following a three-year, top-to-bottom transformation, in October 2013, the Company debuted a fully-transformed Garden, featuring improved sightlines; additional entertainment and dining options; new concourses; upgraded hospitality areas; new technology; unique historic exhibits; and a completely transformed interior, where the intimacy of the arena bowl and The Garden’s world-famous ceiling were maintained. Focused on the total fan experience, the transformation was designed to benefit everyone in attendance, whether first time visitors, season ticket subscribers, athletes, artists, suite holders or marketing partners. The Garden’s transformation ensured that attending an event at “The World’s Most Famous Arena” remained unlike anywhere else.
We own the Madison Square Garden Complex, the platform on which it is built and development rights (including air rights) above our property. Madison Square Garden sits atop Pennsylvania Station (“Penn Station”), a major commuter hub in Manhattan, which is owned by the National Railroad Passenger Corporation (Amtrak). While the development rights we own would permit us to expand in the future, any such use of development rights would require various approvals from the City of New York. The Garden seats up to approximately 21,000 spectators for sporting and entertainment events and, along with The Hulu Theater at Madison Square Garden, contains approximately 1,100,000 square feet of floor space over 11 levels.
The Hulu Theater at Madison Square Garden
The Hulu Theater at Madison Square Garden, which has approximately 5,600 seats, opened as part of the fourth Madison Square Garden Complex in 1968 with seven nights of performances by Judy Garland. Since then, some of the biggest names in live entertainment have played The Hulu Theater at Madison Square Garden, including The Who, Bob Dylan, Diana Ross, Elton John, James Taylor, Mary J Blige, Pentatonix, Sara Bareilles, Ellie Goulding, Chris Rock, Neil Young, Bill Maher, Radiohead, Jerry Seinfeld and Van Morrison. The Hulu Theater at Madison Square Garden has also hosted boxing events and the NBA Draft; award shows such as The Daytime Emmys; and other special events including “Wheel of Fortune” and audition shows for “America’s Got Talent,” as well as a variety of theatrical productions and family shows, including A Christmas Story, Elf The Musical, Paw Patrol Live!, and Sesame Street Live!. In March 2018, the Company and Hulu, a leading premium streaming service, announced a multi-faceted marketing partnership that included exclusive naming rights to the venue, which has now been rebranded as The Hulu Theater at Madison Square Garden. The Hulu Theater at Madison Square Garden is the fifth highest-grossing entertainment venue of its size in the world, based on Billboard Magazine’s 2018 mid-year rankings.
Radio City Music Hall
Radio City Music Hall has a rich history as a national theatrical and cultural mecca since it was first built by theatrical impresario S.L. “Roxy” Rothafel in 1932. Known as “The Showplace of the Nation,” it was the first building in the Rockefeller Center complex and, at the time, the largest indoor theater in the world. Radio City Music Hall, a venue with approximately 6,000 seats, hosts concerts, family shows and special events, and is home to the Christmas Spectacular. See “— MSG EntertainmentOur Productions.” Entertainers who have graced the Great Stage include: Yes, Lady Gaga, Brian Wilson, Harry Styles, Bastille, John Mulaney, Jack White, Kelly Clarkson, Britney Spears, Tony Bennett, Khalid, Sebastian Maniscalco and Dave Chappelle. In 2009, Billboard Magazine ranked Radio City Music Hall the number one venue of the decade in its respective class based upon gross ticket sales. Radio City Music Hall is the highest-grossing entertainment venue of its size in the world, based on Billboard Magazine’s 2018 mid-year rankings.
In 1978, Radio City Music Hall was designated a New York City landmark by the NYC Landmarks Preservation Commission and a national landmark on the National Register of Historic Places. We acquired the lease in 1997, and in 1999, we invested in a complete restoration that returned the legendary theater to its original grandeur. Our acclaimed restoration touched all aspects of the venue and included burnishing the ceilings of Radio City Music Hall with 720,000 sheets of gold and aluminum leaf, replacing the existing stage curtain with a new 112-foot wide golden silk curtain, and cleaning the three-story tall mural “The Fountain of Youth,” by Ezra Winter, which looms above the grand staircase. State-of-the-art sound systems, lighting and HDTV capabilities were also installed.
We lease Radio City Music Hall, located at Sixth Avenue and 50th Street in Manhattan, pursuant to a long-term lease agreement. The lease on Radio City Music Hall expires in 2023. We have the option to renew the lease for an additional 10 years by providing two years’ notice prior to the initial expiration date.

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Beacon Theatre
In November 2006, we entered into a long-term lease agreement to operate the legendary Beacon Theatre, a venue with approximately 2,800 seats, which sits on the corner of Broadway and 74th Street in Manhattan. The Beacon Theatre was conceived of by S. L. “Roxy” Rothafel and is considered the “older sister” to Radio City Music Hall. Designed by Chicago architect Walter Ahlschlager, the Beacon Theatre opened in 1929 as a forum for vaudeville acts, musical productions, drama, opera, and movies. The Beacon Theatre was designated a New York City landmark by the NYC Landmarks Preservation Commission in 1979 and a national landmark on the National Register of Historic Places in 1982. Over its history, the Beacon Theatre has been a venerable rock and roll room for some of the greatest names in music including Steely Dan, Coldplay, Mariah Carey, Crosby Stills & Nash, Elton John, John Fogerty, Ray LaMontagne, Tom Petty and the Heartbreakers, Tedeschi Trucks Band, Eddie Vedder and Bob Dylan, as well as The Allman Brothers Band, which played their 238th show at the Beacon Theatre in October 2014, marking their final concert as a band. The venue has also hosted special events such as film premieres for the Tribeca Film Festival and comedy events, including our Jerry Seinfeld residency, along with numerous luminaries such as His Holiness the Dalai Lama in 2009 and 2013, and President Bill Clinton in 2006 when the Rolling Stones played a private concert in honor of his 60th birthday.
In August of 2008 we closed the Beacon Theatre for a seven-month restoration project to return the theater to its original 1929 grandeur. The restoration of the Beacon Theatre focused on all historic, interior public spaces of the building, backstage and back-of-house areas, and was based on extensive historic research, as well as detailed, onsite examination of original, decorative painting techniques that had been covered by decades-old layers of paint. The Beacon Theatre has won several architectural awards recognizing its outstanding restoration. The widely acclaimed, comprehensive restoration was similar to our restoration of Radio City Music Hall, and reflects our commitment to New York City. The Beacon Theatre is the tenth highest-grossing entertainment venue of its size in the world, based on Billboard Magazine’s 2018 mid-year rankings.
Our lease on the Beacon Theatre expires in 2026.
The Forum
In June 2012, we added a West Coast home with the purchase of the Forum in Inglewood, CA, which serves the Greater Los Angeles area. Following an extensive reinvention of the historic venue, on January 15, 2014, the Forum re-opened with the first of six concerts by the legendary Eagles and is once again a thriving destination for both artists and music fans. With both the Forum and The Garden, the Company has an iconic arena in each of the country’s two largest entertainment markets.
The Forum is the only arena-sized venue in the country dedicated to music and entertainment, and offers something exceptional for everyone. Architecturally, the interior of the bowl has been completely modernized and features superior acoustics, along with flexible seating that ranges from 7,000 seats to 17,600 seats. Fans seated on the floor have access to one of the largest general admission floors in the country, with approximately 8,000 square feet of event level hospitality offerings. The Forum also offers exclusive spaces for VIP customers, including the historic Forum Club, and, for artists, delivers a first-class experience that includes nine, star-caliber dressing rooms with high-end amenities. Among the key features that were resurrected in an effort to replicate the original design is the exterior color of the venue, which was returned to the 1960’s “California sunset red,” and is now known as “Forum Red.” Other outdoor features include the addition of a distinct and iconic Forum marquee and a 40,000-square foot terrace that surrounds the perimeter of the building.
The original Forum was designed by renowned architect, Charles Luckman, who also designed The Garden that opened in 1968. The historic West Coast venue, which opened in 1967, has played host to some of the greatest musical performers of all time, including The Rolling Stones, The Jackson 5, Bob Dylan, Led Zeppelin, Madonna, Van Halen, Foo Fighters, Coldplay, Prince and many others. In addition, the Forum was home to the Los Angeles Lakers and Los Angeles Kings until 1999.
Since re-opening in 2014, the Forum has received several architectural awards recognizing its outstanding restoration. The venue’s impressive lineup of entertainers has included: the Eagles, Justin Timberlake, U2, Maroon 5, Drake, Kanye West, Eric Clapton, Guns N’ Roses, Stevie Wonder, Aerosmith, Steely Dan, Fleetwood Mac, Tom Petty and the Heartbreakers, Mumford & Sons, Foo Fighters, The Weeknd, P!nk and Rihanna as well as His Holiness the Dalai Lama. The Forum has also hosted a number of special events such as the MTV Video Music Awards and Nickelodeon’s Kids’ Choice Awards, as well as select sporting events, including Championship Boxing and mixed martial arts. The Forum is the third highest-grossing entertainment venue of its size in the world, based on Billboard Magazine’s 2018 mid-year rankings.
The Chicago Theatre
In October 2007, to provide us with an anchor for content and distribution in a key market in the Midwest, we purchased the legendary Chicago Theatre, a venue with approximately 3,600 seats. The Chicago Theatre, which features its famous six-story-high “C-H-I-C-A-G-O” marquee, was built in 1921 and designed in the French Baroque style by architects Cornelius W. Rapp and George L. Rapp. It is the oldest surviving example of this architectural style in Chicago today, and was designated a Chicago landmark building in 1983 by the Mayor of Chicago and the Chicago City Council.

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The Chicago Theatre has become a highly attractive destination for concerts, comedy shows and other live events, hosting a wide range of entertainers, including Bob Dylan, Mumford & Sons, David Byrne, Neil Young, Steve Winwood, Jerry Seinfeld, Janet Jackson, The National, Jim Gaffigan, Conan O’Brien, Aziz Ansari and Steely Dan. The venue has also hosted theatrical tours such as A Christmas Story, The Wizard of Oz and Dr. Seuss’ How The Grinch Stole Christmas!. The Chicago Theatre is the seventh highest-grossing entertainment venue of its size in the world, based on Billboard Magazine’s 2018 mid-year rankings.
Wang Theatre
Since August 2008, we have had a booking agreement with respect to the historic Wang Theatre in Boston. Under the booking agreement, we have been utilizing our diverse relationships and experience in event production and entertainment marketing to maximize the quantity and diversity of performances staged at the Wang Theatre. These performances have included theatrical productions and family shows such as the Tony award-winning Annie the Musical, Irving Berlin’s White Christmas the Musical, The Sound of Music, A Christmas Story, and Elf The Musical. The Wang Theatre has also welcomed a variety of concerts, including multi-night runs by Steely Dan, Sting, Neil Young, Chris Rock, Jerry Seinfeld, Steve Martin and The National and performances from Leonard Cohen, Ringo Starr, Wilco, Tegan and Sara, John Legend and The Shins. The Wang Theatre seats approximately 3,600.
Our booking agreement expires in 2019. The expiration of the booking agreement will not have a material negative effect on our business.
MSG Sphere
The Company is moving forward with its plans to create the “venue of the future.” These structures — known as MSG Sphere — will use cutting-edge technologies to create the next-generation of immersive experiences. The Company will build its first MSG Sphere in Las Vegas on land leased from Las Vegas Sands Corp. (“Sands”), which is adjacent to the Venetian/Palazzo/Sands Expo Complex. The Company plans to break ground on the more than 18,000-seat venue during September 2018 with the start of site preparations, with the goal of opening in fiscal 2021.
Key design features of MSG Sphere are expected to include (i) a fully programmable LED exterior and an interior bowl that features the world’s largest and highest resolution LED screen known today, (ii) a multi-layered audio system that will deliver a spectacular acoustical experience, (iii) a custom video system capable of capturing, curating and distributing both today’s and tomorrow’s content, and (iv) an advanced architecture for connectivity that will enable a broader range of content, greater interaction among guests and more immersive entertainment experiences. Sands will provide us with $75 million to help fund the construction costs, including the cost of a pedestrian bridge from MSG Sphere Las Vegas to the Venetian/Palazzo/Sands Expo Complex. Sands will receive priority access to purchase tickets to events at the venue for inclusion in hotel packages or other uses, as well as certain rent-free use of the venue to support its Expo Center business. The ground lease will have no fixed rent; however, if certain return objectives are achieved, Sands will receive 25% of the after-tax cash flow in excess of such objectives. The lease is for a term of 50 years.
In February 2018, we announced the purchase of land in Stratford, London, which we expect will become home to the Company’s second MSG Sphere. Subject to the timely completion of the planning and governmental approval process, our goal is to have our MSG Sphere London debut approximately one year after the Las Vegas venue. We currently expect that MSG Sphere London will be substantially similar to MSG Sphere Las Vegas, including having approximately the same seating capacity.
We continue to explore additional domestic and international markets where next-generation venues can be successful. The design of MSG Sphere will be flexible to accommodate a wide range of sizes and capacities — from large-scale to smaller and more intimate — based on the needs of any individual market. As we explore selectively extending the MSG Sphere network, we will be open to multiple types of transaction structures, including owned, operated, and joint ventures.
See “Part IIItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesMSG Spheres.”

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Our Interactive Initiatives
The Company has a digital presence that includes web sites, social networking sites and mobile applications for our sports and entertainment properties. In 2017, the Company consolidated a collection of individual web sites dedicated to our venues into a new platform, MSG.com, designed to deliver greater value to our customers by providing one place where they can explore upcoming events in all our venues, learn more about our brands, and purchase tickets. Web sites dedicated to our teams (nhl.com/rangers, nba.com/knicks, liberty.wnba.com, westchester.gleague.nba.com, hartfordwolfpack.com, clg.gg, knicksgaming.nba.com) remain separate from MSG.com, as do the web sites for TAO Group (taogroup.com) and Boston Calling (bostoncalling.com). Like our MSG Sports business, the online operations relating to our teams may, in certain circumstances, be subject to certain agreements, rules, policies, regulations and directives of the leagues in which the respective team operates. See “— Our BusinessRegulation.” In addition to driving ticket sales to our events, this interactive business generates revenue for the Company’s segments via the sale of advertising and sponsorships on these digital properties. Additionally, it offers strategic marketing assets that create opportunities to market directly to our fans and cross-promote our businesses.
Other Investments
We continue to explore additional opportunities that strengthen our existing position within the sports and entertainment landscape and/or allow us to exploit our assets and core competencies for growth.
In August 2013, the Company, in a partnership with the owners of Brooklyn Bowl, invested in building a venue in Las Vegas. See “Part IIItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsInvestments in Nonconsolidated Affiliates” for further discussion.
In September 2013, the Company acquired a 50% interest in AMSGE. The AMSGE entity owns and operates businesses in the entertainment industry and is currently focused on music management, performance rights, strategic marketing and venue management consulting services. This strategic partnership brings together the expertise and capabilities of each partner with the goal of jointly entering into attractive new businesses that generate revenue and cash flow. AMSGE currently has a controlling interest in both Full Stop Management LLC., its core music management business, and Global Music Rights, a performance rights company. In addition, AMSGE has a non-controlling interest in Oak View Group, Digital Brand Architects, Burns Entertainment and On Board Experiential Marketing. AMSGE will remain focused on capitalizing on investment opportunities within its existing businesses as well as on others in its pipeline, with the goal of accelerating its revenue growth.
In March 2014, the Company acquired a 50% interest in Tribeca Enterprises, the company that owns and operates the acclaimed Tribeca Film Festival, bringing together two of New York’s most important cultural and entertainment icons to enhance the reach and impact of both brands. Now in its 17th year, the annual Film Festival celebrates storytelling in a variety of forms – from film to television to virtual reality, music and gaming. The Festival supports emerging and established voices, discovers award-winning filmmakers, curates innovative and interactive experiences, and introduces new technology and ideas through panels, premieres, exhibitions, and live performance. Tribeca Enterprises’ businesses also include Tribeca Studios, a branded entertainment content business that has produced award-winning stories, and year-round live events. This joint venture augments our portfolio of premier New York City live entertainment brands, while also providing us with a high-profile entry into the festival business, with a team that has created one of the most successful festivals in the world.
In July 2014, MSG Networks completed the sale of Fuse to SiTV Media, Inc., which has since been renamed Fuse Media, Inc., the parent company of NUVOtv. NUVOtv is an English language entertainment network created for modern Latinos. As part of the transaction, MSG Networks received a 15% equity interest in SiTV Media, LLC, which has since been renamed Fuse Media, LLC (“Fuse Media”), and such equity interest was transferred to the Company in connection with the Distribution. See “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsInvestments in Nonconsolidated Affiliates” for further discussion.
In August 2016, the Company acquired an approximately 12% common equity stake in Townsquare Media, Inc., a leading media, entertainment and digital marketing solutions company that, like us, believes in the value of creating communities around shared experiences and compelling content.
In addition to the investments discussed above, the Company also has other investments in various sports and entertainment companies and related technologies, accounted for either under the cost method or equity method.

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Garden of Dreams Foundation
Our Company has a close association with The Garden of Dreams Foundation (the “Foundation”), a 501(c)(3) non-profit charity that is dedicated to making dreams come true for children facing obstacles. The Foundation works with 28 partner organizations throughout the tristate area, including hospitals, wish organizations and community-based organizations, to reach children who are facing challenges such as homelessness, extreme poverty, illness and foster care. Since it began in 2006, Garden of Dreams has used the magic of The Madison Square Garden Company — including the Rangers, Knicks, Liberty, Rockettes and famed showplaces — to brighten the lives of nearly 375,000 children and their families. The Foundation takes pride in its commitment to truly change lives, hosting more than 500 events and programs each year. They include: events with the Knicks, Rangers and Liberty; special celebrations and event attendance at The Garden, Radio City Music Hall and the Beacon Theatre; visits by Madison Square Garden celebrities; The Garden of Dreams Talent Show, where children perform on the Great Stage at Radio City Music Hall; The Garden of Dreams Prom, which brings together teens who may not otherwise have the opportunity to attend their own proms; toy drives; and the “Make A Dream Come True Program,” where children enjoy unforgettable experiences with celebrities and at events. In addition, through its Garden of Dreams Giving program, the Foundation helps its partner organizations meet the critical needs of the children they serve through direct support of scholarships and tangible, targeted community projects. To date, the Foundation has awarded scholarships to 60 children. Garden of Dreams has also served its partners by refurbishing pediatric wards at area hospitals, activity rooms and gymnasiums at community facilities and by creating brand new spaces such as music and dance studios — with plans for many more vital civic enhancements in the years to come.
Regulation
Our sports and entertainment businesses are subject to legislation governing the sale and resale of tickets and consumer protection statutes generally.
In addition, our venues, like all public spaces, are subject to building and health codes and fire regulations imposed by the state and local governments in the jurisdictions in which they are located. Our venues are also subject to zoning and outdoor advertising regulations, and, with respect to Radio City Music Hall and the Beacon Theatre, landmark regulations which restrict us from making certain modifications to our facilities as of right or from operating certain types of businesses. Our venues also require a number of licenses in order for us to operate, including occupancy permits, exhibition licenses, food and beverage permits, liquor licenses and other authorizations and, with respect to The Garden, a zoning special permit granted by the New York City Planning Commission. In the jurisdictions in which our venues are located, we are subject to statutes that generally provide that serving alcohol to a visibly intoxicated or minor patron is a violation of the law and may provide for strict liability for certain damages arising out of such violations. In addition, our venues are subject to the federal Americans with Disabilities Act, which requires us to maintain certain accessibility features at each of our facilities. We and our venues are also subject to environmental laws and regulations. See “Item 1A. Risk FactorsGeneral RisksWe Are Subject to Extensive Governmental Regulation and Our Failure to Comply with These Regulations May Have a Material Negative Effect on Our Business and Results of Operations.” The professional sports leagues in which we operate, primarily the NBA and NHL, have the right under certain circumstances to regulate important aspects of our sports business and our team-related online and mobile businesses. See “— Our BusinessMSG SportsThe Role of the Leagues in Our Operations.”
Our sports and entertainment businesses are also subject to certain regulations applicable to our Internet web sites and mobile applications. We maintain various web sites and mobile applications that provide information and content regarding our businesses, offer merchandise and tickets for sale, make available sweepstakes and/or contests and offer hospitality services. The operation of these web sites and applications may be subject to a range of federal, state and local laws such as privacy and protection of personal information, accessibility for persons with disabilities and consumer protection regulations. In addition, to the extent any of our web sites collect information from children under 13 years of age or are intended primarily for children under 13 years of age, we must comply with certain limits on commercial matter.
Our businesses are also subject to regulation regarding working conditions and minimum wage requirements. See “Item 1A. Risk FactorsRisks Relating to Our Entertainment BusinessIncreases in Labor Costs Could Slow the Growth of or Harm TAO Group.”
Our international operations are subject to laws and regulations of the countries in which they operate, as well as international bodies, such as the European Union. We are subject to laws and regulations relating to, among other things, foreign privacy and data protection, currency and repatriation of funds, anti-bribery, anti-money laundering and anti-corruption, such as the Foreign Corrupt Practices Act and the U.K. Bribery Act. These laws and regulations apply to the activities of the Company and, in some cases, to individual directors, officers, and employees of the Company and agents acting on our behalf. Certain of these laws impose stringent requirements on how we can conduct our foreign operations and place restrictions on our business and partnering activities.

