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MSGS has been written up multiple times before, and most recently by juice835.  But now we are perhaps closer to some catalysts including the new NBA media rights deal, NBA expansion and both the Knicks and Rangers making the playoffs.  Yes, the big move will still be if Dolan tries to unlock the value disconnect or gets canceled, and that might happen given the sexual assault lawsuit against him, but in the meantime we have the underlying performance improving.  

NBA Media Rights Deal

NBA media rights are distributed equally to all 30 teams.  

Media reports have a potential $76B deal in the works over 11 years.  

https://www.bloomberg.com/news/articles/2024-05-02/nba-targets-76-billion-windfall-in-new-tv-rights-deal

76B over 11 years = 76/11 = $6.9B per year.  Divided among the 30 sports teams equals about $230M per year.  Vs. the current ~$90M.  So incremental $140M if the media reports are right.  

We don’t really see this new media deal reflected in the consensus numbers.  

This normally trades ~6x revenues, so that means $140M increase in revenue from this new deal would be ~$35/share if MSGS continues to trade at that multiple.  

On their FY2Q24 earnings call they talked about their optimism for a strong deal.  

NBA Expansion Opportunity

It has also been reported that the NBA is looking to create new expansion teams.  

https://www.spotrac.com/news/_/id/2076/nba-expansion-series-how-nba-expansion-works

https://www.nbcsports.com/nba/news/adam-silvers-latest-comments-make-nba-expansion-seem-even-more-likely

Here is what Silver has said.  

“What we said, over the last few years, there are two things that we wanted to see happen first before we turned to expansion,” Silver said. “One was we wanted to get a new collective bargaining agreement done. We did that, and we have now labor peace and I think a very strong agreement for both the teams and the players in place till 2030. The other thing we said we wanted to get done is our new media deals. And our current national deals with ABC, ESPN and then TNT go through the end of next season. And the reason we wanted to get those deals done, no secret, is we want to have a better understanding of what the economics would be going forward...

“So, you know, we’ll see what the timing is on those national television agreements. You know, we don’t have to wait till the end of the second season to get those done, but once we do, we’ll turn back to expansion, or turn to expansion. And again, I made no secret out of it. Las Vegas is one of those markets we’re gonna look to. I know that the fans in Seattle have wanted us to get back there forever. No commitments, you know, to anyone. But we’ll certainly be looking at those two markets. Again, as I’ve said before, I think it’s sort of part of any organization you wanna grow over time.

With the TV contract being finalized soon, the attention will then turn to the expansion opportunity.  Las Vegas and Seattle are said to be under serious consideration for expansion cities.  

Rumors are that it would be >$4B expansion fee.  https://sportsnaut.com/las-vegas-nba-expansion-update/

And we know that Silver has said the expansion fee of $2.5 was likely too low.

https://hoopshype.com/rumor/adam-silver-rumored-2-5-billion-nba-expansion-fee-very-low/

If there are two expansion teams at $4B each, a $8B windfall split among 30 teams would be ~$267M.  This is about $11 per share.  

MSGS is held captive by Dolan

Dolan family owns 70.9% of the voting rights.  

James Dolan is 69 years old.  So not young, there is always the risk of a health related issue.  

There is also the risk that he might be a forced seller if he becomes a pariah for his behavior.  

https://www.billboard.com/business/legal/msg-james-dolan-response-sexual-assault-lawsuit-masseuse-eagles-tour-1235642264/

However, since this allegation has come out, there have not been other women who have publicly accused him of similar behavior.  

There is precedent in the NBA getting owners to sell their teams for unacceptable behavior.  Donald Sterling was forced to sell the LA Clippers by the NBA after his racist behavior became public.  So while the current allegations against Dolan don’t rise to this level, it is something to monitor.  

Knicks and Rangers are Playing Well

Knicks have made the postseason these past two seasons.  Losing in the conference semifinals both years.  This year was particularly close with injuries hurting their chances to advance.  A lot can change each season, but the Knicks look to be in a good position to return to the postseason in future years.

The Rangers have made the postseason for 3 consecutive years.  This year they are still in contention, and are in the Conference Finals.  

Transactions when they happen are often at a premium to the Forbes valuation.  

https://www.forbes.com/lists/nba-valuations/

Forbes has the Knicks at 6.6B with their valuation growth faster than the NBA average.

https://www.forbes.com/lists/nhl-valuations/

The Rangers are valued at 2.65B.  

So the value of the two teams is $9.25B.  While the EV of MSGS is $4.8B.  So almost a 50% discount.  

Generally the actual transaction prices are higher than the Forbes valuations.  

• The Phoenix Suns were sold for $4B, despite being valued at $2.7B by Forbes before the transaction.  So 50% higher than the valuation.  

• Washington Commanders were sold in May 2023 for $6.05 billion.  This was higher than their Forbes valuation of $5.6 billion.

• The Denver Broncos were sold for $4.65B which was higher than their Forbes valuation of $3.75B at the time.  

Catalyst

New NBA Media Rights Deal

NBA Expansion Teams