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Competition
Competition in Our Sports Business
Our sports business operates in a market in which numerous sports and entertainment opportunities are available. In addition to the NBA, NHL, WNBA, AHL and NBAGL teams that we own and operate, the New York City metropolitan area is home to two Major League Baseball teams (the New York Yankees (the “Yankees”) and the New York Mets (the “Mets”)), two National Football League teams (the New York Giants (the “Giants”) and the New York Jets (the “Jets”)), two additional NHL teams (the New York Islanders (the “Islanders”) and the New Jersey Devils (the “Devils”)), a second NBA team (the Brooklyn Nets (the “Nets”) and two Major League Soccer franchises (the New York Red Bulls and the New York City Football Club). In addition, there are a number of other amateur and professional teams that compete in other sports, including at the collegiate and minor league levels. New York is also home to the U.S. Open tennis event each summer, as well as many other non-sports related entertainment options.
As a result of the large number of options available, we face strong competition for the New York area sports fan. We must compete with these other sporting events in varying respects and degrees, including on the basis of the quality of the teams we field, their success in the leagues in which they compete, our ability to provide an entertaining environment at our games and the prices we charge for our tickets. In addition, for fans who prefer the unique experience of NHL hockey, we must compete with the Islanders and Devils as well as, in varying respects and degrees, with other NHL hockey teams and the NHL itself. Similarly, for those fans attracted to the equally unique experience of NBA basketball, we must compete with the Nets as well as, in varying respects and degrees, with other NBA teams and the NBA itself. In addition, we also compete to varying degrees with other productions and live entertainment events for advertising and sponsorship dollars.
The amount of revenue we earn is influenced by many factors, including the popularity and on-court or on-ice performance of our sports teams and general economic conditions. In particular, when our sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets, potentially greater food and merchandise sales from increased attendance and increased sponsorship opportunities. When our sports teams qualify for the playoffs, we also benefit from the attendance and in-game spending at the playoff games. The year-to-year impact of team performance is somewhat moderated by the fact that a significant portion of our revenue derives from rights fees, suite rental fees and sponsorship and signage revenue, all of which are generally contracted on a multi-year basis. Nevertheless, the long-term performance of our business is tied to the success and popularity of our sports teams and our ability to attract other compelling sports content.
In July 2017, we acquired a controlling interest in CLG, a premier North American esports organization. Due to the nature of esports, CLG competes with other teams across North America and globally. CLG competes for sponsorship, merchandise rights, media rights, and event prize winnings. Esports teams vary in their amount of funding, size of existing business, and amount of social following, among other factors, which can impact our ability to compete effectively.
See “Item 1A. Risk FactorsRisks Relating to Our Sports BusinessOur Sports Business Faces Intense and Wide-Ranging Competition, Which May Have a Material Negative Effect on Our Business and Results of Operations” and “— Our Businesses Are Substantially Dependent on the Continued Popularity and/or Competitive Success of the Knicks and Rangers, Which Cannot Be Assured.”
Competition in Our Entertainment Business
Our entertainment business competes, in certain respects and to varying degrees, with other live performances, sporting events, movies, home entertainment (including the Internet and online services, television, video and gaming devices), restaurants and nightlife venues, and the large number of other entertainment and public attraction options available to members of the public. Our businesses typically represent alternative uses for the public’s entertainment dollars. The primary geographic area in which we operate, New York City, is among the most competitive entertainment markets in the world, with the world’s largest live theater industry and extensive performing arts venues, 12 major professional sports teams, thousands of restaurants and nightlife venues, numerous museums, galleries and other attractions, and numerous movie theaters available to the public. We also have significant operations in Los Angeles and Las Vegas. Our venues and live offerings outside of New York City similarly compete with other entertainment, dining and nightlife options in their respective markets and elsewhere. We compete with these other entertainment options on the basis of the quality of our productions, the public’s interest in our content, the price of our tickets, the quality, location and atmosphere, including the nature and condition of the setting, of our venues, our service, the price, quality and presentation of our food and the overall experience we provide.
We compete for bookings with a large number of other venues both in the cities in which our venues are located and in alternative locations capable of booking the same productions and events. Generally, we compete for bookings on the basis of the size, quality, expense and nature of the venue required for the booking. Some of our competitors may have a larger network of venues and/or greater financial resources.

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In addition to competition for ticket sales and bookings, we also compete to varying degrees with other productions and sporting events for advertising and sponsorship dollars.
See “Item 1A. Risk FactorsRisks Relating to Our Entertainment BusinessOur Entertainment Business Faces Intense and Wide-Ranging Competition Which May Have a Material Negative Effect on Our Business and Results of Operations,” “— The Success of Our Entertainment Business Depends on the Continued Popularity of Our Live Productions, Particularly the Christmas Spectacular, the Decline of Which Could Have a Material Negative Effect on Our Business and Results of Operations” and “ — Negative Publicity with Respect to Any of the Existing or Future TAO Group Brands Could Reduce Sales at One or More of the Existing or Future TAO Group Venues and Make the TAO Group Brands Less Valuable, Which Could Have a Material Negative Effect on Our Business and Results of Operations.”
Employees
As of June 30, 2018 we had approximately 2,900 full-time union and non-union employees and 8,800 part-time union and non-union employees. Approximately 58% of our employees were represented by unions as of June 30, 2018. Approximately 24% of such union employees are subject to CBAs that expired as of June 30, 2018 and approximately 16% are subject to CBAs that will expire by June 30, 2019 if they are not extended prior thereto. Labor relations in general and in the sports and entertainment industry in particular can be volatile, though our current relationships with our unions taken as a whole are positive. We have from time to time faced labor action or had to make contingency plans because of threatened or potential labor actions.
The NHL players and the NBA players are covered by CBAs between the NHL Players’ Association (“NHLPA”) and the NHL and between the National Basketball Players Association (“NBPA”) and the NBA, respectively. Both the NHL and the NBA have experienced labor difficulties in the past and may have labor issues in the future. On June 30, 2011 the prior CBA between the NBA and NBPA expired and there was a work stoppage for approximately five months until a new CBA was entered into in December 2011. On September 15, 2012 the prior CBA between the NHL and NHLPA expired and there was a work stoppage for approximately four months until a new CBA was entered into in January 2013. See “Item 1A. Risk FactorsGeneral RisksOrganized Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.”
Financial Information about Segments and Geographic Areas
Substantially all of the Company’s revenues and assets are attributed to or located in the United States and are primarily concentrated in the New York City metropolitan area. Financial information by business segments for each of the years ended June 30, 2018, 2017, and 2016 is set forth in “Part IIItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II — Item 8. Financial Statements and Supplementary DataConsolidated Financial StatementsNotes to Consolidated Financial Statements — Note 18. Segment Information.”

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Item 1A. Risk Factors
Risks Relating to Our Sports Business
Our Sports Business Faces Intense and Wide-Ranging Competition, Which May Have a Material Negative Effect on Our Business and Results of Operations.
The success of a sports business, like ours, is dependent upon the performance and/or popularity of its franchises. Our Knicks and Rangers and other sports franchises compete, in varying respects and degrees, with other live sporting events, and with sporting events delivered over television networks, radio, the Internet and online services, mobile applications and other alternative sources. For example, our sports teams compete for attendance, viewership and advertising with a wide range of alternatives available in the New York City metropolitan area. During some or all of the basketball and hockey seasons, our sports teams face competition, in varying respects and degrees, from professional baseball (including the Yankees and the Mets), professional football (including the Giants and the Jets), professional soccer (including the New York Red Bulls and the New York City Football Club) and each other. For fans who prefer the unique experience of NHL hockey, we must compete with two other NHL hockey teams located in the New York City metropolitan area (the Islanders and the Devils) as well as, in varying respects and degrees, with other NHL hockey teams and the NHL itself. Similarly, for those fans attracted to the equally unique experience of NBA basketball, we must compete with another NBA team located in the New York City metropolitan area (the Nets) as well as, in varying respects and degrees, with other NBA teams and the NBA itself.

As a result of the large number of options available, we face strong competition for the New York area sports fan. We must compete with these other sports teams and sporting events, in varying respects and degrees, including on the basis of the quality of the teams we field, their success in the leagues in which they compete, our ability to provide an entertaining environment at our games, prices we charge for tickets and the viewing availability of our teams on multiple media alternatives. Given the nature of sports, there can be no assurance that we will be able to compete effectively, including with companies that may have greater resources than we have, and as a consequence, our business and results of operations may be materially negatively affected.
Our Businesses Are Substantially Dependent on the Continued Popularity and/or Competitive Success of the Knicks and Rangers, Which Cannot Be Assured.
Our financial results have historically been dependent on, and are expected to continue to depend in large part on, the Knicks and Rangers remaining popular with our fan bases and, in varying degrees, on the teams achieving on-court and on-ice success, which can generate fan enthusiasm, resulting in sustained ticket, premium seating, suite, concession and merchandise sales during the season. In addition, the popularity of our sports teams can impact television ratings, which could affect the long-term value of the media rights for the Knicks and/or Rangers. Furthermore, success in the regular season may qualify one of our sports teams for participation in post-season playoffs, which provides us with additional revenue by increasing the number of games played by our sports teams and, more importantly, by generating increased excitement and interest in our sports teams, which can improve attendance and television ratings in subsequent seasons. There can be no assurance that any of our sports teams, including the Knicks and Rangers, will maintain continued popularity or compete in post-season play in the future.
Our Basketball and Hockey Decisions, Especially Those Concerning Player Selection and Salaries, May Have a Material Negative Effect on Our Business and Results of Operations.
Creating and maintaining our sports teams’ popularity and/or on-court and on-ice competitiveness is key to the success of our sports business. Accordingly, efforts to improve our revenues and earnings from operations from period to period may be secondary to actions that management believes will generate long-term value. As with other sports teams, the competitive positions of our sports teams depend primarily on our ability to develop, obtain and retain talented players, coaches and team executives, for which we compete with other professional sports teams. Our efforts in this regard may include, among other things, trading for highly compensated players, signing draft picks, free agents or current players to new contracts, engaging in salary arbitration with existing players, terminating and waiving players and replacing team executives. Any of these actions could increase expenses for a particular period, subject to any salary cap restrictions contained in the respective leagues’ CBAs. There can be no assurance that any actions taken by management to increase our long-term value will be successful.

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A significant factor in our ability to attract and retain talented players is player compensation. NBA and NHL player salaries have generally increased significantly and may continue to increase. Although CBAs between the NBA and the NBPA and the NHL and the NHLPA generally cap league-wide player salaries at a prescribed percentage of league-wide revenues, we may pay our players different aggregate salaries and a different proportion of our revenues than other NBA or NHL franchises. Future CBAs may increase the percentage of league-wide revenues to which NBA or NHL players are entitled or impose other conditions, which may further increase our costs. In addition, we may also be obligated to pay the NBA a luxury tax each year, the calculation of which is determined by a formula based on the aggregate salaries paid to our NBA players. See “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMSG SportsExpensesPlayer Salaries, Escrow System/Revenue Sharing and NBA Luxury Tax.”
We have incurred, and may in the future incur, significant charges for costs associated with transactions relating to players on our sports teams for season-ending and career-ending injuries and for trades, waivers and contract terminations of players and other team personnel, including team executives. These transactions can result in significant charges as the Company recognizes the estimated ultimate costs of these events in the period in which they occur, although amounts due to these individuals are generally paid over their remaining contract terms. These expenses add to the volatility of the results of our MSG Sports segment.
The Actions of the Basketball and Hockey Leagues May Have a Material Negative Effect on Our Business and Results of Operations.
The governing bodies of the NBA (including the WNBA and the NBAGL) and the NHL have certain rights under certain circumstances to take actions that they deem to be in the best interests of their respective leagues, which may not necessarily be consistent with maximizing our results of operations and which could affect our sports teams in ways that are different than the impact on other sports teams. Certain of these decisions by the NBA or the NHL could have a material negative effect on our business and results of operations. From time to time, we may disagree with or challenge actions the leagues take or the power and authority they assert. The following discussion highlights certain areas in which decisions of the NBA and the NHL could materially affect our businesses.
The NBA and the NHL may assert control over certain matters, under certain circumstances, that may affect our revenues such as the national and international rights to telecast the games of league members, including the Knicks and Rangers, licensing of the rights to produce and sell merchandise bearing the logos and/or other intellectual property of our sports teams and the leagues, and the Internet-based activities of our sports teams. The NBA and NHL have each entered into agreements regarding the national and international telecasts of NBA and NHL games. We receive a share of the income the NBA and the NHL generate from these contracts, which expire from time to time. There can be no assurance that the NBA or the NHL will be able to renew these contracts following their expiration on terms as favorable to us as those in the current agreements or that we will continue to receive the same level of revenues in the future. We receive significant revenues from MSG Networks for the right to telecast games of the Knicks and Rangers. Changes to league rules, regulations and/or agreements, including national and international media rights, could impact the availability of games covered by our local media rights and could negatively affect the rights fees we receive from MSG Networks and our business and results of operations. The sports leagues have asserted control over certain other important decisions, under certain circumstances, such as the length and format of the playing season, preseason and playoff schedules, the operating territories of the member teams, admission of new members, franchise relocations, labor relations with the players associations, collective bargaining, free agency, luxury taxes and revenue sharing. The esports leagues have adopted a number of rules and regulations governing the length and format of the playing season, how teams may generate revenue, and player rosters. Decisions on these matters, some of which are also subject to the terms of a CBA, may materially negatively affect our business and results of operations. In addition, the NBA imposes a luxury tax and escrow system with respect to player salaries and a revenue sharing plan, and the NHL imposes an escrow system with respect to player salaries and a revenue sharing plan. For fiscal year 2018, the Knicks and Rangers recorded approximately $57.7 million in estimated revenue sharing expenses, net of escrow receipts. The actual amounts for the 2017-18 season may vary significantly from the estimate based on actual operating results for the respective leagues and all teams for the season and other factors. For a discussion of the NBA luxury tax impacts, see “— Our Basketball and Hockey Decisions, Especially Those Concerning Player Selection and Salaries, May Have a Material Negative Effect on Our Business and Results of Operations.
The NBA and the NHL have imposed certain restrictions on the ability of owners to undertake some types of transactions in respect of teams, including a change in ownership and a relocation of a team. The NBA and NHL have also imposed restrictions on certain types and/or amounts of financing transactions. In certain instances, these restrictions could impair our ability to proceed with a transaction that is in the best interest of the Company and its stockholders if we were unable to obtain any required league approvals in a timely manner or at all.

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The leagues impose certain rules that define, under certain circumstances, the territories in which we operate, including the markets in which our games can be telecast. Changes to these rules could have a material negative effect on our business and results of operations.
Each league’s governing body has imposed a number of rules, regulations, guidelines, bulletins, directives, policies and agreements upon its teams. Changes to these provisions may apply to our teams and their personnel, and the Company as a whole, regardless of whether we agree or disagree with such changes, have voted against such changes or have challenged them through other means, and it is possible that any such changes could materially negatively affect our business and results of operations to the extent they are ultimately determined to bind our teams. The commissioners of each of the NBA and NHL assert significant authority to take certain actions on behalf of their respective leagues under certain circumstances. Decisions by the commissioners of the NBA and the NHL, including on the matters described above, may materially negatively affect our businesses and results of operations. The leagues’ governing documents and our agreements with the leagues purport to limit the manner in which we may challenge decisions and actions by a league commissioner or the league itself.
Injuries to Players on Our Sports Teams Could Hinder Our Success.
To the degree that our financial results are dependent on our sports teams’ popularity and/or on-court and on-ice success, the likelihood of achieving such popularity or competitive success may, given the nature of sports, be substantially impacted by serious and/or untimely injuries to key players. Nearly all of our Knicks and Rangers players, including those with multi-year contracts, have partially or fully guaranteed contracts, meaning that in some cases (subject to the terms of the applicable player contract and CBA), a player or his estate may be entitled to receive his salary even if the player dies, or is unable to play as a result of injury. These salaries represent significant financial commitments for our sports teams. We are generally insured against having to pay salaries in the event of a player’s death and seek to obtain disability insurance policies for substantially all of our material player contracts. In the event of injuries sustained resulting in lost services (as defined in the applicable insurance policies), generally the insurance policies provide for payment to us of a portion of the player’s salary for the remaining term of the contract or until the player can resume play, in each case following a deductible number of missed games. Such insurance may not be available in every circumstance or on terms that are commercially feasible or such insurance may contain significant dollar limits and/or exclusions from coverage for preexisting medical conditions. We may choose not to obtain (or may not be able to obtain) such insurance in some cases and we may change coverage levels (or be unable to change coverage levels) in the future.
In the absence of disability insurance, we may be obligated to pay all of an injured player’s salary. In addition, player disability insurance policies do not cover any NBA luxury tax that we may be required to pay under the NBA CBA. For purposes of determining NBA luxury tax under the NBA CBA, salary payable to an injured player is included in team salary, unless and until that player’s salary is removed from the team salary for purposes of calculating NBA luxury tax which, pursuant to the terms of the NBA CBA, requires a waiting period of one year and satisfaction of other conditions. Replacement of an injured player may result in an increase in salary and NBA luxury tax expense for us.
Risks Relating to Our Entertainment Business
Our Entertainment Business Faces Intense and Wide-Ranging Competition Which May Have a Material Negative Effect on Our Business and Results of Operations.
Our entertainment business competes, in certain respects and to varying degrees, with other leisure-time activities such as television, radio, motion pictures, sporting events, other live performances, restaurants and nightlife venues, the Internet, and online and mobile services, including sites for online content distribution, video on demand and other alternative sources of entertainment and information, in addition to competing for concerts with other event venues, and other restaurants and nightlife venues, for total entertainment dollars in our marketplace. The success of our entertainment business is largely dependent on the continued success of our Christmas Spectacular and the TAO Group business, and the availability of, and our venues’ ability to attract, concerts, family shows and other events, competition for which is intense, and the ability of acts to attract strong attendance at our venues. For example, The Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre all compete with other entertainment options in the New York City metropolitan area. The Forum, The Chicago Theatre and the Wang Theatre face similar competition from other entertainment options in their respective markets and elsewhere. A proposed new stadium in Inglewood, CA, is reportedly scheduled to open in 2020. In addition, there are plans to open an indoor arena as part of the same complex in Inglewood. Either of these venues could materially adversely affect the performance of the Forum. The restaurant, nightlife and hospitality industries are intensely competitive with respect to, among other things, service, price, food quality and presentation, location, atmosphere, overall experience, and the nature and condition of the setting. Competitors of TAO Group business include a large and diverse group of well-recognized upscale restaurants and nightlife venues and brands. Some of our competitors may have a larger network of venues and/or greater financial resources.

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Further, in order to maintain the competitive positions of The Garden and our other venues, we must invest on a continuous basis in state-of-the-art technology. In addition, we must maintain a competitive pricing structure for events that may be held in our venues, many of which have alternative venue options available to them in New York and other cities. In addition, we invest a substantial amount in our Christmas Spectacular and in new productions to continue to attract audiences. We cannot assure you that such investments will generate revenues that are sufficient to justify our investment or even that exceed our expenses.
The Success of Our Entertainment Business Depends on the Continued Popularity of Our Live Productions, Particularly the Christmas Spectacular, the Decline of Which Could Have a Material Negative Effect on Our Business and Results of Operations.
The financial results of our entertainment business are dependent on the popularity of our live productions, particularly the Christmas Spectacular, which represented 15% of our MSG Entertainment segment’s revenues in fiscal year 2018. Should the popularity of the Christmas Spectacular decline, our revenues from ticket sales, and concession and merchandise sales would likely also decline, and we might not be able to replace the lost revenue with revenues from other sources.
We Plan to Build and Operate Entertainment Venues in Las Vegas and London and are Exploring Other Potential Sites. These State-of-the-Art Venues Will Use Cutting-Edge Technologies and Will Require Significant Capital Investment by the Company. There Can Be No Assurance That The Company’s Sphere Projects Will Be Successful.
The Company is moving forward with its venue strategy to create, build and operate new music and entertainment-focused venues — called MSG Sphere - that will utilize cutting-edge technologies to create the next generation of immersive experiences. There is no assurance that the MSG Sphere in Las Vegas or London will be successful. We are building the first MSG Sphere in Las Vegas with the goal of opening in fiscal year 2021. Subject to the timely completion of the planning and governmental approval process, our goal is to have our London venue debut approximately one year after the Las Vegas venue. Our primary focus now is to build the Las Vega and London MSG Spheres, but we also continue to explore additional domestic and international markets where these next-generation venues can be successful. While both the Las Vegas and London venues would have a scalable capacity of more than 18,000 seats, moving forward, our goal is to develop a venue model that will accommodate a wide range of sizes and seating capacities — from large-scale to more intimate — based on the needs of any individual market.
Given the transformative nature of these venues, we expect that construction of these venues will require greater capital spend than would be required for a traditional arena-sized venue. As is the case with any large-scale real estate development, as the Company moves forward with the planning and construction of these and other major new venues, the Company may face unexpected project delays and costs. In light of the ambitious and unique design of MSG Sphere, including the use of technologies that have not previously been employed in major entertainment venues, the risk of delays and higher than anticipated costs are elevated. In connection with the construction of the MSG Sphere venues, the Company will need to obtain additional capital beyond what is available from cash on hand, cash flows from operations and borrowings under our revolving credit facilities. There is no assurance that we will be able to obtain such capital. The NBA and NHL have imposed restrictions on certain types and/or amounts of financing transactions. See also “ — The Actions of the Basketball and Hockey Leagues May Have a Material Negative Effect on Our Business and Results of Operations.
While the Company believes that these next-generation venues will enable new experiences and innovative opportunities to engage with audiences, there can be no assurance that customers, artists, promoters, advertisers and marketing partners will embrace this new platform.
Our Entertainment Business is Highly Sensitive to Customer Tastes and Depends on Our Ability to Attract Artists and Events.
The success of our entertainment business depends in part upon our ability to offer live entertainment that is popular with customers. We contract with promoters and others to provide performers and events at our venues. There may be a limited number of popular artists, groups or events that can attract audiences to our venues, and our entertainment segment would suffer to the extent that we are unable to continue to attract such artists, groups and events to perform at our venues.

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TAO Group Plans to Add a Significant Number of New Venues. This Will Require Additional Capital and There Can Be No Guarantee of Success.
TAO Group has an aggressive plan to add new venues. In pursuing its expansion strategy, TAO Group faces a number of risks associated with cost overruns and construction delays, obtaining financing and operating in new or existing markets. In addition, TAO Group faces the risk that new venues may not be successful and that TAO Group may lose all or a part of its investment in existing and new venues, which could have a material negative effect on our business and results of operations.
Our Strategy for Our Entertainment Business Includes the Development of New Live Productions and the Possible Addition of New Venues, Each of Which Could Require Us to Make Considerable Investments for Which There Can Be No Guarantee of Success.
As part of our business strategy, we intend to develop new productions, attractions and live entertainment events, which may include expansions or enhancements of our existing productions or relationships or the creation of entirely new live productions. Expansion or enhancement of productions and/or the development of new productions, attractions and live entertainment events could require significant upfront investment in sets, staging, creative processes, licensing of intellectual property, casting and advertising and dislocation of other alternative sources of entertainment that may have played in our venues absent these productions. To the extent that any efforts at expanding or enhancing productions or creating new productions do not result in a viable live show, or to the extent that any such productions do not achieve expected levels of popularity among audiences, we may be subject to a write-down of all or a portion of such investments. In addition, any delay in launching such productions or enhancements could result in the incurrence of operating costs which may not be recouped. In March 2016, we wrote off approximately $41.8 million of deferred production costs of the New York Spectacular Starring the Radio City Rockettes (“New York Spectacular”). Subsequently, due to assessments of the show’s creative direction, timing and scale, the Company wrote off the remaining balance of deferred production costs related to the New York Spectacular in the amount of $33.6 million during the fourth quarter of fiscal year 2017.
A Lack of Availability of Suitable Locations for New TAO Group Venues or a Decline in the Quality of the Locations of Current TAO Group Venues May Have a Material Negative Effect on Our Business and Results of Operations.
The success of the existing TAO Group venues depends in large part on their locations. Possible declines in neighborhoods where TAO Group venues are located or adverse economic conditions in areas surrounding those neighborhoods could result in reduced sales in those venues. Further, TAO Group’s growth strategy is based, in part, on the expansion of TAO Group venues into new geographic markets where its business has not previously operated. Desirable locations for new openings or for the relocation of existing venues may not be available at an acceptable cost when TAO Group identifies a particular opportunity for a new venue or relocation. In addition, the success of new TAO Group venues tends to expand or revive interest in TAO Group venues that have been in operation for an extended period of time. Thus, the inability to successfully open new TAO Group venues could also negatively impact the existing TAO Group business. The occurrence of one or more of these events could have a material negative effect on our business and results of operations.
The Success of TAO Group Depends in Part Upon the Continued Retention of Certain Key Personnel.
The success of TAO Group depends, in part, on certain key members of its management, including its four original founders. The expertise of TAO Group’s senior management team in developing, acquiring, reinventing, integrating and growing businesses, particularly those focused on entertainment and hospitality, has been and will continue to be a significant factor in the growth of TAO Group’s business and the ability of TAO Group to execute its business strategy. The loss of such key personnel could have a material negative effect on our business and results of operations.
The Geographic Concentration of Our Businesses Could Subject Us to Greater Risk Than Our Competitors and Have a Material Negative Effect on Our Business and Results of Operations.
The Company primarily operates in three markets — New York City, Las Vegas and Los Angeles — and, as a result, is subject to greater degrees of risk than competitors with more operating properties or that operate in more markets. The Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall and the Beacon Theatre are all located in New York City, our sports teams are all based in the New York City metropolitan area, and TAO Group currently operates 12 venues in New York City, including the food and beverage operations at the Dream Downtown and Dream Midtown hotels. In addition, TAO Group currently operates six venues in Las Vegas, where the Company plans to construct its first MSG Sphere. The Forum is located in Inglewood, California, which is adjacent to Los Angeles, where TAO Group currently operates five venues. Therefore, the Company is particularly vulnerable to adverse events (including acts of terrorism, natural disasters, weather conditions, labor market disruptions and government actions) and economic conditions in New York City, Las Vegas, Los Angeles and surrounding areas. Any adverse event or conditions in those markets could have a material negative effect on our business and results of operations.

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Negative Publicity with Respect to Any of the Existing or Future TAO Group Brands Could Reduce Sales at One or More of the Existing or Future TAO Group Venues and Make the TAO Group Brands Less Valuable, Which Could Have a Material Negative Effect on Our Business and Results of Operations.
The success of TAO Group depends upon the reputation and popularity of the TAO Group venues and brands. If customers have a poor experience at a restaurant or nightlife venue owned, operated or managed by TAO Group, the TAO Group venues may experience a decrease in customer traffic. Negative publicity with respect to any of the TAO Group brands could adversely affect TAO Group. Such publicity could relate to food quality, illness, injury or other health concerns, poor service, negative experiences or other problems and reduce demand in the TAO Group business. The risk of negative publicity is exacerbated by the growing influence of social media, which can result in immediate and widespread dissemination of information (which may be false) with limited ability on our part to respond or correct such reports.
Increases in Labor Costs Could Slow the Growth of or Harm TAO Group.
TAO Group has a substantial number of hourly employees whose compensation may be impacted by increases in government-imposed minimum wage rates. In addition, TAO Group employs a substantial number of employees whose income is supplemented through the receipt of gratuities. In certain jurisdictions in which TAO Group operates, the minimum hourly wage to which gratuity eligible employees are entitled under law is lower than the minimum wage required to be paid to other employees, subject to the former’s receipt of sufficient gratuities. The difference between the two minimum rates is referred to as a “tip credit”. Governmental entities have acted to increase minimum wage rates in jurisdictions where TAO Group operates or may operate in the future. In addition, governmental entities have acted to eliminate, or considered the elimination of, tip credits in the application of minimum wage laws. As minimum wage rates increase, or if tip credits are reduced or eliminated, TAO Group may need to increase wages paid to a substantial number of employees, which will increase the labor costs of TAO Group. In addition, TAO Group’s labor costs may increase if certain employees elect to be union represented and to collectively bargain their compensation. TAO Group may be unable offset these increased labor cost either through increased prices or changes to its operations, which could have a material negative effect on our business and results of operations.
General Risks
Our Business Has Been Adversely Impacted and May, in the Future, Be Materially Adversely Impacted by an Economic Downturn and Financial Instability or Changes in Consumer Tastes and Preferences.
Our businesses depend upon the ability and willingness of consumers and businesses to purchase tickets (including season tickets) at our venues, license suites at The Garden, spend on concessions and merchandise, and drive continued advertising and sponsorship revenues. Further, the restaurant, nightlife and hospitality industries are often affected by changes in consumer tastes, national, regional and local economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and location of competing businesses.
As a result, instability and weakness of the U.S. and global economies and the negative effects on consumers’ and businesses’ discretionary spending may materially negatively affect our business and results of operations.
We Have in Past Periods Incurred Substantial Operating Losses, Negative Adjusted Operating Income and Negative Cash Flow and There is No Assurance We Will Have Operating Income, Positive Adjusted Operating Income or Positive Cash Flow in the Future.
We have in past periods incurred operating losses and negative cash flow and there is no assurance that we will have operating income or positive cash flow in the future. Our MSG Entertainment segment recognized operating losses during the years ended June 30, 2017, 2016 and 2014 and our MSG Sports segment recognized an operating loss during the year ended June 30, 2014. Significant operating losses may limit our ability to raise necessary financing, or to do so on favorable terms, as such losses could be taken into account by potential investors, lenders and the organizations that issue investment ratings on indebtedness. See “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMSG SportsFactors Affecting Operating Results” and “Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMSG Entertainment Factors Affecting Operating Results.”

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Our Operating Results and Cash Flow Can Vary Substantially from Period to Period.
Our operating results and cash flow reflect significant variation from period to period and will continue to do so in the future. Therefore, period-to-period comparisons of our operating results may not necessarily be meaningful and the operating results of one period are not indicative of our financial performance during a full fiscal year. This variability may adversely affect our business, results of operations and financial condition.
Weather or Other Conditions May Impact Events at Our Venues, Which May Have a Material Negative Effect on Our Business and Results of Operations.
Weather or other conditions, including natural disasters, acts of terrorism and similar events, in the New York metropolitan area and other locations in which we own or operate venues may affect patron attendance as well as sales of concessions and merchandise, among other things. Weather conditions may also require us to cancel or postpone events. Any of these events may have a material negative effect on our business and results of operations.
Our Business Could Be Adversely Affected by Terrorist Activity or the Threat of Terrorist Activity and Other Developments that Discourage Congregation at Prominent Places of Public Assembly.
The success of our businesses is dependent upon the willingness and ability of patrons to attend events at our venues. The venues we operate, like all prominent places of public assembly, could be the target of terrorist activities or other actions that discourage attendance. Any such activity at or near one of our venues or other similar venues could result in a material negative effect on our business and results of operations. In addition, terrorist activity or other actions that discourage attendance at other locations, or even the threat of such activity, could result in reduced attendance at our venues. Similarly, a major epidemic or pandemic, or the threat of such an event, could adversely affect attendance at our events.
We May Pursue Acquisitions and Other Strategic Transactions to Complement or Expand Our Business that May Not Be Successful; We Have Significant Investments in Businesses We Do Not Control.
From time to time, we explore opportunities to purchase or invest in other businesses, venues or assets that we believe will complement, enhance or expand our current business or that might otherwise offer us growth opportunities, including opportunities that may differ from the Company’s current business. Any transactions that we are able to identify and complete may involve risks, including the commitment of significant capital, the incurrence of indebtedness, the payment of advances, the diversion of management’s attention and resources, litigation or other claims in connection with acquisitions or against companies we invest in or acquire, our lack of control over certain joint venture companies and other minority investments, the inability to successfully integrate such business into our operations or even if successfully integrated, the risk of not achieving the intended results and the exposure to losses if the underlying transactions or ventures are not successful. We have significant investments in businesses that we account for under the equity method of accounting. These investments have generated operating losses each year and certain have required additional investments from us in the form of equity or loans. We incurred losses in our equity method investments of approximately $7.8 million, $30.0 million, $19.1 million, and $40.6 million in the 2018, 2017, 2016 and 2015 fiscal years, respectively. There can be no assurance that these investments will become profitable individually or in the aggregate or that they will not require material additional funding from us in the future.
We do not control the day-to-day operations of these investments. We have in the past written down and, to the extent that these investments are not successful in the future, we may write down of all or a portion of such investments. Additionally, these businesses are subject to laws, rules and other circumstances, and have risks in their operations, which may be similar to, or different from, those to which we are subject. Any of the foregoing risks could result in a material negative effect on our business and results of operations or adversely impact the value of our investments.
We Do Not Own All of Our Venues and Our Failure to Renew Our Leases or Venue Management Agreements on Economically Attractive Terms May Have a Material Negative Effect on Our Business and Results of Operations; Our Lease on Radio City Music Hall Requires Us to Maintain a Certain Net Worth or Meet Certain Other Requirements.
The lease on Radio City Music Hall expires in 2023. We have the option to renew the lease at fair market value for an additional ten years by providing two years’ notice prior to the initial expiration date. Similarly, we lease the Beacon Theatre pursuant to a lease that expires in 2026. If we are unable to renew these leases on economically attractive terms, our business could be materially negatively affected. Our booking agreement with the Wang Theatre in Boston expires in 2019. The expiration of the booking agreement will not have a material negative effect on our business. MSG Sports & Entertainment, LLC, the entity that guarantees the Radio City Music Hall lease, is required to maintain a certain net worth or, if such net worth is not maintained, the entity must either post a letter of credit or provide cash collateral. The MSG Sphere Las Vegas will be constructed on property we lease from Sands under a 50 year lease.

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TAO Group operates venues under various agreements that include leases with third parties and management agreements. The long-term success of TAO Group will depend in part on the availability of real estate, the ability to lease this real estate and the ability to enter into management agreements. As many of these agreements are with third parties over whom TAO Group has little or no control, they may be unable to renew these agreements or enter into new agreements on acceptable terms or at all, and may be unable to obtain favorable agreements with venues. The ability to renew these agreements and obtain new agreements on favorable terms depends on a number of other factors, many of which are beyond the control of us or TAO Group, such as national and local business conditions and competition from other businesses. There can be no assurance that TAO Group will be able to renew these agreements on acceptable terms or at all, or that they will be able to obtain attractive agreements with appropriate venues or real estate owners, which could have a material negative effect on our business and results of operations.
We Are Subject to Extensive Governmental Regulation and Our Failure to Comply with These Regulations May Have a Material Negative Effect on Our Business and Results of Operations.
Our operations are subject to federal, state and local laws and regulations.
We hold liquor licenses at each of our venues and are subject to licensing requirements with respect to the sale of alcoholic beverages in the jurisdictions in which we serve those beverages. Failure to receive or retain, or the suspension of, liquor licenses or permits could interrupt or terminate our ability to serve alcoholic beverages at the applicable venue and could have a material negative effect on our business and our results of operations. Additional regulation relating to liquor licenses may limit our activities in the future or significantly increase the cost of compliance, or both. In the jurisdictions in which our venues are located, we are subject to statutes that generally provide that serving alcohol to a visibly intoxicated or minor patron is a violation of the law and may provide for strict liability for certain damages arising out of such violations. Our liability insurance coverage may not be adequate or available to cover any potential liability.
We and our venues are subject to environmental laws and regulations relating to the use, disposal, storage, emission and release of hazardous and non-hazardous substances, as well as zoning and noise level restrictions which may affect, among other things, the operations of our venues. Additionally, certain laws and regulations could hold us strictly, jointly and severally responsible for the remediation of hazardous substance contamination at our facilities or at third-party waste disposal sites, and could hold us responsible for any personal or property damage related to any contamination. Any requirements to dispose of, or remediate, such hazardous or non-hazardous materials and any associated costs and impact on operations of such efforts may be heightened as a result of the purchase, construction or renovation of a venue.
Our venues are subject to zoning and building regulations including permits relating to the operation of The Garden. In addition, The Garden requires a zoning special permit. The original permit was granted by the New York City Planning Commission in 1963 and renewed in July 2013 for 10 years. In connection with the renewal, certain government officials and special interest groups sought to use the renewal process to pressure us to improve Penn Station or to relocate The Garden. There can be no assurance regarding the future renewal of the permit or the terms thereof.
In January 2016, New York Governor Andrew Cuomo announced a request for proposal (“RFP”) process for proposals on transforming Penn Station. For example, he noted the possibility of seeking to move The Hulu Theater at Madison Square Garden to create a new Penn Station entrance, but noted that New York State was ready to explore all RFP proposals. The Governor has not announced a final decision on any of the proposals received. We have no assurance on how the final approved proposal may impact the Madison Square Garden Complex.
Our businesses are, and may in the future be, subject to a variety of other laws and regulations, including licensing, permitting, and historic designation and similar requirements; working conditions, labor, immigration and employment laws; health, safety and sanitation requirements; compliance with the Americans with Disabilities Act; and privacy laws.
Our failure to comply with applicable governmental laws and regulations, or to maintain necessary permits or licenses, could have a material negative effect on our business and results of operations.

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Our Properties Are Subject to, and Benefit from, Certain Easements, the Availability of Which May Not Continue on Terms Favorable to Us or at All.
Our properties are subject to, and benefit from, certain easements. For example, the “breezeway” into the Madison Square Garden Complex from Seventh Avenue in New York City is a significant easement that we share with other property owners. Additionally, our planned MSG Sphere Las Vegas will have the benefit of an easement with respect to the planned pedestrian bridge to the Sands Expo & Convention Center. Our ability to continue to utilize these and other easements, including for advertising purposes, requires us to comply with a number of conditions. Moreover, certain adjoining property owners have easements over our property, which we are required to maintain so long as those property owners meet certain conditions. It is possible that we will be unable to continue to access or maintain any easements on terms favorable to us, or at all, which could have a material negative effect on our business and results of operations.
We May Be Exposed to Business, Reputational and Litigation Risk if There is Loss, Disclosure or Misappropriation of or Access to Stored Personal Information or Other Breaches of Our Information Security.
Through our operations, we may collect and store, including by electronic means, certain personal information and payment card information that is provided to us through purchases, registration on our web sites, or otherwise in communication or interaction with us. These activities require the use of centralized data storage, including through third party service providers. Data maintained in electronic form is subject to the risk of intrusion, tampering, theft or other malicious activity. Our ability to safeguard such personal information and other confidential information, including information regarding the Company and our distributors, advertisers and employees, is important to our business. We take these matters seriously and take significant steps to protect our stored information. These protections are costly and require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, the risks of a data breach cannot be entirely eliminated and our information technology and other systems that maintain and transmit consumer, distributor, advertiser, Company, employee and other confidential information may be compromised. This compromise of information on our network security or that of a third party service provider could result in personal information and/or confidential information being lost, disclosed, accessed or taken without consent, as well as the security of our other confidential information may be compromised. For example, on November 22, 2016, the Company announced that it was notifying customers that it had identified and addressed a payment card issue that affected cards used at merchandise and food and beverage locations at several of the Company’s New York venues and The Chicago Theatre. The Company, working with security firms, promptly fixed the issue and implemented enhanced security measures. The Company also continues to review and enhance our security measures in light of changes in the industry. The Company has incurred and expects to incur expenses associated with the payment card incident.
If our electronically stored data is compromised, our ability to conduct business may be interrupted or impaired, we may lose profitable opportunities or the value of those opportunities may be diminished and we may lose revenue as a result of unlicensed use of our intellectual property. Further, a penetration of our network security or other misappropriation or misuse of personal or confidential information could subject us to business and litigation risk and damage our reputation, which could have a material negative effect on our business and results of operations.
A Change to or Withdrawal of New York City Real Estate Tax Exemption May Have a Material Negative Effect on Our Business and Results of Operations.
Many arenas, ballparks and stadiums nationally and in New York City have received significant public support, such as tax exempt financing, other tax benefits, direct subsidies and other contributions, including for public infrastructure critical to the facilities such as parking lots and transit improvements. Our Madison Square Garden Complex benefits from a more limited real estate tax exemption pursuant to an agreement with the City of New York, subject to certain conditions, and legislation enacted by the State of New York in 1982. For fiscal year 2018, the tax exemption was $41.5 million. From time to time there have been calls to repeal or amend the tax exemption. Repeal or amendment would require legislative action by New York State. There can be no assurance that the tax exemption will not be amended in a manner adverse to us or repealed in its entirety, either of which could have a material negative effect on our business and results of operations.

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Certain of Our Subsidiaries Have Incurred Indebtedness, and the Occurrence of an Event of Default Under Our Subsidiaries’ Credit Facilities Could Substantially Impair the Assets of Those Subsidiaries; Failure of Our Joint Ventures to Perform as Expected Could Have a Negative Effect on Our Business.
Certain of our subsidiaries have incurred indebtedness, which indebtedness in the case of the TAO Group is significant relative to the assets of the TAO Group business. New York Knicks, LLC and New York Rangers, LLC, which own the assets of the Knicks and Rangers franchises, respectively, have also entered into credit facilities, both of which were undrawn as of June 30, 2018. The occurrence of an event of default under our subsidiaries’ credit facilities could substantially impair the assets of those subsidiaries and, as a result, have a negative effect on our business and results of operations.
In addition, we have made investments in, or otherwise extended loans to, one or more of our joint ventures and may make additional investments in, or otherwise extend loans to, one or more of our joint ventures or their affiliates in the future. To the extent that those joint ventures or related affiliates do not perform as expected, including with respect to repayment of such loans, it could impair such assets or create losses related to such loans, and, as a result, have a negative effect on our business and results of operations.
We May Require Financing to Fund Our Ongoing Operations and Capital Expenditures, the Availability of Which is Highly Uncertain.
The capital and credit markets can experience volatility and disruption. Such markets can exert extreme downward pressure on stock prices and upward pressure on the cost of new debt capital and can severely restrict credit availability for most issuers.
Our business has been characterized by significant expenditures for properties, businesses, renovations and productions. In the future we may engage in transactions that depend on our ability to obtain financing. We may also seek financing to fund our ongoing operations.
Depending upon conditions in the financial markets and/or the Company’s financial performance, we may not be able to raise additional capital on favorable terms, or at all. In addition, as described above, the leagues in which our sports teams compete may have, under certain circumstances, approval rights over certain financing transactions, and in connection with those rights, could affect our ability to obtain such financing. If we are unable to pursue our current and future spending programs, we may be forced to cancel or scale back those programs. Failure to successfully pursue our capital expenditure and other spending plans could negatively affect our ability to compete effectively and have a material negative effect on our business and results of operations.
Our Business is Subject to Seasonal Fluctuations.
Our revenues have been seasonal and we expect they will continue to be seasonal. For example, 15% of our MSG Entertainment segment’s revenues and 7% of our consolidated revenues in fiscal year 2018 were derived from the Christmas Spectacular. Revenues of the MSG Entertainment segment are highest in the second quarter of our fiscal year when these performances primarily occur. As a result, MSG Entertainment earns a disproportionate amount of its revenue and operating income in the second quarter of each fiscal year. Similarly, because of the nature of the NBA and NHL playing seasons, revenues from our sports teams are concentrated in the second and third quarters of each fiscal year. Revenues from our business on a consolidated basis tend to be at their lowest in the first and fourth quarters of the fiscal year.
Organized Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.
Our business is dependent upon the efforts of unionized workers. Approximately 58% of our employees are represented by unions. Any labor disputes, such as strikes or lockouts, with the unions with which we have CBAs could have a material negative effect on our business and results of operations (including our ability to produce or present concerts, theatrical productions, sporting events and other events).

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NBA players are covered by a CBA between the NBPA and the NBA. NHL players are covered by a CBA between the NHLPA and the NHL. Both the NBA and the NHL have experienced labor difficulties in the past and may have labor issues in the future. Labor difficulties may include players’ strikes or management lockouts. For example, the NHL has experienced labor difficulties, including a lockout during the 1994-95 NHL season, which resulted in the regular season being shortened from 84 to 48 games, a lockout beginning in September 2004, which resulted in the cancellation of the entire 2004-05 NHL season, and a lockout during the 2012-13 NHL season, which resulted in the regular season being shortened from 82 to 48 games. The current NHL CBA expires on September 15, 2022 (although the NHL and NHLPA each have the right to terminate the CBA effective following the 2019-20 season). The NBA has also experienced labor difficulties, including a lockout during the 1998-99 season, which resulted in the regular season being shortened from 82 to 50 games, and a lockout during the 2011-12 season, which resulted in the regular season being shortened from 82 games to 66 games. The current NBA CBA expires after the 2023-24 season (although the NBA and NBPA each has the right to terminate the CBA effective following the 2022-23 season).
The Unavailability of Systems Upon Which We Rely May Have a Material Negative Effect on Our Business and Results of Operations.
We rely upon various internal and third-party software or systems in the operation of our business, including, with respect to ticket sales, credit card processing, email marketing, point of sale transactions, database, inventory, human resource management and financial systems. From time to time, certain of these arrangements may not be covered by long-term agreements. The failure or unavailability of these internal or third-party services or systems, depending upon its severity and duration, could have a material negative effect on our business and results of operations.
We May Become Subject to Infringement or Other Claims Relating to Our Content or Technology.
From time to time, third parties may assert against us alleged intellectual property (e.g., copyright, trademark and patent) or other claims relating to our productions, technologies or other content or material, some of which may be important to our business. In addition, our productions could potentially subject us to claims of defamation or similar types of allegations. Any such claims, regardless of their merit, could cause us to incur significant costs. In addition, if we are unable to continue use of certain intellectual property rights, our business and results of operations could be materially negatively impacted.
There Is the Risk of Personal Injuries and Accidents in Connection with Our Venues, Which Could Subject Us to Personal Injury or Other Claims; We are Subject to the Risk of Adverse Outcomes in Other Types of Litigation.
There are inherent risks associated with producing and hosting events and operating, maintaining or renovating our venues and in operating the restaurant and nightlife venues. As a result, personal injuries, accidents and other incidents have occurred and may occur from time to time, which could subject us to claims and liabilities.
These risks might not be covered by insurance or could involve exposures that exceed the limits of any applicable insurance. Incidents in connection with events at any of our venues could also reduce attendance at our events, and cause a decrease in our revenue and operating income. While we seek to obtain contractual indemnities for events at our venues that we do not promote and we maintain insurance policies that provide coverage for incidents in the ordinary course of business, there can be no assurance that such indemnities or insurance will be adequate at all times and in all circumstances.
From time to time, we become subject to other kinds of litigation. The outcome of litigation is inherently unpredictable. As a result, we could incur liability from litigation which could be material and for which we may have inadequate or no insurance coverage or be subject to other forms of relief which might adversely affect the Company.

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We face risks from doing business internationally.

We have operations and own property outside of the United States. As a result, our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks include:

laws and policies affecting trade and taxes, including laws and policies relating to currency, the repatriation of funds and withholding taxes, and changes in these laws;
changes in local regulatory requirements, including restrictions on foreign ownership;
exchange rate fluctuation;
exchange controls, tariffs and other trade barriers;
differing degrees of protection for intellectual property and varying attitudes towards the piracy of intellectual property;
foreign privacy and data protection laws and regulations and changes in these laws;
the instability of foreign economies and governments;
war and acts of terrorism;
anti-corruption laws and regulations such as the Foreign Corrupt Practices Act and the U.K. Bribery Act that impose stringent requirements on how we conduct our foreign operations and changes in these laws and regulations; and
shifting consumer preferences regarding entertainment.

Events or developments related to these and other risks associated with international operations could have a material negative effect on our business and results of operations.

The Distribution Could Result in Significant Tax Liability.
We have received an opinion from Sullivan & Cromwell LLP substantially to the effect that, among other things, the Distribution qualified as a tax-free distribution under the Internal Revenue Code (the “Code”). The opinion is not binding on the Internal Revenue Service (the “IRS”) or the courts. Additionally, MSG Networks received a private letter ruling from the IRS concluding that certain limited aspects of the Distribution do not prevent the Distribution from satisfying certain requirements for tax-free treatment under the Code. The opinion and the private letter ruling relied on factual representations and reasonable assumptions, which if incorrect or inaccurate may jeopardize the ability to rely on such opinion and letter ruling.
If the Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes, then, in general, MSG Networks would recognize taxable gain in an amount equal to the excess of the fair market value of the common stock of our Company over MSG Networks’ tax basis therein (i.e., as if it had sold the common stock of our Company in a taxable sale for its fair market value). In addition, the receipt by MSG Networks’ stockholders of common stock of our Company would be a taxable distribution, and each U.S. holder that participated in the Distribution would recognize a taxable distribution as if the U.S. holder had received a distribution equal to the fair market value of our common stock that was distributed to it, which generally would be treated first as a taxable dividend to the extent of MSG Networks’ earnings and profits, then as a non-taxable return of capital to the extent of each U.S. holder’s tax basis in its MSG Networks common stock, and thereafter as capital gain with respect to any remaining value. It is expected that the amount of any such taxes to MSG Networks’ stockholders and MSG Networks would be substantial. See “— We May Have a Significant Indemnity Obligation to MSG Networks if the Distribution Is Treated as a Taxable Transaction.
We May Have a Significant Indemnity Obligation to MSG Networks if the Distribution Is Treated as a Taxable Transaction.
We have entered into a Tax Disaffiliation Agreement with MSG Networks, which sets out each party’s rights and obligations with respect to deficiencies and refunds, if any, of federal, state, local or foreign taxes for periods before and after the Distribution and related matters such as the filing of tax returns and the conduct of IRS and other audits. Pursuant to the Tax Disaffiliation Agreement, we are required to indemnify MSG Networks for losses and taxes of MSG Networks resulting from the breach of certain covenants and for certain taxable gain recognized by MSG Networks, including as a result of certain acquisitions of our stock or assets. If we are required to indemnify MSG Networks under the circumstances set forth in the Tax Disaffiliation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position.

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We are Controlled by the Dolan Family. As a Result of Their Control, the Dolan Family Has the Ability to Prevent or Cause a Change in Control or Approve, Prevent or Influence Certain Actions by the Company.
We have two classes of common stock:
Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), which is entitled to one vote per share and is entitled collectively to elect 25% of our Board of Directors; and
Class B Common Stock, par value $0.01 per share (“Class B Common Stock”), which is entitled to ten votes per share and is entitled collectively to elect the remaining 75% of our Board of Directors.
As of July 31, 2018, the Dolan family, including trusts for the benefit of members of the Dolan family (collectively, the “Dolan Family Group”), collectively own all of our Class B Common Stock, approximately 2.8% of our outstanding Class A Common Stock and approximately 71.1% of the total voting power of all our outstanding common stock. The members of the Dolan Family Group holding Class B Common Stock have executed a stockholders agreement (the “Stockholders Agreement”) that has the effect of causing the voting power of the holders of our Class B Common Stock to be cast as a block with respect to all matters to be voted on by holders of Class B Common Stock. Under the Stockholders Agreement, the shares of Class B Common Stock owned by members of the Dolan Family Group are to be voted on all matters in accordance with the determination of the Dolan Family Committee, except that the decisions of the Dolan Family Committee are non-binding with respect to the Class B Common Stock owned by certain Dolan family trusts that collectively own 40.5% of the outstanding Class B Common Stock (“Excluded Trust”). The “Dolan Family Committee” consists of Charles F. Dolan and his six children, James L. Dolan, Thomas C. Dolan, Patrick F. Dolan, Kathleen M. Dolan, Marianne Dolan Weber and Deborah A. Dolan-Sweeney. The Dolan Family Committee generally acts by majority vote, except that approval of a going-private transaction must be approved by a two-thirds vote and approval of a change-in-control transaction must be approved by not less than all but one vote. The voting members of the Dolan Family Committee are James L. Dolan, Thomas C. Dolan, Kathleen M. Dolan, Deborah A. Dolan-Sweeney and Marianne Dolan Weber, with each member having one vote other than James L. Dolan, who has two votes. Because James L. Dolan has two votes, he has the ability to block Dolan Family Committee approval of any Company change in control transaction. Shares of Class B Common Stock owned by Excluded Trusts are to be voted on all matters in accordance with the determination of the Excluded Trusts holding a majority of the Class B Common Stock held by all Excluded Trusts, except in the case of a vote on a going-private transaction or a change in control transaction, in which case a vote of trusts holding two-thirds of the Class B Common Stock owned by Excluded Trusts is required.
The Dolan Family Group is able to prevent a change in control of our Company and no person interested in acquiring us will be able to do so without obtaining the consent of the Dolan Family Group. The Dolan Family Group, by virtue of their stock ownership, have the power to elect all of our directors subject to election by holders of Class B Common Stock and are able collectively to control stockholder decisions on matters on which holders of all classes of our common stock vote together as a single class. These matters could include the amendment of some provisions of our certificate of incorporation and the approval of fundamental corporate transactions.
In addition, the affirmative vote or consent of the holders of at least 66 23% of the outstanding shares of the Class B Common Stock, voting separately as a class, is required to approve:
the authorization or issuance of any additional shares of Class B Common Stock; and
any amendment, alteration or repeal of any of the provisions of our certificate of incorporation that adversely affects the powers, preferences or rights of the Class B Common Stock.
As a result, the Dolan Family Group also has the power to prevent such issuance or amendment.
The Dolan Family Group also controls MSG Networks and AMC Networks Inc. (“AMC Networks”).
We Have Elected to Be a “Controlled Company” for NYSE Purposes Which Allows Us Not to Comply with Certain of the Corporate Governance Rules of NYSE.
Members of the Dolan Family Group have entered into a Stockholders Agreement relating, among other things, to the voting of their shares of our Class B Common Stock. As a result, we are a “controlled company” under the corporate governance rules of NYSE. As a controlled company, we have the right to elect not to comply with the corporate governance rules of NYSE requiring: (i) a majority of independent directors on our Board, (ii) an independent corporate governance and nominating committee and (iii) an independent compensation committee. Our Board of Directors has elected for the Company to be treated as a “controlled company” under NYSE corporate governance rules and not to comply with the NYSE requirement for a majority independent board of directors and for an independent corporate governance and nominating committee because of our status as a controlled company. Nevertheless, our Board of Directors has elected to comply with the NYSE requirement for an independent compensation committee.

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Future Stock Sales, Including as a Result of the Exercise of Registration Rights by Certain of Our Stockholders, Could Adversely Affect the Trading Price of Our Class A Common Stock.
Certain parties have registration rights covering a portion of our shares. We have entered into registration rights agreements with Charles F. Dolan, members of his family, certain Dolan family interests, and the Dolan Family Foundation that provide them with “demand” and “piggyback” registration rights with respect to approximately 5.1 million shares of Class A Common Stock, including shares issuable upon conversion of shares of Class B Common Stock. Sales of a substantial number of shares of Class A Common Stock could adversely affect the market price of the Class A Common Stock and could impair our future ability to raise capital through an offering of our equity securities.
Transfers and Ownership of Our Common Stock Are Subject to Restrictions Under Rules of the NBA, NHL and WNBA and Our Certificate of Incorporation Provides Us with Remedies Against Holders Who Do Not Comply with Those Restrictions.
The Company is the owner of professional sports franchises in the NBA, NHL and WNBA. As a result, transfers and ownership of our common stock are subject to certain restrictions under the governing documents of the NBA, NHL and WNBA as well as the Company’s consent and other agreements with the NBA, NHL and WNBA in connection with their approval of the Distribution. These restrictions are described under “Description of Capital Stock — Class A Common Stock and Class B Common Stock — Transfer Restrictions” in our Information Statement filed as Exhibit 99.1 to Amendment No. 6 to the registration statement on Form 10 filed with the SEC on September 11, 2015. In order to protect the Company and its NBA, NHL and WNBA franchises from sanctions that might be imposed by the NBA, NHL or WNBA as a result of violations of these restrictions, our amended and restated certificate of incorporation provides that, if a transfer of shares of our common stock to a person or the ownership of shares of our common stock by a person requires approval or other action by a league and such approval or other action was not obtained or taken as required, the Company shall have the right by written notice to the holder to require the holder to dispose of the shares of common stock which triggered the need for such approval. If a holder fails to comply with such a notice, in addition to any other remedies that may be available, the Company may redeem the shares at 85% of the fair market value of those shares.
We Share Certain Key Executives and Directors with MSG Networks and/or AMC Networks, Which Means Those Executives Do Not Devote Their Full Time and Attention to Our Affairs and the Overlap May Give Rise to Conflicts; Certain Directors Are Also Directors and/or Executives of AMC Networks.
Our Executive Chairman and Chief Executive Officer, James L. Dolan, also serves as the Executive Chairman of MSG Networks, and our Executive Vice President, General Counsel and Secretary, Lawrence J. Burian, also serves as the Executive Vice President, General Counsel and Secretary of MSG Networks. As a result, not all of our executive officers devote their full time and attention to the Company’s affairs. In addition, our Vice Chairman, Gregg G. Seibert, also serves as the Vice Chairman of both MSG Networks and AMC Networks, and one of our directors, Charles F. Dolan, is the Executive Chairman of AMC Networks. Furthermore, six members of our Board of Directors (including James L. Dolan) are also directors of MSG Networks, and seven members of our Board of Directors (including James L. Dolan) are also directors of AMC Networks. The overlapping officers and directors may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, the potential for a conflict of interest exists when we on the one hand, and MSG Networks and/or AMC Networks on the other hand, look at certain acquisitions and other corporate opportunities that may be suitable for more than one of the companies. Also, conflicts may arise if there are issues or disputes under the commercial arrangements that exist between MSG Networks or AMC Networks and us. In addition, certain of our directors and officers hold MSG Networks and/or AMC Networks stock, stock options, restricted stock units and/or cash performance awards. These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our Company and MSG Networks or AMC Networks. See “Certain Relationships and Potential Conflicts of Interest” in our Proxy Statement filed with the SEC on October 27, 2016 and “Certain Relationships and Related Party Transactions — Certain Relationships and Potential Conflicts of Interest” in our Information Statement filed as Exhibit 99.1 to Amendment No. 6 to the registration statement on Form 10 filed with the SEC on September 11, 2015 for a discussion of certain procedures we instituted to help ameliorate such potential conflicts with MSG Networks and/or AMC Networks that may arise.

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Our Overlapping Directors and Executive Officers with MSG Networks and/or AMC Networks May Result in the Diversion of Corporate Opportunities to MSG Networks and/or AMC Networks and Other Conflicts and Provisions in Our Amended and Restated Certificate of Incorporation May Provide Us No Remedy in That Circumstance.
The Company’s amended and restated certificate of incorporation acknowledges that directors and officers of the Company (the “Overlap Persons”) may also be serving as directors, officers, employees or agents of MSG Networks and/or AMC Networks (each an “Other Entity”), and that the Company may engage in material business transactions with such Other Entities. The Company has renounced its rights to certain business opportunities and the Company’s amended and restated certificate of incorporation provides that no director or officer of the Company who is also serving as a director, officer, employee or agent of one or more of the Other Entities will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated certificate of incorporation) to one or more of the Other Entities instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company. These provisions in our amended and restated certificate of incorporation also expressly validate certain contracts, agreements, arrangements and transactions (and amendments, modifications or terminations thereof) between the Company and the Other Entities and, to the fullest extent permitted by law, provide that the actions of the overlapping directors or officers in connection therewith are not breaches of fiduciary duties owed to the Company, any of its subsidiaries or their respective stockholders. See “Certain Relationships and Potential Conflicts of Interest” in our Proxy Statement filed with the SEC on October 27, 2017 and “Description of Capital Stock — Certain Corporate Opportunities and Conflicts” in our Information Statement filed as Exhibit 99.1 to Amendment No. 6 to the registration statement on Form 10 filed with the SEC on September 11, 2015.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own the Madison Square Garden Complex, which includes The Garden (with a maximum capacity of approximately 21,000 seats) and The Hulu Theater at Madison Square Garden (approximately 5,600 seats) in New York City, comprising approximately 1,100,000 square feet; a training center in Greenburgh, NY with approximately 105,000 square feet of space; The Chicago Theatre (approximately 3,600 seats) in Chicago comprising approximately 72,600 square feet; and the Forum (approximately 17,600 seats) in Inglewood, CA comprising approximately 307,000 square feet.
Significant properties that are leased in New York City include approximately 328,500 square feet housing Madison Square Garden’s administrative and executive offices, approximately 577,000 square feet comprising Radio City Music Hall (approximately 6,000 seats) and approximately 57,000 square feet comprising the Beacon Theatre (approximately 2,800 seats). We also lease storage space in various other locations. For more information on our venues, see “Item 1. BusinessOur BusinessOur Performance Venues.”
We also lease property in Las Vegas, Nevada and own property in Stratford, London on which we intend to construct new venues — known as “MSG Sphere.” See “Item 1. BusinessOur BusinessOur Performance VenuesMSG Sphere.”
Our Madison Square Garden Complex is subject to and benefits from various easements, including over the “breezeway” into Madison Square Garden from Seventh Avenue in New York City (which we share with other property owners). Additionally, our planned MSG Sphere Las Vegas will have the benefit of an easement with respect to the planned pedestrian bridge to the Sands Expo & Convention Center. Our ability to continue to utilize these and other easements requires us to comply with certain conditions. Moreover, certain adjoining property owners have easements over our property, which we are required to maintain so long as those property owners meet certain conditions.
In addition, TAO Group is engaged in the management and operation of restaurants, nightlife and hospitality venues in New York City, Las Vegas, Los Angeles, Singapore and Australia, of which 14 venues are leased properties as well as five leased offices located in in New York and Las Vegas. The size of the TAO Group’s leased venues ranges from approximately 4,200 to 26,000 square feet and total approximately 200,000 square feet including office space. TAO Group also manages 11 venues (including one venue located in Australia and one venue located in Singapore) that are not owned or leased properties.

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Item 3. Legal Proceedings
The Company owns 50% of AMSGE, which in turn owns a majority interest in Global Music Rights, LLC (“GMR”). GMR is primarily a performance rights organization, whose business includes obtaining the right to license the public performance rights of songs composed by leading songwriters. GMR engaged in negotiations with the Radio Music Licensing Committee (“RMLC”), which represents over ten thousand commercial radio stations. On November 18, 2016, RMLC filed a complaint against GMR in the United States District Court for the Eastern District of Pennsylvania alleging that GMR is violating Section 2 of the Sherman Antitrust Act and seeking an injunction, requiring, among other things, that GMR issue radio stations licenses for GMR’s repertory, upon request, at a rate set through a judicial rate-making procedure, that GMR offer “economically viable alternatives to blanket licenses,” and that GMR offer only licenses for songs which are fully controlled by GMR. GMR and RMLC agreed to an interim license arrangement through September 30, 2017, which has been extended through September 30, 2018. GMR has advised the Company that it believes that the RMLC Complaint is without merit and is vigorously defending itself. On January 20, 2017, GMR filed a motion to dismiss or to transfer venue, asserting that the Eastern District of Pennsylvania is not a proper venue for the matter, lacks personal jurisdiction of GMR and that in any event the complaint fails to state a claim. On December 6, 2016, GMR filed a complaint against RMLC in the United States District Court for the Central District of California, alleging that RMLC operates as an illegal cartel that unreasonably restrains trade in violation of Section 1 of the Sherman Antitrust Act and California state law, and seeking an injunction restraining RMLC and its co-conspirators from enforcing or establishing agreements that unreasonably restrict competition for public performance licenses. The judge in the Central District of California denied RMLC’s motion to dismiss GMR’s claim for lack of ripeness and, on the basis that the two cases involve similar facts, stayed the California action in order to assess the status of the Pennsylvania case. On July 21, 2017, RMLC filed a preliminary injunction motion in the United States District Court for the Eastern District of Pennsylvania to extend the duration of the interim licenses which GMR had granted to certain radio stations. The district court determined that the jurisdictional matter should be decided prior to addressing the motion for preliminary injunction and referred the jurisdictional questions to the Magistrate Judge in the United States District Court Eastern District of Pennsylvania. On November 29, 2017, the Magistrate Judge issued a report and recommendation that personal jurisdiction was not appropriate over GMR in the Eastern District of Pennsylvania and recommending the dismissal of RMLC’s action without prejudice. RMLC has filed objections to the Magistrate Judge’s report and recommendation. On May 3, 2018, GMR filed a motion to lift the stay in GMR’s California action on the basis that a continuation of the stay would cause undue prejudice to GMR. On May 14, 2018, RMLC opposed GMR’s motion to lift the stay and, on May 23, 2018, GMR filed a reply in support of its motion to lift the stay. On August 14, 2018, the court denied GMR’s motion to lift the stay.
The Company is a defendant in various other lawsuits. Although the outcome of these other lawsuits cannot be predicted with certainty (including the extent of available insurance, if any), management does not believe that resolution of these other lawsuits will have a material adverse effect on the Company.
Item 4. Mine Safety Disclosures
Not applicable.

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PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), is listed on the New York Stock Exchange (“NYSE”) under the symbol “MSG.” The Company’s Class A Common Stock began “regular way” trading on the NYSE on October 1, 2015.
Performance Graph
The following graph compares the relative performance of our Class A Common Stock, the Russell 3000 Index and the Bloomberg Americas Entertainment Index. This graph covers the period from October 1, 2015 through June 30, 2018. The stock price performance included in this graph is not necessarily indicative of future stock performance.
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12417412&doc=17
 
 
Base Period 10/1/15
 
12/31/15
 
6/30/16
 
12/31/16
 
6/30/17
 
12/31/17
 
6/30/18
The Madison Square Garden Company
 
$
100.00

 
$
101.45

 
$
108.16

 
$
107.54

 
$
123.46

 
$
132.20

 
$
194.49

Russell 3000 Index
 
100.00

 
106.11

 
109.96

 
119.62

 
130.31

 
144.90

 
149.56

Bloomberg Americas Entertainment Index
 
100.00

 
99.65

 
106.98

 
110.36

 
118.88

 
141.61

 
156.68

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

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As of June 30, 2018, there were 693 holders of record of our Class A Common Stock. There is no public trading market for our Class B Common Stock, par value $.01 per share (“Class B Common Stock”). As of June 30, 2018, there were 14 holders of record of our Class B Common Stock.
We did not pay any dividend on our common stock during fiscal year 2018 and do not have any current plans to pay a cash dividend on our common stock for the foreseeable future.
Price Range of Madison Square Garden Class A Common Stock
The following tables set forth for the periods indicated the intra-day high and low sales prices per share of our Class A Common Stock as reported on NYSE:
Year ended June 30, 2018
High      
 
Low      
For the Quarter ended September 30, 2017
$
226.95

 
$
189.96

For the Quarter ended December 31, 2017
231.44

 
207.98

For the Quarter ended March 31, 2018
254.50

 
205.22

For the Quarter ended June 30, 2018
321.92

 
236.78

Year ended June 30, 2017
High      
 
Low      
For the Quarter ended September 30, 2016
$
188.80

 
$
166.13

For the Quarter ended December 31, 2016
178.29

 
160.96

For the Quarter ended March 31, 2017
206.24

 
166.86

For the Quarter ended June 30, 2017
206.60

 
192.15

Issuer Purchases of Equity Securities
As of June 30, 2018, the Company had approximately $260 million remaining under the $525 million Class A Common Stock share repurchase program authorized by the Company’s board of directors (“Board”) on September 11, 2015. Under the authorization, shares of Class A Common Stock may be purchased from time to time in accordance with applicable insider trading and other securities laws and regulations, with the timing and amount of purchases depending on market conditions and other factors. The Company has been funding and expects to continue to fund stock repurchases through a combination of cash on hand and cash generated by operations. During the three months ended June 30, 2018, the Company did not engage in any share repurchase activity under its share repurchase program.
Item 6. Selected Financial Data
The operating and balance sheet data included in the following selected financial data table have been derived from the consolidated and combined financial statements of The Madison Square Garden Company and its subsidiaries. The balance sheet data as of June 30, 2018, 2017 and 2016 and the operating data for the years ended June 30, 2018 and 2017 and the nine months ended June 30, 2016 are presented on a consolidated basis, as the Company became a standalone public company on the September 30, 2015 (the “Distribution Date”). Operating data prior to the Distribution Date, which included operating data for the years ended June 30, 2015 and 2014, as well as operating data for the three months ended September 30, 2015 that is included in results of operations for the year ended June 30, 2016, were prepared on a standalone basis derived from the consolidated financial statements and accounting records of MSG Networks Inc. (“MSG Networks” or “Former Parent”) and are presented as carve-out financial statements as the Company was not a standalone public company prior to the Distribution Date (“carve-out and combined basis”). Balance sheet data as of June 30, 2015 and 2014 were also presented on a carve-out and combined basis.
For periods prior to the Distribution Date, the financial information presented below does not necessarily reflect what our results of operations and financial position would have been if we had operated as a separate publicly-traded entity. The selected financial data presented below should be read in conjunction with the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As discussed in note (a) below, our operating results for the year ended June 30, 2018 are not directly comparable with the year ended June 30, 2017 primarily due to the timing of our acquisition of a controlling interest in TAO Group Holdings LLC ( “TAO Group”).

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Years Ended June 30,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(in thousands, except per share data)
Operating Data (a):
 
 
 
 
 
 
 
 
 
Revenues
$
1,559,095

 
$
1,318,452

 
$
1,115,311

 
$
1,071,551

 
$
913,615

Operating income (loss)
18,876

 
(60,356
)
 
(58,631
)
 
(406
)
 
(114,028
)
Net income (loss)
134,448

 
(76,789
)
 
(77,290
)
 
(40,684
)
 
(116,933
)
Less: Net income (loss) attributable to nonredeemable noncontrolling interests
(6,518
)
 
304

 

 

 

Less: Net loss attributable to redeemable noncontrolling interests
(628
)
 
(4,370
)
 

 

 

Net Income (loss) attributable to The Madison Square Garden Company’s stockholders
$
141,594

 
$
(72,723
)
 
$
(77,290
)
 
$
(40,684
)
 
$
(116,933
)
Basic earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders
$
5.99

 
$
(3.05
)
 
$
(3.12
)
 
$
(1.63
)
 
$
(4.69
)
Diluted earnings (loss) per common share attributable to The Madison Square Garden Company’s stockholders
$
5.94

 
$
(3.05
)
 
$
(3.12
)
 
$
(1.63
)
 
$
(4.69
)
Weighted-average number of common shares outstanding (b):
 
 
 
 
 
 
 
 
 
Basic
23,639

 
23,853

 
24,754

 
24,928

 
24,928

Diluted
23,846

 
23,853

 
24,754

 
24,928

 
24,928

Balance Sheet Data (a):
 
 
 
 
 
 
 
 
 
Total assets
$
3,736,173

 
$
3,712,753

 
$
3,543,950

 
$
2,148,942

 
$
2,137,191

Long-term debt (including current portion), net of deferred financing costs (c)
105,700

 
105,433

 

 

 

Total The Madison Square Garden Company stockholders’ equity / divisional equity
2,536,483

 
2,408,163

 
2,586,421

 
1,223,275

 
1,191,203

        
(a) 
Operating and balance sheet data beginning in fiscal year 2017 includes results from the acquisitions of Boston Calling Events, LLC (“BCE”) operating information from July 1, 2016 to June 30, 2017 and TAO Group operating information from February 1, 2017 to March 26, 2017. Operating and balance sheet data beginning in fiscal year 2018 includes results from the acquisitions of Counter Logic Gaming (“CLG”) and Obscura Digital (“Obscura”) since their acquisition dates. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsIntroductionFactors Affecting Operating Results from Acquisitions. In addition, see “Item 8. Financial Statements and Supplementary Data — Consolidated Financial StatementsNotes to Consolidated Financial Statements — Note 2. Summary of Significant Accounting PoliciesBusiness Combinations and Noncontrolling Interests” for more information on our acquisitions of BCE, TAO Group and CLG, as well as “Item 8. Financial Statements and Supplementary Data — Consolidated Financial StatementsNotes to Consolidated Financial Statements — Note 3. Acquisitions” for more information on our current year’s acquisitions of CLG and Obscura.
(b) 
Following the Distribution Date, the Company had 24,928 common shares outstanding on September 30, 2015. This amount has been utilized to calculate earnings (loss) per share for the periods prior to the Distribution Date as no Madison Square Garden common stock or equity based awards were outstanding prior to September 30, 2015.
(c) 
Long-term debt presented above is net of debt issuance costs of $3,613 and $4,567 as of June 30, 2018 and 2017, respectively. See “Part II — Item 8. Financial Statements and Supplementary Data — Consolidated Financial StatementsNotes to Consolidated Financial Statements — Note 11. Credit Facilities” for more information.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this MD&A, there are statements concerning the future operating and future financial performance of The Madison Square Garden Company and its direct and indirect subsidiaries (collectively, “we,” “us,” “our,” “Madison Square Garden,” “MSG,” or the “Company”), including possible impacts from the timing and costs of new venue construction and the potential spin-off of the Company’s sports businesses (the “Sports Distribution”). See “Part IItem 1. Business” for further discussion of the Sports Distribution. Words such as “expects,” “anticipates,” “believes,” “estimates,” “may,” “will,” “should,” “could,” “potential,” “continue,” “intends,” “plans,” and similar words and terms used in the discussion of future operating and future financial performance identify forward-looking statements. Investors are cautioned that such forward-looking statements are not guarantees of future performance, results or events and involve risks and uncertainties and that actual results or developments may differ materially from the forward-looking statements as a result of various factors. Factors that may cause such differences to occur include, but are not limited to:
the level of our revenues, which depends in part on the popularity and competitiveness of our sports teams and the level of popularity of the Christmas Spectacular Starring the Radio City Rockettes (“Christmas Spectacular”) and other entertainment events which are presented in our venues;
costs associated with player injuries, and waivers or contract terminations of players and other team personnel;
changes in professional sports teams’ compensation, including the impact of signing free agents and trades, subject to league salary caps and the impact of luxury tax;
the level of our capital expenditures and other investments;
general economic conditions, especially in the New York City, Los Angeles, Las Vegas and London metropolitan areas where we have operations;
the demand for sponsorship arrangements and for advertising;
competition, for example, from other teams, other venues and other sports and entertainment options, including the construction of new competing venues;
Our ability to successfully design, construct, finance and operate new venues in Las Vegas, London and other markets, and the investments, costs and timing associated with those efforts, including the impact of unexpected construction delays and cost overruns;
changes in laws, National Basketball Association (the “NBA”) or National Hockey League (the “NHL”) rules, regulations, guidelines, bulletins, directives, policies and agreements (including the leagues’ respective collective bargaining agreements (each a “CBA”) with their players’ associations, salary caps, revenue sharing, NBA luxury tax thresholds and media rights) or other regulations under which we operate;
any NBA or NHL work stoppage;
seasonal fluctuations and other variation in our operating results and cash flow from period to period;
the level of our expenses, including our corporate expenses;
the successful development of new live productions, enhancements or changes to existing productions and the investments associated with such development, enhancements, or changes;
the continued popularity and success of the TAO Group restaurants and nightlife and hospitality venues, as well as its existing brands, and the ability to successfully open and operate new restaurants and nightlife and hospitality venues;
the ability of BCE to attract attendees and performers to its festival;
the evolution of the esports industry and its potential impact on our esports businesses;
the acquisition or disposition of assets or businesses and/or the impact of, and our ability to successfully pursue, acquisitions or other strategic transactions;
our ability to successfully integrate acquisitions, new venues or new businesses into our operations;
the operating and financial performance of our strategic acquisitions and investments, including those we do not control;

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the costs associated with, and the outcome of, litigation and other proceedings to the extent uninsured, including litigation or other claims against companies we invest in or acquire;
the impact of governmental regulations or laws, including changes in how those regulations and laws are interpreted and the continued benefit of certain tax exemptions and the ability to maintain necessary permits or licenses;
the impact of any government plans to redesign Pennsylvania Station;
business, reputational and litigation risk if there is a loss, disclosure or misappropriation of stored personal information or other breaches of our information security;
a default by our subsidiaries under their respective credit facilities;
financial community and rating agency perceptions of our business, operations, financial condition and the industry in which we operate;
the ability of our investees and others to repay loans and advances we have extended to them;
our ownership of professional sports franchises in the NBA and NHL and certain related transfer restrictions on our common stock;
the tax free treatment of the Distribution;
whether or not we pursue and complete the Sports Distribution and, if so, its impact on our business, financial condition and results of operations; and
the factors described under “Part IItem 1A. Risk Factors” included in this Annual Report on Form 10-K.
We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws.

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All dollar amounts included in the following MD&A are presented in thousands, except as otherwise noted.
Introduction
MD&A is provided as a supplement to, and should be read in conjunction with, the audited consolidated financial statements and footnotes thereto included in Item 8 of this Annual Report on Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of operations.
Factors Affecting Results of Operations
The Company’s financial information for the three months ended September 30, 2015 that is included in the results of operations for the year ended June 30, 2016, was prepared on a standalone basis derived from the consolidated financial statements and accounting records of Former Parent and are presented as carve-out financial statements as the Company was not a standalone public company prior to the Distribution Date.
During the first quarter of fiscal year 2017, the Company refined its approach to allocating corporate, performance venues operating and other shared expenses. Management analyzed the specific support provided by individual corporate and venue personnel, in part using a detailed efforts-based analysis. The Company considered the new approach to better define segment profitability for users of the financial information and, therefore, made this change in the first quarter of fiscal year 2017. Fiscal year 2016 results are reflected as originally reported and have not been restated. Had the revised approach been used in fiscal year 2016, operating income reported in MSG Sports would have increased and operating loss reported in MSG Entertainment would have improved by $6,045 and $337, respectively. These changes in the MSG Sports and MSG Entertainment segments operating income (loss) would have been offset by an increase of $6,382 in the operating loss of “Corporate and Other” for the year ended June 30, 2016. The adjusted operating income, as defined in “— Consolidated Results of OperationsAdjusted operating income,” reported in MSG Sports would have increased and adjusted operating loss reported in MSG Entertainment would have improved during the year ended June 30, 2016 by $5,908 and $2,680, respectively. These improvements would have been offset by an increase of $8,588 in the adjusted operating loss of “Corporate and Other” for the year ended June 30, 2016.
Our MD&A is organized as follows:
Business Overview. This section provides a general description of our business, as well as other matters that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.
Results of Operations. This section provides an analysis of our results of operations for the years ended June 30, 2018, 2017 and 2016 on both a consolidated and segment basis. Our segments are MSG Entertainment and MSG Sports.
Liquidity and Capital Resources. This section provides a discussion of our financial condition, as well as an analysis of our cash flows for the years ended June 30, 2018, 2017 and 2016. The discussion of our financial condition and liquidity includes summaries of (i) our primary sources of liquidity and (ii) our contractual obligations and off balance sheet arrangements that existed at June 30, 2018.
Seasonality of Our Business. This section discusses the seasonal performance of our MSG Sports and MSG Entertainment segments.
Recently Issued Accounting Pronouncements and Critical Accounting Policies. This section includes a discussion of accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are discussed in the notes to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Business Overview
The Company is a sports and entertainment business comprised of dynamic and powerful assets and brands. The Company is comprised of two business segments: MSG Entertainment and MSG Sports, which is built on a foundation of iconic venues and compelling content, including live sports and entertainment events that we create, produce and present. The Company conducts a significant portion of its operations at venues that it either owns or operates under long-term leases. The Company owns Madison Square Garden (“The Garden”) and The Hulu Theater at Madison Square Garden in New York City, the Forum in Inglewood, CA and The Chicago Theatre in Chicago. In addition, the Company leases Radio City Music Hall and the Beacon Theatre in New York City, and has a booking agreement with respect to the Wang Theatre in Boston. A description of our segments follows:

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MSG Entertainment
Our MSG Entertainment segment, which represented approximately 50% of our consolidated revenues for the year ended June 30, 2018, is one of the country’s leaders in live entertainment. MSG Entertainment presents or hosts live entertainment events, including concerts, family shows, performing arts events and special events, in our diverse collection of venues. Those venues include The Garden, The Hulu Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, the Forum, and The Chicago Theatre. In addition, we have an exclusive booking agreement with respect to the Wang Theatre. The scope of our collection of venues enables us to showcase acts that cover a wide spectrum of genres and popular appeal.
Although we primarily license our venues to third-party promoters for a fee, we also promote or co-promote shows in which case we have economic risk relating to the event.
MSG Entertainment also creates, produces and/or presents live productions that are performed in the Company’s venues. This includes the Christmas Spectacular, which is the top grossing live holiday family show in North America, featuring the Rockettes. The Christmas Spectacular has been performed at Radio City Music Hall for 85 years and more than one million tickets were sold for performances during the 2017 holiday season.
In July 2016, the Company acquired a controlling interest in BCE, the entertainment production company that owns and operates the Boston Calling Music Festival. This was followed in January 2017 by the Company’s purchase of a controlling interest in TAO Group, a hospitality group with globally-recognized entertainment dining and nightlife brands. These companies are part of the MSG Entertainment segment. In November 2017, the Company acquired a 100% controlling interest in Obscura, a creative studio, globally-recognized for its work in designing and developing next-generation immersive experiences. Third-party revenues generated by Obscura and related costs are reflected in the MSG Entertainment segment. Any costs incurred by Obscura that are associated with the Company’s business development initiatives are reported in “Corporate and Other.”
Revenue Sources
Our primary sources of revenue in our MSG Entertainment segment are ticket sales to our audiences for live events that we produce or promote/co-promote and license fees for our venues paid by third-party promoters in connection with events that we do not produce or promote/co-promote. We also generate revenue from other sources, including facility and ticketing fees, concessions, sponsorships and signage, a portion of suite license fees at The Garden, merchandising and tours of our venues. The amount of revenue and expense we record in our MSG Entertainment segment for a given event depends to a significant extent on whether we are promoting or co-promoting the event or are licensing our venue to a third party. In addition, a significant component of the MSG Entertainment segment revenues are generated by the TAO Group through entertainment dining and nightlife offerings, which primarily consist of food and beverage sales.
Ticket Sales and Suite Licenses
For our productions and for entertainment events in our venues that we promote, we recognize revenues from the sale of tickets to our audiences. We sell tickets to the public through our box office, via our web sites and ticketing agencies and through group sales. The amount of revenue we earn from ticket sales depends on the number of shows and the mix of events that we promote, the capacity of the venue used, the extent to which we can sell to fully utilize the capacity and our ticket prices. During the fiscal year 2017, we implemented significant changes to how we sell Christmas Spectacular tickets. By eliminating block sales to third party brokers, we brought a significant number of tickets back in-house, which created the opportunity for more customers to buy tickets to the production directly from us. 
The Garden has 21 Event Level suites, 58 Lexus Madison Level suites, and 18 Signature Level suites. Suite licenses at The Garden are generally sold to corporate customers pursuant to multi-year licenses. Under standard suite licenses, the licensees pay an annual license fee, which varies depending on the location of the suite. The license fee includes, for each seat in the suite, tickets for events at The Garden for which tickets are sold to the general public, subject to certain exceptions. In addition, suite holders separately pay for food and beverage service in their suites at The Garden. Revenues from the sale of suite licenses are shared between our MSG Entertainment and MSG Sports segments.
Venue License Fees
For entertainment events held at our venues that we do not produce, promote or co-promote, we typically earn revenue from venue license fees charged to the third-party promoter of the event. The amount of license fees we charge varies by venue, as well as by the size of the production and the number of days utilized, among other factors. Our fees include both the cost of renting space in our venues and costs for providing event staff, such as front-of-house and back-of-house staff, including stagehands, electricians, laborers, box office staff, ushers and security as well as production services such as staging, lighting and sound.

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Facility and Ticketing Fees
For all public and ticketed entertainment events held in our venues, we also earn additional revenues on substantially all tickets sold, whether we promote/co-promote the event or license the venue to a third party. These revenues are earned in the form of certain fees and assessments, including the facility fee we charge, and vary by venue.
Concessions
We sell food and beverages during substantially all entertainment events held at our venues. In addition to concession-style sales of food and beverages, which represent the majority of our concession revenues, we also generate revenue from catering for our suites at The Garden.
Merchandise
We earn revenues from the sale of merchandise relating to our proprietary productions and other live entertainment events that take place at our venues. The majority of our merchandise revenues are generated through on-site sales during performances of our productions and other live events. We also generate revenues from the sales of our Christmas Spectacular merchandise, such as ornaments and apparel, through traditional retail channels. Typically, revenues from our merchandise sales at our non-proprietary events relate to sales of merchandise provided by the artist, the producer or promoter of the event and are generally subject to a revenue sharing arrangement.
Venue Signage and Sponsorship
We earn revenues through the sale of signage space and sponsorship rights in connection with our venues, productions and other live entertainment events. Signage revenues generally involve the sale of advertising space at The Garden during entertainment events and otherwise in our venues.
Sponsorship rights may require us to use the name, logos and other trademarks of sponsors in our advertising and in promotions for our venues, productions and other live entertainment events. Sponsorship arrangements may be exclusive within a particular sponsorship category or non-exclusive and generally permit a sponsor to use the name, logos and other trademarks of our productions, events and venues in connection with their own advertising and in promotions in our venues or in the community.
Entertainment Dining and Nightlife Offerings
We earn revenues from entertainment dining and nightlife offerings through our operations of the TAO Group’s restaurants and nightlife and hospitality venues. These revenues primarily consist of food and beverage sales and banquet hosting services at TAO Group leased restaurants and nightclubs. In addition, we earn fees from our real estate partners for operating certain of our restaurants and nightclubs.
Expenses
Our MSG Entertainment segment’s principal expenses are payments made to performers, staging costs and day-of-event costs associated with events, and advertising costs. We charge a portion of our actual expenses associated with the ownership, lease, maintenance and operation of our venues, along with a portion of our corporate expenses, to our MSG Entertainment segment. However, the operating results of our MSG Entertainment segment benefit from the fact that no rent is charged to the segment for use of the Company’s owned venues. We do not allocate to our segments depreciation expense on property and equipment related to The Garden, The Hulu Theater at Madison Square Garden or the Forum.
Performer Payments
Our productions are performed by talented actors, dancers, singers, musicians and entertainers. In order to attract and retain this talent, we are required to pay our performers an amount that is commensurate with both their abilities and the demand for their services from other entertainment companies. Our productions typically feature ensemble casts (such as the Rockettes), where most of our performers are paid based on a standard “scale,” pursuant to CBAs we negotiate with the performers’ unions. Certain performers, however, have individually negotiated contracts.
Staging Costs
Staging costs for our proprietary events as well as other events that we promote include the costs of sets, lighting, display technologies, special effects, sound and all of the other technical aspects involved in presenting a live entertainment event. These costs vary substantially depending on the nature of the particular show, but tend to be highest for large-scale theatrical productions, such as the Christmas Spectacular. For concerts we promote, the performer usually provides a fully-produced show. Along with performer salaries, the staging costs associated with a given production are an important factor in the determination of ticket prices.

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Day-of-Event Costs
For days on which MSG Entertainment stages its productions, promotes an event or provides one of our venues to a third-party promoter under a license fee arrangement, the event is charged the variable costs associated with such event, including box office staff, stagehands, ticket takers, ushers, security, and other similar expenses. In situations where we provide our venues to a third-party promoter under a license fee arrangement, day-of-event costs are typically included in the license fees charged to the promoter.
Marketing and Advertising Costs
We incur significant costs promoting our productions and other events through various advertising campaigns, including advertising on outdoor platforms and in newspapers, on television and radio, and on social and digital platforms. In light of the intense competition for entertainment events, such expenditures are a necessity to drive interest in our productions and encourage members of the public to purchase tickets to our shows.
Entertainment Dining and Nightlife Offerings Costs
Through our ownership in the operations of the TAO Group restaurants and nightlife and hospitality venues, we incur costs for providing food and beverage as well as banquet hosting services to our customers. Our dining and nightlife offering costs primarily include the following:
labor costs, consisting of restaurant management salaries, hourly staff payroll and other payroll-related items, including taxes and fringe benefits;
food and beverage costs;
operating costs, consisting of maintenance, utilities, bank and credit card charges, and any other restaurant-level expenses; and
occupancy costs, consisting of both fixed and variable portions of rent, common area maintenance charges, insurance premiums and taxes.
Factors Affecting Operating Results
The operating results of our MSG Entertainment segment are largely dependent on our ability to attract concerts, family shows and other events to our venues, as well as the continuing popularity of the Christmas Spectacular at Radio City Music Hall. Our MSG Entertainment segment recognized operating losses during the years ended June 30, 2017 and 2016. The operating results for the year ended June 30, 2017 include a $33,629 write-off of the remaining balance of deferred production costs related to the New York Spectacular Starring the Radio City Rockettes (“New York Spectacular”) due to the assessments of the show’s creative direction, timing and scale. The operating results for the year ended June 30, 2016 include a $41,816 write-off of deferred production costs associated with the New York Spectacular due to the creative decision to not include, in the summer of 2016 performances, certain scenes from the previous show of the New York Spectacular.
Our MSG Entertainment segment’s future performance is dependent in part on general economic conditions and the effect of these conditions on our customers. Weak economic conditions may lead to lower demand for our entertainment and nightlife offerings, suite licenses and tickets to our live productions, concerts, family shows and other events, which would also negatively affect concession and merchandise sales, as well as lower levels of sponsorship and venue signage. These conditions may also affect the number of concerts, family shows and other events that take place in the future. An economic downturn could adversely affect our business and results of operations.
The Company continues to explore additional opportunities to expand our presence in the entertainment industry. Any new investment may not initially contribute to operating income, but is intended to become operationally profitable over time. Our results will also be affected by investments in, and the success of, new productions.

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MSG Sports
Our MSG Sports segment, which represented approximately 50% of our consolidated revenues for the year ended June 30, 2018, owns and operates professional sports franchises, including the New York Knicks (the “Knicks”), a founding member of the NBA, and the New York Rangers (the “Rangers”), one of the “original six” franchises of the NHL. MSG Sports also owns and operates the New York Liberty (the “Liberty”) of the Women’s National Basketball Association, one of the league’s founding franchises, and the Hartford Wolf Pack of the American Hockey League (the “AHL”), which is the primary player development team for the Rangers and is also competitive in its own right in the AHL. Since 2014, the Company has owned and operated an NBA G League team, named the Westchester Knicks, which plays its home games at the Westchester County Center in White Plains, NY. The Knicks and Rangers play their home games at The Garden. The Liberty currently play 15 home games at the Westchester County Center, located in White Plains, NY, in addition to two regular season home games at The Garden. Our professional sports franchises are collectively referred to herein as “our sports teams.” The MSG Sports segment also includes CLG, a premier North American esports organization, and Knicks Gaming, MSG’s franchise that competes in the NBA 2K League. CLG and Knicks Gaming are collectively referred to herein as “our esports teams,” and, together with our sports teams, “our teams.” In addition, our sports business also promotes, produces and/or presents a broad array of live sporting events including professional boxing, college basketball, college hockey, professional bull riding, mixed martial arts, esports, tennis and college wrestling.
Revenue Sources
We earn revenue in our MSG Sports segment from several primary sources: ticket sales and a portion of suite rental fees at The Garden, our share of distributions from NHL and NBA league-wide national and international television contracts and other league-wide revenue sources, venue signage and other sponsorships, concessions and merchandising. Our MSG Sports segment also earns substantial fees from MSG Networks for the local media rights to telecast the games of our professional sports teams. We also earn venue license fees, primarily from the rental of The Garden to third-party promoters or conferences holding sporting events at our arena. The amount of revenue we earn is influenced by many factors, including the popularity and on-court or on-ice performance of our sports teams and general economic conditions. In particular, when our sports teams have strong on-court and on-ice performance, we benefit from increased demand for tickets, potentially greater food and merchandise sales from increased attendance and increased sponsorship opportunities. When our sports teams qualify for the playoffs, we also benefit from the attendance and in-game spending at the playoff games. The year-to-year impact of team performance is somewhat moderated by the fact that a significant portion of our revenue derives from rights fees, suite rental fees and sponsorship and signage revenue, all of which are generally contracted on a multi-year basis. Nevertheless, the long-term performance of our business is tied to the success and popularity of our sports teams and our ability to attract other compelling sports content.
Ticket Sales, Suite Licenses, Venue Licenses, Facility and Ticketing Fees
Ticket sales have historically constituted the largest single source of revenue for our MSG Sports segment. We sell tickets to our sports teams’ home games through season tickets, which are typically held by long-term season subscribers, through group sales, and through single-game tickets, which are purchased by fans either individually or in multi-game packages. The prices of our tickets vary, depending on the sports team and the location of the seats. We generally review and set the price of our tickets before the start of each team’s season. During the fiscal year 2017 we made changes to our ticketing polices, resulting in fewer full season tickets sold and more sales of individual and group tickets, as well as partial season plans.
Revenues from the sale of suite licenses are shared between the MSG Entertainment and MSG Sports segments. See “— MSG Entertainment Revenue Sources” for further discussion.
In addition to our sports teams’ home games, we also present or host other live sporting events at our venues. When the Company acts as the promoter or co-promoter of such events, the Company typically earns revenues from ticket sales and incurs expenses associated with the event. When these events are promoted by third-party promoters, the Company typically earns venue license fees from the promoter for use of our venues. When licensing our venues, the amount recorded as revenue also includes the event’s variable costs such as the costs of front-of-house and back-of-house staffs, including electricians, laborers, box office staff, ushers, security and building services, which we pass along to the promoter. The number and mix of live sporting events, including whether we are the promoter or co-promoter of an event or license our venues to a third-party promoter, could have a significant impact on the level of revenues and expenses that we record in our MSG Sports segment.
Our MSG Sports segment also earns revenues in the form of certain fees added to ticket prices for events held at our venues, regardless of whether we act as promoter or co-promoter for such events. This currently includes a facility fee the Company charges on tickets it sells to all events at our venues, except for our sports teams’ season tickets and certain other limited exceptions.

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Media Rights
We earn revenue from the licensing of media rights for our sports teams’ home and away games and also through the receipt of our share of fees paid for league-wide media rights, which are awarded under contracts negotiated and administered by each league.
In connection with the Distribution, the Company and MSG Networks entered into media rights agreements covering the local telecast rights for the Knicks and Rangers. The financial success of our MSG Sports segment is significantly dependent on the rights fees we receive from MSG Networks in connection with the telecast of our Knicks and Rangers games.
National and international telecast arrangements differ by league. Fees paid by telecasters under these arrangements are pooled by each league and then generally shared equally among all teams.
Venue Signage and Sponsorships and Ad Sales Commission
We earn revenues through the sale of signage space at The Garden and sponsorship rights in connection with our teams and certain other sporting events. Our strategy is to develop marketing partnerships with world-class brands by creating customized platforms that achieve our partners’ business objectives. Signage sales generally involve the sale of advertising space within The Garden during our sports teams’ home games and include the sale of signage on the ice and on the boards of the hockey rink during Rangers games, courtside during Knicks and Liberty games, and/or on the various scoreboards and display panels at The Garden. We offer both television camera-visible and non-camera-visible signage space.
Sponsorship rights generally require us to use the name, logos and other trademarks of a sponsor in our advertising and in promotions for our teams and during our sports events. Sponsorship arrangements may be exclusive within a particular sponsorship category or non-exclusive and generally permit a sponsor to use the name, logos and other trademarks of our teams and venues in connection with their own advertising and in promotions in The Garden or in the community.
In connection with the Distribution, we entered into an advertising sales representation agreement with MSG Networks. Pursuant to the agreement, we have the exclusive right and obligation to sell advertising availabilities of MSG Networks. We are entitled to and earn commission revenue on such sales. The expense associated with advertising personnel, which was transferred from MSG Networks in connection with this advertising sales representation agreement, is recognized in selling, general and administrative expenses.  
Concessions
We sell food and beverages during all sporting events held at our venues. In addition to concession-style sales of food and beverages, which represent the majority of our concession revenues, we also provide higher-end dining at our full service restaurant and clubs as well as catering for suites at The Garden.
Merchandise
We earn revenues from the sale of our teams’ merchandise both through the in-venue (and in some cases, online) sale of items bearing the logos or other marks of our teams and through our share of sports league distributions of royalties and other revenues from the sports leagues’ licensing of team and sports league trademarks, which revenues are generally shared equally among the teams in the sports leagues. By agreement among the teams, each of the sports leagues in which we operate acts as an agent for the sports teams to license their logos and other marks, as well as the marks of the leagues, subject to certain rights retained by the teams to license these marks within their arenas and the geographic areas in which they operate.
Expenses
The most significant expenses in our MSG Sports segment are player and other team personnel salaries and charges for transactions relating to players for career-ending and season-ending injuries, trades, and waivers and contract termination costs of players and other team personnel, including team executives. We also incur costs for travel, player insurance, league operating assessments (including a 6% NBA assessment on regular season ticket sales), NHL and NBA revenue sharing and NBA luxury tax. We charge a portion of our actual expenses associated with the ownership, lease, maintenance and operation of our venues, along with a portion of our corporate expenses, to our MSG Sports segment. However, the operating results of our MSG Sports segment benefit from the fact that no rent is charged to the segment for use of the Company’s owned venues. We do not allocate to our segments depreciation expense on property and equipment related to The Garden, The Hulu Theater at Madison Square Garden or the Forum.

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Player Salaries, Escrow System/Revenue Sharing and NBA Luxury Tax
The amount we pay an individual player is determined by negotiation between the player (typically represented by an agent) and us, and is generally influenced by the player’s individual playing statistics, the amounts paid to players with comparable playing statistics by other sports teams and restrictions in the CBAs, including the salary caps and NBA luxury tax. The leagues’ CBAs typically contain restrictions on when players may move between league clubs following expiration of their contracts and what rights their current and former clubs have.
NBA CBA. The NBA CBA expires after the 2023-24 season (although the NBA and the National Basketball Players Association (“NBPA”) each have the right to terminate the CBA following the 2022-23 season). The NBA CBA contains a “soft” salary cap (i.e., a cap on each team’s aggregate player salaries but with certain exceptions that enable teams to pay players more, sometimes substantially more, than the cap).
NBA Luxury Tax. Amounts in this paragraph are in thousands, except for luxury tax rates. The NBA CBA provides for a luxury tax that is applicable to all teams with aggregate player salaries exceeding a threshold that is set prior to each season based upon projected league-wide revenues (as defined under the CBA). The luxury tax rates for teams with aggregate player salaries above such threshold start at $1.50 for each $1.00 of team salary above the threshold up to $5,000 and scale up to $3.25 for each $1.00 of team salary that is from $15,000 to $20,000 over the threshold, and an additional tax rate increment of $0.50 applies for each additional $5,000 (or part thereof) of team salary in excess of $20,000 over the threshold. In addition, for teams that are taxpayers in at least three of four previous seasons, the above tax rates are increased by $1.00 for each increment. Fifty percent of the aggregate luxury tax payments is a funding source for the revenue sharing plan and the remaining 50% of such payments is distributed in equal shares to non-taxpaying teams. The Knicks incurred a luxury tax expense of $8,300, $38,100 and $5,100 with respect to the 2012-13, 2013-14 and 2014-15 seasons, respectively. For the 2015-16, 2016-17 and 2017-18 seasons, the Knicks were not a luxury tax payer and we recorded approximately $2,500, $500 and $2,200, respectively, of luxury tax proceeds from tax-paying teams. Tax obligations for years beyond the 2017-18 season will be subject to contractual player payroll obligations and corresponding NBA luxury tax thresholds. The Company recognizes the estimated amount associated with luxury tax expense or the amount it expects to receive as a non-tax paying team, if applicable, on a straight-line basis over the NBA regular season as a component of direct operating expenses.
NBA Escrow System/Revenue Sharing. The NBA CBA also provides that players collectively receive a designated percentage of league-wide revenues (net of certain direct expenses) as compensation (approximately 51%), and the teams retain the remainder. The percentage of league-wide revenues paid as compensation and retained by the teams does not apply evenly across all teams and, accordingly, the Company may pay its players a higher or lower percentage of the Knicks’ revenues than other NBA teams. Throughout each season, NBA teams withhold 10% of each player’s salary and contribute the withheld amounts to an escrow account. If the league’s aggregate player compensation exceeds the designated percentage of league-wide revenues, some or all of such escrowed amounts are distributed equally to all NBA teams. In the event that the league’s aggregate player compensation is below the designated percentage of league-wide revenues, the teams will remit the shortfall to the NBPA for distribution to the players.
The NBA also has a revenue sharing plan that generally requires the distribution of a pool of funds to teams with below-average net revenues (as defined in the plan), subject to reduction or elimination based on individual team market size and profitability. The plan is funded by a combination of disproportionate contributions from teams with above-average net revenues, subject to certain profit-based limits (each as defined in the plan); 50% of aggregate league-wide luxury tax proceeds (see above); and collective league sources, if necessary. Additional amounts may also be distributed on a discretionary basis, funded by assessments on playoff ticket revenues and through collective league sources.
We record our revenue sharing expense net of the amount we expect to receive from the escrow. Our net provision for these items for the year ended June 30, 2018 was approximately $36,600. The actual amounts for the 2017-18 season may vary significantly from the recorded provision based on actual operating results for the league and all NBA teams for the season and other factors.
NHL CBA. The NHL CBA expires September 15, 2022 (although the NHL and NHL Players’ Association each have the right to terminate the CBA effective following the 2019-20 season). The NHL CBA provides for a “hard” salary cap (i.e., teams may not exceed a stated maximum that has been negotiated for the 2013-14 season and is adjusted each season thereafter based upon league-wide revenues).

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NHL Escrow System/Revenue Sharing. The NHL CBA provides that each season the players receive as player compensation 50% of that season’s league-wide revenues. Because the aggregate amount to be paid to the players is based upon league-wide revenues and not on a team-by-team basis, the Company may pay its players a higher or lower percentage of the Rangers’ revenues than other NHL teams pay of their own revenues. In order to implement the salary cap system, NHL teams withhold a portion of each player’s salary and contribute the withheld amounts to an escrow account. If the league’s aggregate player compensation for a season exceeds the designated percentage (50%) of that season’s league-wide revenues, the excess is retained by the league. Any such excess funds are distributed to all teams in equal shares.
The NHL CBA also provides for a revenue sharing plan. The plan generally requires the distribution of a pool of funds approximating 6.055% of league-wide revenues to certain qualifying lower-revenue teams and is funded as follows: (a) 50% from contributions by the top ten revenue earning teams (based on pre-season and regular season revenues) in accordance with a formula; (b) then from payments by teams participating in the playoffs, with each team contributing 35% of its gate receipts for each home playoff game; and (c) the remainder from centrally-generated NHL sources. We record our revenue sharing expense net of the amount we expect to receive from the escrow. Our net provisions for these items for the years ended June 30, 2018 and 2017 were approximately $21,100 and $24,800 (including approximately $6,300 related to the 2016-17 season’s playoff), respectively. The actual amounts for the 2016-17 and 2017-18 seasons may vary significantly from the recorded provision based on actual operating results for the league and all NHL teams for the season and other factors.
Other Team Operating Expenses
Our teams also pay expenses associated with day-to-day operations, including for travel, equipment maintenance and player insurance. Direct variable day-of-event costs incurred at The Garden, such as the costs of front-of-house and back-of-house staff, including electricians, laborers, box office staff, ushers, security, and event production are charged to our MSG Sports segment.
Operating costs of the Company’s training center in Greenburgh, NY are also charged to our MSG Sports segment. The operation of the Hartford Wolf Pack is also a net Rangers player development expense for our MSG Sports segment.
As members of the NBA and NHL, the Knicks and Rangers, respectively, are also subject to league assessments. The governing bodies of each league determine the amount of each season’s league assessments that are required from each member team. For the 2017-18 season, the NBA imposed on each team a 6% assessment on regular season ticket revenue.
Our MSG Sports segment also incurs costs associated with VIP amenities provided to certain ticket holders.
Other Expenses
MSG Sports also incurs selling, general and administrative expenses.
Factors Affecting Operating Results
The operating results of our MSG Sports segment are largely dependent on the continued popularity and/or on-ice or on-court competitiveness of our Rangers and Knicks teams, which have a direct effect on ticket sales for the teams’ home games and are each team’s largest single source of revenue, as well as our ability to attract high-caliber sporting events. As with other sports teams, the competitive positions of our sports teams depend primarily on our ability to develop, obtain and retain talented players, for which we compete with other professional sports teams. A significant factor in our ability to attract and retain talented players is player compensation. Our MSG Sports segment results reflect the impact of high costs for player salaries (including NBA luxury tax, if any) and salaries of non-player team personnel. In addition, we have incurred significant charges for costs associated with transactions relating to players on our sports teams for season-ending and career-ending injuries and for trades, waivers and contract terminations of players and other team personnel, including team executives. Waiver and termination costs reflect our efforts to improve the competitiveness of our sports teams. These transactions can result in significant charges as the Company recognizes the estimated ultimate costs of these events in the period in which they occur, although amounts due to these individuals are generally paid over their remaining contract terms. For example, the expense for these items was $27,514, $42,337 and $7,484 for fiscal years 2018, 2017 and 2016, respectively. These expenses add to the volatility of the results of our MSG Sports segment. We expect to continue to pursue opportunities to improve the overall quality of our sports teams and our efforts may result in continued significant expenses and charges. Such expenses and charges may result in future operating losses for our MSG Sports segment although it is not possible to predict their timing or amount. Our MSG Sports segment’s performance has been, and may in the future be, impacted by work stoppages. See “Part IItem 1A. Risk FactorsGeneral RisksOrganized Labor Matters May Have a Material Negative Effect on Our Business and Results of Operations.”

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In addition to our MSG Sports segment’s future performance being dependent upon the continued popularity and/or on-ice or on-court competitiveness of our Rangers and Knicks teams, it is also dependent on general economic conditions, in particular those in the New York City metropolitan area, and the effect of these conditions on our customers. An economic downturn could adversely affect our business and results of operations as it may lead to lower demand for suite licenses and tickets to the games of our sports teams, which would also negatively affect merchandise and concession sales, as well as decrease levels of sponsorship and venue signage revenues. These conditions may also affect the number of other live sporting events that this segment is able to present.
Factors Affecting Operating Results from Acquisitions
TAO Group’s Operating Results
The Company completed the TAO Group acquisition on January 31, 2017. TAO Group’s financial statements are not available within the time constraints the Company requires to ensure the financial accuracy of the operating results. Therefore, the Company records TAO Group’s operating results in its consolidated statements of operations under the MSG Entertainment segment on a three-month lag basis. As a result, TAO Group’s related operating results for the year ended June 30, 2018 are for the period from March 27, 2017 to April 1, 2018. TAO Group’s related operating results for the year ended June 30, 2017 are for the period from February 1, 2017 to March 26, 2017. The Company’s results for the year ended June 30, 2016 do not include any of TAO Group’s operating results. In addition, the Company’s consolidated balance sheets as of June 30, 2018 and 2017 reflects the financial position of TAO Group as of April 1, 2018 and March 26, 2017, respectively. All disclosures related to TAO Group’s financial position are therefore also reported as of April 1, 2018 and March 26, 2017, as applicable.
CLG’s Operating Results
The results of operations of the Company and the MSG Sports segment for the year ended June 30, 2018 include CLG’s results of operations from the date of acquisition, which was July 28, 2017. The Company’s results for the years ended June 30, 2017 and 2016 do not include any of CLG’s operating results.
Obscura’s Operating Results
The results of operations of the Company and the MSG Entertainment segment for the year ended June 30, 2018 include Obscura’s results of operations from the date of acquisition, which was November 20, 2017. The Company’s results for the year ended June 30, 2017 and 2016 do not include any of Obscura’s operating results. Third-party revenues generated by Obscura and related costs are reflected in the MSG Entertainment segment. Any costs incurred by Obscura that are associated with the Company’s business development initiatives are reported in “Corporate and Other.”
BCE’s Operating Results
The results of operations of the Company and the MSG Entertainment segment for the years ended June 30, 2018 and 2017 include BCE ’s results of operations from the date of acquisition, which was July 1, 2016. The Company’s results for the year ended June 30, 2016 do not include any of BCE ’s operating results.
Corporate Expenses and Venue Operating Costs
The Company allocates certain corporate costs and its performance venues operating expenses to both reportable segments. Allocated performance venue operating expenses include the non-event related costs of operating the Company’s performance venues, and include such costs as rent for the Company’s leased venues, real estate taxes, insurance, utilities, repairs and maintenance, and labor related to the overall management of the venues. Depreciation expense on property and equipment related to The Garden, The Hulu Theater at Madison Square Garden and the Forum is not allocated to the reportable segments.
Amounts that we collect for ticket sales, sponsorships and suite rentals in advance are recorded as deferred revenue and are recognized as revenues when earned for both accounting and tax purposes. In connection with the reorganization transactions related to the Distribution, the tax recognition on most of these deferred revenues was accelerated to the date of the reorganization, rather than being recognized over the course of the year ending June 30, 2016. The applicable tax on the acceleration of such deferred revenue at the time of the Distribution was approximately $152,000. Such tax was paid by MSG Networks and not the Company. The Company will not reimburse MSG Networks for the payment of such taxes. As a result, for the year ended June 30, 2016, approximately $348,000 of taxable revenue that would have been reflected on the Company’s income tax returns were instead reported on MSG Networks’ income tax returns, and consequently, the Company generated a taxable loss for the year ended June 30, 2016.

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Purchase Accounting Adjustments
In connection with the BCE, TAO Group, CLG and Obscura acquisitions in the past two fiscal years (“Recent Business Acquisitions”), the Company recorded certain fair value adjustments related to acquired assets and liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. For the Company’s Recent Business Acquisitions, the Company recognized fair value adjustments primarily for (i) recognition of intangible assets such as trade names, venue management contracts, favorable leases, and festival rights, (ii) step-up of property and equipment, (iii) step-up of inventory, (iv) unfavorable lease obligation, and (v) goodwill. The aforementioned fair value adjustments, except for goodwill, will be expensed as incremental non-cash expenses in the Company’s consolidated statements of operations based on their estimated useful lives (“Purchase Accounting Adjustments”). The Company does not allocate any Purchase Accounting Adjustments to the reporting segments and reports any Purchase Accounting Adjustments as reconciliation items in reporting segment operating results. See “Part II — Item 8. Financial Statements and Supplementary DataConsolidated Financial StatementsNotes to Consolidated Financial Statements — Note 3. Acquisitions” for more information on the Recent Business Acquisitions and “Part II — Item 8. Financial Statements and Supplementary DataConsolidated Financial StatementsNotes to Consolidated Financial Statements — Note 18. Segment Information” for more information on the presentation of Purchase Accounting Adjustments.
Investments in Nonconsolidated Affiliates
The Company’s investments in nonconsolidated affiliates primarily include investments in Brooklyn Bowl Las Vegas, LLC (“BBLV”), Azoff MSG Entertainment LLC (“AMSGE”), Tribeca Enterprises LLC (“Tribeca Enterprises”), and Fuse Media LLC (“Fuse Media”), which are accounted for under the equity method of accounting.
In August 2013, the Company acquired an interest in BBLV. In March 2014, BBLV opened a new venue in Las Vegas which brings together live music, bowling and a restaurant. As a result of BBLV’s liquidity position, the Company evaluated whether or not an impairment of its investment had occurred as of December 31, 2014. This evaluation resulted in the Company recording a pre-tax non-cash impairment charge of $23,600 to write-off the remaining equity portion of its investment in BBLV.
In September 2013, the Company acquired a 50% interest in AMSGE. The AMSGE entity owns and operates businesses in the entertainment industry and is currently focused on music management, performance rights, comedy and productions, and strategic marketing. As of June 30, 2018, the Company’s investment in AMSGE was $101,369. In addition, as of June 30, 2018, AMSGE had outstanding loans of $63,500 under a $100,000 credit facility with the Company.
In March 2014, the Company acquired a 50% interest in Tribeca Enterprises, the company that owns and operates the Tribeca Film Festival and certain other businesses. Tribeca Enterprises’ businesses also include Tribeca Studios, a branded entertainment content business that has produced award-winning stories, and year-round live events. As of June 30, 2018, the Company’s investment in Tribeca Enterprises was $8,007. The Company provides a $17,500 revolving credit facility to Tribeca Enterprises. As of June 30, 2018, the $17,500 revolving credit facility was fully drawn. In addition, Tribeca Enterprises also owed $2,025 of payments-in-kind (“PIK”) interest as of June 30, 2018. PIK interest owed does not reduce availability under the revolving credit facility.
In July 2014, MSG Networks sold Fuse to Fuse Media, Inc., and as part of the transaction MSG Networks received a 15% equity interest in Fuse Media which was transferred to the Company in connection with the Distribution. In the third quarter of fiscal year 2017, certain Fuse Media warrant holders notified Fuse Media of their intent to exercise certain put options (which Fuse Media disputed). The purported exercise of the put options triggered an assessment of Fuse Media’s fair value. This assessment, which was performed during the third quarter of fiscal 2017, resulted in unfavorable fair value measurements of Fuse Media. As a result, the Company evaluated whether or not an other-than-temporary impairment of its investment had occurred as of the third quarter of fiscal 2017. This evaluation resulted in the Company recording a pre-tax non-cash impairment charge of $20,613 to write off the carrying value of its equity investment in Fuse Media, which is reflected in loss in equity method investments in the accompanying consolidated statements of operations for the year ended June 30, 2017.
In addition to the investments discussed above, the Company also has other investments in various sports and entertainment companies and related technologies, accounted for either under the cost method or equity method. See Note 6 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on our investments in nonconsolidated affiliates.
In August 2016, the Company acquired a common equity stake of approximately 12% in Townsquare Media, Inc., a leading media, entertainment and digital marketing solutions company, which is accounted for under available-for-sale securities. See Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for more information on our investment in available-for-sale securities.

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Results of Operations
Comparison of the Year Ended June 30, 2018 versus the Year Ended June 30, 2017
Consolidated Results of Operations
The table below sets forth, for the periods presented, certain historical financial information. 
 
 
Years Ended June 30,
 
Change
 
 
2018
 
2017
 
Amount
 
Percentage
Revenues
 
$
1,559,095

 
$
1,318,452

 
$
240,643

 
18
 %
 
 
 
 
 
 
 
 
 
Direct operating expenses
 
945,428

 
861,381

 
84,047

 
10
 %
Selling, general and administrative expenses
 
472,305

 
410,039

 
62,266

 
15
 %
Depreciation and amortization
 
122,486

 
107,388

 
15,098

 
14
 %
Operating income (loss)
 
18,876

 
(60,356
)
 
79,232

 
NM

Other income (expense):
 
 
 
 
 
 
 
 
Loss in equity method investments
 
(7,770
)
 
(29,976
)
 
22,206

 
74
 %
Interest income, net
 
6,167

 
7,647

 
(1,480
)
 
(19
)%
Miscellaneous income
 
303

 
1,492

 
(1,189
)
 
(80
)%
Income (loss) from operations before income taxes
 
17,576

 
(81,193
)
 
98,769

 
NM

Income tax benefit
 
116,872

 
4,404

 
112,468

 
NM

Net income (loss)
 
134,448

 
(76,789
)
 
211,237

 
NM

Less: Net income (loss) attributable to nonredeemable noncontrolling interests
 
(6,518
)
 
304

 
(6,822
)
 
NM

Less: Net loss attributable to redeemable noncontrolling interests
 
(628
)
 
(4,370
)
 
3,742

 
86
 %
Net income (loss) attributable to The Madison Square Garden Company’s stockholders
 
$
141,594

 
$
(72,723
)
 
$
214,317

 
NM

        
NM — Percentage is not meaningful
The following is a summary of changes in segments’ operating results for the year ended June 30, 2018 as compared to the prior year.
Changes attributable to
 
Revenues
 
Direct
operating
expenses
 
Selling,
general and
administrative
expenses
 
Depreciation
and
amortization
 
Operating
income (loss)
MSG Entertainment segment (a)
 
$
274,258

 
$
104,938

 
$
72,433

 
$
7,176

 
$
89,711

MSG Sports segment (a)
 
(33,331
)
 
(15,896
)
 
(23,027
)
 
(1,838
)
 
7,430

Corporate and Other
 

 
120

 
12,564

 
(5,222
)
 
(7,462
)
Purchase accounting adjustments
 

 
(4,831
)
 
223

 
14,982

 
(10,374
)
Inter-segment eliminations
 
(284
)
 
(284
)
 
73

 

 
(73
)
 
 
$
240,643

 
$
84,047

 
$
62,266

 
$
15,098

 
$
79,232

        
(a) See “Business Segment Results” for a more detailed discussion of the operating results of our segments.

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Direct operating expenses primarily include:
compensation expense for our sports teams’ players and certain other team personnel;
cost of team personnel transactions for season-ending player injuries (net of anticipated insurance recoveries), trades, and waivers/contract termination costs of players and other team personnel;
NBA luxury tax, NBA and NHL revenue sharing and league assessments for the MSG Sports segment;
event costs related to the presentation, production and marketing of our live entertainment and other live sporting events;
venue lease, maintenance and other operating expenses;
the cost of concessions, merchandise and food and beverage sold at our venues; and
restaurant operating expenses, inclusive of labor costs.    
In connection with the purchase price allocation of the TAO Group acquisition on January 31, 2017, the inventory value was increased by $8,705 and was fully expensed to direct operating expenses for the year ended June 30, 2017 as the related inventory was consumed. In addition, the direct operating expenses for the year ended June 30, 2018 principally reflect the amortization of favorable leases in connection with the TAO Group acquisition.
Selling, general and administrative expenses
Selling, general and administrative expenses primarily consist of administrative costs, including compensation, reorganization costs, professional fees, as well as sales and marketing costs, including non-event related advertising expenses.
Selling, general and administrative expenses in Corporate and Other for the year ended June 30, 2018 increased $12,564, or 16%, to $92,166 as compared to the prior year. The increase was primarily due to higher employee compensation and related benefits, as well as the inclusion of Obscura expenses associated with the Company’s business development initiatives. The increase was partially offset by a management fee earned for providing management and strategic services to TAO Group (see “— Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion), which is eliminated in the Company’s consolidated results of operations presented above, as well as certain favorable adjustments related to contingent payments for the Company’s business acquisitions.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2018 increased $15,098, or 14%, to $122,486 as compared to the prior year primarily due to purchase accounting adjustments and the inclusion of depreciation and amortization expense related to property and equipment associated with the business acquisitions (see “— Factors Affecting Operating Results from Acquisitions” for further discussion), partially offset by certain assets being fully depreciated and amortized.
Operating loss - Corporate and Other
Operating loss in Corporate and Other for the year ended June 30, 2018 increased $7,462, or 5%, to $170,642 as compared to the prior year. The increase was primarily due to higher selling, general and administrative expenses as discussed above, partially offset by lower depreciation and amortization as a result of certain assets being fully depreciated and amortized. See Note 18 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for discussion of depreciation and amortization under Corporate and Other.
Loss in equity method investments
Loss in equity method investments for the year ended June 30, 2018 improved $22,206, or 74%, to a loss of $7,770 as compared to the prior year. The year-over-year improvement is primarily due to a pre-tax non-cash impairment charge of $20,613 recorded during the prior year to write off the carrying value of our equity investment in Fuse Media.
Interest income, net
Net interest income for the year ended June 30, 2018 decreased $1,480, or 19%, to $6,167 as compared to the prior year primarily due to interest expense incurred under the TAO Term Loan Facility. See “— Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion. The decrease was partially offset by higher interest income earned by the Company as a result of higher interest rates and a change in investment mix. In addition, during the year ended June 30, 2018, the Company recognized interest income of $938, which was received in connection with the repayment of a loan receivable from one of the Company’s nonconsolidated affiliates that was on a nonaccrual status.

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Miscellaneous income

Miscellaneous income in the current year principally consists of a dividend received from the Company’s investment in Townsquare Media Inc., which is classified as available-for-sale securities (see Note 10 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K). Miscellaneous income in the prior year consists principally of the recovery of certain claims in connection with a third-party bankruptcy proceeding.
Income taxes
On December 22, 2017, new tax legislation, commonly referred to as the Tax Cuts and Jobs Act, was enacted, which significantly changed the existing U.S. tax laws, including a reduction in the corporate Federal income tax rate from 35% to 21% effective January 1, 2018. During the second quarter of fiscal year 2018, the Company was required to recognize the effect of tax law changes in the period of enactment even though certain key aspects of the new law became effective January 1, 2018. The Company used a blended statutory Federal income tax rate of 28% based upon the number of days that it will be taxed at the former rate of 35% and the number of days it will be taxed at the new rate of 21% to calculate its most recent effective tax rate.
Income tax benefit for the year ended June 30, 2018 was $116,872 and income tax benefit for the year ended June 30, 2017 was $4,404.
Income tax benefit for the year ended June 30, 2018 of $116,872 differs from the income tax expense derived from applying the blended statutory Federal rate of 28% to pretax income primarily as a result of a deferred income tax benefit of $113,494 related to the revaluation of the Company’s deferred tax assets and liabilities under provisions contained in the new tax legislation, of which (i) $51,015 was due to the reduction of net deferred tax liabilities in connection with the lower Federal income tax rate of 21%, and (ii) $62,479 was due to a reduction in the valuation allowance attributable to the new rules, which provide that future Federal net operating losses have an unlimited carry-forward period. These rules on future Federal net operating losses allow the Company to recognize a portion of its unrecognized deferred tax assets for future deductible items. Other decreases to the statutory rate include $13,211 of income tax benefit related to a decrease in the valuation allowance, which offsets the income tax expense attributable to most of the operating income, and $1,974 of income tax benefit related to the vesting of restricted stock units. These decreases were partially offset by (i) $1,800 of tax expense related to state and local income taxes (net of Federal benefit), (ii) $1,998 of tax expense primarily related to non-deductible expenses, (iii) $2,006 of tax expense related to consolidated partnership book income attributable to non-controlling interest, (iv) $846 of tax expense related to a change in state tax rates and (v) $223 of other.
Income tax benefit for the year ended June 30, 2017 of $4,404 differs from the income tax expense derived from applying the statutory Federal rate of 35% to pretax income primarily as a result of (i) an increase of $30,697 in recorded federal and state valuation allowances, (ii) tax expense of $3,449 related to non-deductible expenses, (iii) the tax impact of consolidated partnership book income attributable to non-controlling interests of $1,414, (iv) deferred expense of $1,329 based on tax amortization on indefinite lived intangibles that are not available as a source of taxable income to support the realization of deferred tax assets, and (v) expense of $672 recorded due to a state rate change computed as a result of filed state tax returns. This tax expense is offset by (i) $6,716 of state tax benefit (net of Federal effect), (ii) $6,477 of tax benefit related to other comprehensive income gains recorded in continuing operations and (iii) $354 of other.
Adjusted operating income
The Company evaluates segment performance based on several factors, of which the key financial measure is their operating income (loss) before (i) depreciation, amortization and impairments of property and equipment and intangible assets, (ii) share-based compensation expense or benefit, (iii) restructuring charges or credits, and (iv) gains or losses on sales or dispositions of businesses, which is referred to as adjusted operating income (loss), a non-GAAP measure. In addition to excluding the impact of items discussed above, the impact of purchase accounting adjustments related to business acquisitions is also excluded in evaluating the Company’s consolidated adjusted operating income (loss). The Company has presented the components that reconcile operating income (loss) to adjusted operating income (loss).

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The following is a reconciliation of operating income (loss) to adjusted operating income:  
 
 
Years Ended June 30,
 
Change
 
 
2018
 
2017
 
Amount
 
Percentage
Operating income (loss)
 
$
18,876

 
$
(60,356
)
 
$
79,232

 
NM

Share-based compensation
 
47,563

 
41,129

 


 
 
Depreciation and amortization (a)
 
122,486

 
107,388

 


 
 
Other purchase accounting adjustments (b)
 
4,858

 
9,466

 
 
 
 
Adjusted operating income
 
$
193,783

 
$
97,627

 
$
96,156

 
98
%
________________
(a) 
Depreciation and amortization included purchase accounting adjustments of $18,134 and $3,152 for the years ended June 30, 2018 and 2017, respectively.
(b) 
Other purchase accounting adjustments for the year ended June 30, 2018 primarily included the amortization of favorable leases in connection with the TAO Group acquisition. Other purchase accounting adjustments for the year ended June 30, 2017 primarily included an inventory adjustment of $8,705 that was expensed to direct operating expenses and associated with the TAO Group acquisition on January 31, 2017 as the related inventory was consumed.
Adjusted operating income for the year ended June 30, 2018 increased $96,156, or 98%, to $193,783 as compared to the prior year. The net increase is attributable to the following:
Increase in adjusted operating income of the MSG Entertainment segment
$
95,064

Increase in adjusted operating income of the MSG Sports segment
6,542

Other net decreases
(5,377
)
Inter-segment eliminations
(73
)
 
$
96,156

Other net decreases were primarily due to higher employee compensation and related benefits, excluding share-based compensation expense, and the inclusion of Obscura expenses associated with the Company’s business development initiatives partially offset by a management fee earned for providing management and strategic services to TAO Group (see “— Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion), which is eliminated in the Company’s consolidated results of operations presented above. These increases were offset by certain favorable adjustments related to contingent payments for the Company’s business acquisitions.
Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests

For the year ended June 30, 2018, the Company recorded net loss attributable to redeemable noncontrolling interests of $628 and a net loss attributable to nonredeemable noncontrolling interests of $6,518 as compared to $4,370 of net loss attributable to redeemable noncontrolling interests and $304 of net income attributable to nonredeemable noncontrolling interests for the year ended June 30, 2017. These amounts represent the share of net income (loss) of TAO Group, BCE, and CLG that are not attributable to the Company. In addition, the net income (loss) attributable to redeemable and nonredeemable noncontrolling interests includes a proportional share of expenses related to purchase accounting adjustments. See “— Introduction — Factors Affecting Operating Results from Acquisitions” for further discussion.


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Business Segment Results
MSG Entertainment
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income (loss) to adjusted operating income for the Company’s MSG Entertainment segment. 
 
 
Years Ended June 30,
 
Change
 
 
2018
 
2017
 
Amount
 
Percentage
Revenues
 
$
780,726

 
$
506,468

 
$
274,258

 
54
%
Direct operating expenses
 
483,263

 
378,325

 
104,938

 
28
%
Selling, general and administrative expenses
 
192,929

 
120,496

 
72,433

 
60
%
Depreciation and amortization
 
18,515

 
11,339

 
7,176

 
63
%
Operating income (loss)
 
$
86,019

 
$
(3,692
)
 
$
89,711

 
NM

Reconciliation to adjusted operating income:
 
 
 
 
 
 
 
 
Share-based compensation
 
12,500

 
14,323

 
 
 
 
Depreciation and amortization
 
18,515

 
11,339

 
 
 
 
Adjusted operating income
 
$
117,034

 
$
21,970

 
$
95,064

 
NM

—————
NM — Percentage is not meaningful
Revenues
Revenues for the year ended June 30, 2018 increased $274,258, or 54%, to $780,726 as compared to the prior year. The net increase is attributable to the following: 
Inclusion of revenues associated with entertainment dining and nightlife offerings
$
208,629

Increase in event-related revenues at The Garden
28,390

Increase in event-related revenues at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular
14,638

Increase in event-related revenues at the Forum
11,395

Increase in event-related revenues at The Hulu Theater at Madison Square Garden
6,912

Increase in event-related revenues at The Chicago Theatre
6,031

Increase in revenues from the presentation of the Christmas Spectacular
5,055

Increase in venue-related sponsorship and signage and suite rental fee revenues
1,140

Decrease in revenues from the presentation of the New York Spectacular as a result of no scheduled performances in the current year
(11,483
)
Decrease in BCE event-related revenues
(2,712
)
Other net increases, primarily due to the inclusion of revenue associated with the acquisition of Obscura
6,263

 
$
274,258

The inclusion of revenues associated with entertainment dining and nightlife offerings is the result of the acquisition of a 62.5% interest in TAO Group on January 31, 2017, and primarily reflects revenues generated from food and beverage sales. TAO Group’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related revenues for fiscal year 2018 are for the period from March 27, 2017 to April 1, 2018, as compared to TAO Group’s related revenues for fiscal year 2017, which are for the period from February 1, 2017 to March 26, 2017. See “— Introduction — Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion.
The increase in event-related revenues at The Garden was due to a change in the mix of events (including the impact of a large-scale event held during the current year) and additional events held at the venue during the current year as compared to the prior year.
The increase in event-related revenues at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular, was primarily due to additional events held at the venue during the current year as compared to the prior year.

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The increase in event-related revenues at the Forum was due to a change in the mix of events and an additional event held at the venue during the current year as compared to the prior year.
The increase in event-related revenues at The Hulu Theater at Madison Square Garden was primarily due to a change in the mix of events partially offset by fewer events held at the venue during the current year as compared to the prior year.
The increase in event-related revenues at The Chicago Theatre was primarily due to additional events held at the venue during the current year as compared to the prior year.
The increase in revenues from the presentation of the Christmas Spectacular was primarily due to higher ticket-related revenue, mainly as a result of higher average ticket prices and the impact of additional scheduled performances, partially offset by a decrease in average per-show paid attendance in the current year as compared to the prior year. The Company had 200 scheduled performances of the production this holiday season as compared to 197 scheduled performances in fiscal year 2017. For the 2017 holiday season, more than one million tickets were sold, representing a low single digit percentage decrease as compared to the 2016 holiday season.
The increase in venue-related sponsorship and signage and suite rental fee revenues was due to higher suite rental fee revenue mainly driven by contractual rate increases.
The decrease in revenues from the presentation of the New York Spectacular was driven by no scheduled performances in the current year as compared to 56 scheduled performances presented in the prior year. This was a result of the Company’s decision to suspend the planned 2017 presentation announced in February 2017.
The decrease in BCE event-related revenues was primarily due to a decrease in ticket-related revenue.
Direct operating expenses
Direct operating expenses for the year ended June 30, 2018 increased $104,938, or 28%, to $483,263 as compared to the prior year. The net increase is attributable to the following: 
Inclusion of direct operating expenses associated with entertainment dining and nightlife offerings
$
112,958

Increase in event-related direct operating expenses at The Garden
15,273

Increase in event-related direct operating expenses at the Forum
7,919

Increase in event-related direct operating expenses at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular
4,391

Increase in BCE event-related direct operating expenses
3,954

Increase in event-related direct operating expenses at The Chicago Theatre
3,842

Increase in venue operating costs
3,086

Increase in event-related direct operating expenses at The Hulu Theater at Madison Square Garden
2,429

Increase in direct operating expenses associated with the presentation of the Christmas Spectacular
1,386

Decrease in direct operating expenses associated with the presentation of the New York Spectacular as a result of no scheduled performances in the current year
(56,196
)
Other net increases, principally the inclusion of direct expenses related to Obscura’s third-party business
5,896

 
$
104,938

The inclusion of direct operating expenses associated with entertainment dining and nightlife offerings is the result of the acquisition of a 62.5% interest in TAO Group on January 31, 2017, and primarily reflects costs associated with food and beverage sales, inclusive of labor costs, as well as venue-related operating expenses. TAO Group’s operating results are recorded in the Company’s consolidated statements of operations on a three-month lag basis. As a result, TAO Group’s related direct operating expenses for fiscal year 2018 are for the period from March 27, 2017 to April 1, 2018, as compared to TAO Group’s related direct operating expenses for fiscal year 2017, which are for the period from February 1, 2017 to March 26, 2017. See “— Introduction — Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion.
The increase in event-related direct operating expenses at The Garden was due to a change in the mix of events (including the impact of a large-scale event held during the current year) and additional events held at the venue during the current year as compared to the prior year.

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The increase in event-related direct operating expenses at the Forum was due to a change in the mix of events as well as one additional event held at the venue during the current year as compared to the prior year.
The increase in event-related direct operating expenses at Radio City Music Hall, excluding the Christmas Spectacular and the New York Spectacular, was due to additional events partially offset by a change in the mix of events held at the venue during the current year as compared to the prior year.
The increase in BCE event-related direct operating expenses was due to higher costs related to the Boston Calling Music Festival in the current year.
The increase in event-related direct operating expenses at The Chicago Theatre was primarily due to additional events held at the venue during the current year as compared to the prior year.
The increase in venue operating costs was primarily due to higher labor-related costs at our venues during the current year as compared to the prior year.
The increase in event-related direct operating expenses at The Hulu Theater at Madison Square Garden was due to a change in the mix of events partially offset by fewer events held at the venue during the current year as compared to the prior year.
The increase in direct operating expenses associated with the presentation of the Christmas Spectacular was primarily due to higher labor costs and an increase in deferred production cost amortization, partially offset by lower marketing expenses during the current year as compared to the prior year. The Company had 200 scheduled performances of the production this holiday season as compared to 197 scheduled performances in fiscal year 2017.
The decrease in direct operating expenses associated with the presentation of the New York Spectacular was driven by no scheduled performances in the current year as compared to 56 scheduled performances presented in the prior year. This was a result of the Company’s decision to suspend the planned 2017 presentation announced in February 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2018 increased $72,433, or 60%, to $192,929 as compared to the prior year mainly due to (i) inclusion of TAO Group’s selling, general and administrative costs, including a management fee incurred by TAO Group payable to the Company for providing management and strategic services and, to a lesser extent, (ii) higher professional fees and (iii) an increase in corporate general and administrative costs. See “— Introduction — Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2018 increased $7,176, or 63%, to $18,515 as compared to the prior year primarily due to the inclusion of depreciation and amortization expenses for TAO Group’s property and equipment before the purchase accounting adjustments. See “— Introduction — Factors Affecting Operating Results from Acquisitions TAO Group’s Operating Results” for further discussion.
Operating income (loss)
Operating income for the year ended June 30, 2018 improved $89,711 to $86,019 as compared to the prior year due to higher revenues, partially offset by increases in direct operating expenses, selling, general and administrative expenses and depreciation and amortization expenses, as discussed above.
Adjusted operating income
Adjusted operating income for the year ended June 30, 2018 increased $95,064 to $117,034 as compared to the prior year due to higher revenues, partially offset by increases in direct operating expenses and selling, general and administrative expenses, as discussed above, excluding share-based compensation expense.

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MSG Sports
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating income to adjusted operating income for the Company’s MSG Sports segment. 
 
 
Years Ended June 30,
 
Change
 
 
2018
 
2017
 
Amount
 
Percentage
Revenues
 
$
778,653

 
$
811,984

 
$
(33,331
)
 
(4
)%
Direct operating expenses
 
457,694

 
473,590

 
(15,896
)
 
(3
)%
Selling, general and administrative expenses
 
186,914

 
209,941

 
(23,027
)
 
(11
)%
Depreciation and amortization
 
7,481

 
9,319

 
(1,838
)
 
(20
)%
Operating income
 
$
126,564

 
$
119,134

 
$
7,430

 
6
 %
Reconciliation to adjusted operating income:
 
 
 
 
 
 
 
 
Share-based compensation
 
15,498

 
14,548

 
 
 
 
Depreciation and amortization
 
7,481

 
9,319

 
 
 
 
Adjusted operating income
 
$
149,543

 
$
143,001

 
$
6,542

 
5
 %
Revenues
Revenues for the year ended June 30, 2018 decreased $33,331, or 4%, to $778,653 as compared to the prior year. The net decrease is attributable to the following: 
Decrease in professional sports teams’ playoff related revenues
$
(29,333
)
Decrease in revenues from league distributions
(24,820
)
Decrease in event-related revenues from other live sporting events
(10,817
)
Increase in professional sports teams’ sponsorship and signage revenues and ad sales commission
12,454

Increase in local media rights fees from MSG Networks
6,528

Increase in professional sports teams’ pre/regular season ticket-related revenues
5,640

Increase in suite rental fee revenues
4,764

Other net increases, inclusive of certain revenues from CLG
2,253

 
$
(33,331
)
The decrease in professional sports team’s playoff related revenues was primarily due to the Rangers playing six home playoff games as the team advanced to the second round of the playoffs in the prior year versus not qualifying for playoffs in the current year.
The decrease in revenues from league distributions primarily reflects an NHL expansion fee of $15,500 and approximately $15,000 of non-recurring distributions from the NHL and NBA, which were both recorded by the Company in fiscal year 2017. These decreases were partially offset by other net increases, inclusive of league distributions related to CLG, which was acquired on July 28, 2017.
The decrease in event-related revenues from other live sporting events was due to a change in the mix of events held during the current year as compared to the prior year and one event that generated lower revenue during the current year as compared to the prior year.
The increase in professional sports teams’ sponsorship and signage revenues and ad sales commissions was primarily due to sales of new sponsorship and signage inventory, increased sales of existing sponsorship and signage inventory and the impact of a marketing partner, upon renewal of its agreement, shifting its marketing partnership spend from a combination of entertainment and sports entirely to sports.
The increase in local media rights fees from MSG Networks was primarily due to contractual rate increases.
The increase in professional sports teams’ pre/regular season ticket-related revenues was primarily due to higher average Rangers per-game revenue, partially offset by lower average Liberty and Knicks per-game revenue.
The increase in suite rental fee revenue was primarily due to contractual rate increases.

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Direct operating expenses
Direct operating expenses for the year ended June 30, 2018 decreased $15,896, or 3%, to $457,694 as compared to the prior year. The net decrease is attributable to the following: 
Decrease in professional sports teams’ playoff related expenses
$
(14,290
)
Decrease in event-related expenses associated with other live sporting events
(5,612
)
Decrease in team personnel compensation
(3,726
)
Decrease in net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax
(3,590
)
Increase in net provisions for certain team personnel transactions
5,535

Increase in other team operating expenses
4,209

Other net increases
1,578

 
$
(15,896
)
The decrease in professional sports teams’ playoff related expenses was primarily due to the Rangers playing six home playoff games as the team advanced to the second round of the playoffs in the prior year versus not qualifying for playoffs in the current year.
The decrease in event-related expenses associated with other live sporting events was primarily due to a change in the mix of events during the current year as compared to the prior year, and to a lesser extent, one event that generated lower expense during the current year as compared to the prior year.
The decrease in team personnel compensation was primarily due to lower overall player salaries during the current year as a result of roster changes, partially offset by higher other team personnel compensation and the inclusion of team personnel compensation for CLG, which was acquired on July 28, 2017.
Net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax and for certain team personnel transactions were as follows:
 
 
Years Ended June 30,
 
Increase (Decrease)
 
 
2018
 
2017
 
Net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax
 
$
55,450

 
$
59,040

 
$
(3,590
)
Net provisions for certain team personnel transactions
 
27,514

 
21,979

 
5,535

The decrease in net provisions for NBA and NHL revenue sharing expense (excluding playoffs) and NBA luxury tax reflects a lower provision for NBA and NHL revenue sharing expense of $1,878 and a higher estimated NBA luxury tax receipt of $1,712. Lower NBA and NHL revenue sharing expense primarily reflects an increase in estimated net player escrow recoveries, partially offset by higher estimated NBA and NHL revenue sharing expense for the 2017-18 season and, to a lesser extent, net adjustments to prior season’s revenue sharing expense. The increase in estimated NBA luxury tax receipt is based on the Knicks’ roster, which as of June 30, 2018 did not result in luxury tax for the 2017-18 season. The Knicks were not a luxury tax payer for the 2016-17 season and, therefore, received an equal share of the portion of luxury tax receipts that were distributed to non-tax paying teams. The actual amounts for the 2017-18 season may vary significantly from the recorded provisions based on actual operating results for each league and all teams within each league for the season and other factors.
Team personnel transactions for the year ended June 30, 2018 reflect provisions recorded for (i) waivers/contract terminations of $21,559, (ii) season-ending player injuries of $4,273, which is net of insurance recoveries of $468 and (iii) player trades of $1,682. Team personnel transactions for the year ended June 30, 2017 reflect provisions recorded for waivers/contract terminations and player trades of $13,979 and $8,000, respectively.
The increase in other team operating expenses was primarily due to higher day-of-event costs and league expenses.

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Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended June 30, 2018 decreased $23,027, or 11%, to $186,914 as compared to the prior year primarily due to lower employee compensation and related benefits, and to a lesser extent, lower marketing costs, partially offset by an increase in corporate general and administrative costs. The reduction in employee compensation and related benefits as compared to the prior year is primarily driven by severance-related costs in the prior year, which were attributable to a separation agreement with a team executive.
Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2018 decreased $1,838, or 20%, to $7,481 as compared to the prior year primarily as a result of an intangible asset becoming fully amortized.
Operating income
Operating income for the year ended June 30, 2018 increased $7,430, or 6%, to $126,564 as compared to the prior year primarily due to lower selling, general and administrative expenses and direct operating expenses, partially offset by a decrease in revenues, as discussed above.
Adjusted operating income
Adjusted operating income for the year ended June 30, 2018 increased $6,542, or 5%, to $149,543, as compared to the prior year primarily due to lower selling, general and administrative expenses, excluding share-based compensation expense, and direct operating expenses, partially offset by a decrease in revenues.

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Comparison of the Year Ended June 30, 2017 versus the Year Ended June 30, 2016
Consolidated Results of Operations
The table below sets forth, for the periods presented, certain historical financial information. 
 
 
Years Ended June 30,
 
Change
 
 
2017
 
2016
 
Amount
 
Percentage
Revenues
 
$
1,318,452

 
$
1,115,311

 
$
203,141

 
18
 %
 
 
 
 
 
 
 
 
 
Direct operating expenses
 
861,381

 
737,857

 
123,524

 
17
 %
Selling, general and administrative expenses
 
410,039

 
333,603

 
76,436

 
23
 %
Depreciation and amortization
 
107,388

 
102,482

 
4,906

 
5
 %
Operating loss
 
(60,356
)
 
(58,631
)
 
(1,725
)
 
(3
)%
Other income (expense):
 
 
 
 
 
 
 
 
Loss in equity method investments
 
(29,976
)
 
(19,099
)
 
(10,877
)
 
(57
)%
Interest income, net
 
7,647

 
4,754

 
2,893

 
61
 %
Miscellaneous income (expense)
 
1,492

 
(4,017
)
 
5,509

 
NM

Loss from operations before income taxes
 
(81,193
)
 
(76,993
)
 
(4,200
)
 
(5
)%
Income tax benefit (expense)
 
4,404

 
(297
)
 
4,701

 
NM

Net loss
 
(76,789
)
 
(77,290
)
 
501

 
1
 %
Less: Net income attributable to nonredeemable noncontrolling interests
 
304

 

 
304

 
NM

Less: Net loss attributable to redeemable noncontrolling interests
 
(4,370
)
 

 
(4,370
)
 
NM

Net loss attributable to The Madison Square Garden Company’s stockholders
 
$
(72,723
)
 
$
(77,290
)
 
$
4,567

 
6
 %
        
NM — Percentage is not meaningful
The following is a summary of changes in segments’ operating results for the year ended June 30, 2017 as compared to the prior year.
Changes attributable to
 
Revenues
 
Direct
operating
expenses
 
Selling,
general and
administrative
expenses
 
Depreciation
and
amortization
 
Operating
income (loss)
MSG Entertainment segment (a)
 
$
91,078

 
$
36,688

 
$
24,292

 
$
1,455

 
$
28,643

MSG Sports segment (a)
 
112,922

 
77,370

 
27,810

 
(1,638
)
 
9,380

Corporate and Other
 
(859
)
 

 
24,334

 
1,937

 
(27,130
)
Purchase accounting adjustments
 

 
9,466

 

 
3,152

 
(12,618
)
 
 
$
203,141

 
$
123,524

 
$
76,436

 
$
4,906

 
$
(1,725
)
        
(a) 
See “Business Segment Results” for a more detailed discussion relating to the operating results of our segments.
(b) 
See “Introduction” for the discussion of the Company’s refinement of its methodologies used to allocate its corporate, performance venues operating and other shared expenses in fiscal year 2017.
Selling, general and administrative expenses - Corporate and Other
Selling, general and administrative expenses in Corporate and Other for the year ended June 30, 2017 increased $24,334, or 44%, to $79,602 as compared to prior year. The increase was primarily due to (i) an increase in employee compensation and related benefits, inclusive of the impact from the change in allocation methodology, (ii) higher professional fees primarily associated with the Company’s business development initiatives and (iii) the Company being subject to New York State and City capital tax for four fiscal quarters in the current year as compared to three fiscal quarters in the prior year.

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Depreciation and amortization
Depreciation and amortization for the year ended June 30, 2017 increased $4,906, or 5%, to $107,388 as compared to the prior year primarily due to (i) depreciation and amortization of assets related to purchase accounting adjustments associated with the fiscal 2017 acquisitions and (ii) depreciation and amortization expenses of TAO Group’s property and equipment.
Operating loss - Corporate and Other
Operating loss in Corporate and Other for the year ended June 30, 2017 increased $27,130, or 20%, to $163,180. The increase was primarily due to higher selling, general and administrative expenses as discussed above.
Loss in equity method investments
Loss in equity method investments for the year ended June 30, 2017 increased by $10,877, or 57%, to $29,976 as compared to the prior year. The year-over-year increase in loss reflects a pre-tax non-cash impairment charge of $20,613 in the third quarter of fiscal year 2017 to write off the carrying value of the Company’s equity investment in Fuse Media. This increase was partially offset by the non-recurrence of a non-cash impairment charge of $7,270 to write off the carrying value of the Company’s investment in the Broadway production of Finding Neverland during the fourth quarter of fiscal year 2016, as well as improved operating results for certain of the Company’s joint ventures and, to a lesser extent, a distribution in the current year from an equity method investment that was previously written off.
Miscellaneous income (expense)
Miscellaneous income for the year ended June 30, 2017 consisted principally of the recovery of certain claims in connection with a third-party bankruptcy proceeding. Miscellaneous expense in the prior year reflected a pre-tax non-cash impairment charge of $4,080 to partially write down the carrying value of one of the Company’s cost method investments.
Income taxes
Income tax benefit for the year ended June 30, 2017 was $4,404 and income tax expense for the year ended June 30, 2016 was $297.
Income tax benefit for the year ended June 30, 2017 of $4,404 differs from the income tax expense derived from applying the statutory Federal rate of 35% to pretax income primarily as a result of an increase of $30,697 in recorded federal and state valuation allowances, tax expense of $3,449 related to non-deductible expense, the tax impact of consolidated partnership book income attributable to non-controlling interests of $1,414, deferred expense of $1,329 based on tax amortization on indefinite lived intangibles that are not available as a source of taxable income to support the realization of deferred tax assets, and expense of $672 recorded due to a state rate change computed as a result of filed state tax returns. This tax expense is offset by a state tax benefit (net of federal effect) of $6,716, the tax benefit of other comprehensive income gains recorded in continuing operations of $6,477 and other of $354.
Income tax expense for the year ended June 30, 2016 of $297 differs from the income tax expense derived from applying the statutory Federal rate of 35% to pretax income due to the Company not being able to record a tax benefit related to the deferred tax assets established on the operating losses during that year. Due to a lack of history of achieving operating income from operations, we have provided a full valuation allowance against our deferred tax assets.
Adjusted operating income
The following is a reconciliation of operating loss to adjusted operating income:
 
 
Years Ended June 30,
 
Change
 
 
2017
 
2016
 
Amount
 
Percentage
Operating loss
 
$
(60,356
)
 
$
(58,631
)
 
$
(1,725
)
 
(3
)%
Share-based compensation (a)
 
41,129

 
24,476

 


 
 
Depreciation and amortization (b)
 
107,388

 
102,482

 


 
 
Other purchase accounting adjustments
 
9,466

 

 
 
 
 
Adjusted operating income
 
$
97,627

 
$
68,327

 
$
29,300

 
43
 %
________________
(a) 
The increase in share-based compensation as compared to prior year, primarily reflects changes the Company made during fiscal year 2016 to its long-term incentive plans. These changes resulted in a shift in the performance-based component of the Company’s long-term incentive awards from cash to performance-based restricted stock units.
(b) 
Depreciation and amortization includes purchase accounting adjustments of $3,152 for the year ended June 30, 2017.

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Adjusted operating income for the year ended June 30, 2017 increased $29,300, or 43%, to $97,627 as compared to the prior year. The net increase is attributable to the following: 
Increase in adjusted operating income of the MSG Entertainment segment
$
36,551

Increase in adjusted operating income of the MSG Sports segment
11,974

Other net decreases
(19,225
)
 
$
29,300

Other net decreases reflect (i) an increase in employee compensation and related benefits, excluding share-based compensation expense, (ii) higher professional fees and (iii) the Company being subject to New York State and City capital tax for four fiscal quarters in the current year as compared to three fiscal quarters in the prior year.
Net income (loss) attributable to redeemable and nonredeemable noncontrolling interests
For the year ended June 30, 2017, the Company recorded net loss attributable to redeemable noncontrolling interests of $4,370 and a net income attributable to nonredeemable noncontrolling interests of $304. These amounts represent the share of net income (loss) of TAO Group and BCE that are not attributable to the Company. In addition, the net income (loss) attributable to redeemable and nonredeemable noncontrolling interests includes a proportional share of expenses related to purchase accounting adjustments. See “— Introduction — Factors Affecting Operating Results from Acquisitions” for further discussion.

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Business Segment Results
MSG Entertainment
The table below sets forth, for the periods presented, certain historical financial information and a reconciliation of operating loss to adjusted operating income (loss) for the Company’s MSG Entertainment segment. 
 
 
Years Ended June 30,
 
Change
 
 
2017
 
2016
 
Amount
 
Percentage