Las Vegas Strip's beautiful $1 billion loser faces another challenge

Going $1 billion over its construction budget is just the start of the problems for the Las Vegas Strip's boldest bet yet.

Nov 18, 2023 - 23:30

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Las Vegas Strip's beautiful $1 billion loser faces another challenge

You can't argue that the Las Vegas Sphere isn't impressive.

It's a visually stunning first-of-its-kind venue that can light up the Las Vegas Strip skyline. As a technological marvel, the Sphere is unparalleled. It stands out in a city full of design wonder and impossible-to-believe structures.

As a business, however, it's a disaster.

Construction of the Sphere cost $2.3 billion, over budget by $1 billion. And the cost overruns forced the Sphere's original parent, Madison Square Garden Entertainment (MSGE) - Get Free Report, to lay off workers and eventually sell its stake in Tao Group Hospitality.

Under its new corporate structure as Sphere Entertainment, the company has also gotten off to a rocky start. The new venue lost $90 million in the quarter before it opened.

Chief Executive James Dolan remains undeterred, however, and has very high hopes for the Las Vegas Sphere.

"While it takes some time to reach its full potential, we have designed Sphere to be busy 365 days a year with multiple events per day," he said during the company's fourth-quarter-earnings call.

That seems a little unlikely when you consider the major problem the company faces in getting bands and solo artists to perform at the unique venue.

The Sphere can also serve as a giant advertising platform.
Image source: Daniel Kline/TheStreet.

The Las Vegas Sphere has a headliner problem

U2 served as the headline act at The Sphere, and the band will play 36 shows over a few months. It has been reported that to lure the band, Dolan's company paid it $10 million and gave them 90% of the ticket revenue.

Those numbers have not been confirmed but have been reported multiple times by The New York Post.

The problem — and it's a very large one — is that The Sphere has roughly 20,000 seats when it is set up as a concert venue. To play there, a band or musician needs a bespoke, wildly expensive show designed to take advantage of the venue's unique capabilities, which Dolan described.

"This month, we completed installation and testing of the majority of the technological systems inside the venue," he said.

"That includes our next generation immersive technologies, such as our interior display plane, Sphere Immersive Sound, an advanced concert-grade audio system, and 4D multisensory technologies that enable effects such as vibration, wind, scent, and changing temperatures."

Ultimately, the company plans to build smaller versions of the Sphere in other cities. Until that happens, however, the only available headliners are artists big enough to sell out a 20,000-seat venue multiple times a week at high ticket prices.

U2 isn't unique in meeting the criteria, but the potential headliners list for the venue is very small.

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Las Vegas Sphere wants Beyoncé

For a residency at the Sphere to make sense, the act needs to have the drawing power to sell 20,000 tickets a night and the showmanship to take full advantage of the venue's technology.

Various reports have had the company discussing a run of dates with the Eagles, but it makes little sense for that band to spend the money required to build a show for the Sphere. Unlike U2, the Eagles do not have an expensive stage show. They're generally just a band on a basic stage.

Dolan has reportedly reached out to Beyoncé, according to the New York Post, but her reported demands may kill any possible deal.

"To put a ring on Beyonce’s finger to seal the deal, her team is asking for about $10 million to produce the diva’s high-tech stage show, a source said — roughly the same amount of money the Sphere paid U2 to put on its spectacle," the Post reported.

Beyoncé joins the Eagles, Harry Styles, Bon Jovi, Coldplay and Paul McCartney as artists who have at least been rumored to be in discussion for a run of shows at the Las Vegas venue.

In 2024, however, the venue will host more than headliner performances.

That schedule will include movies made specifically for the venue's unique setup as well as other ticketed events including something called the Sphere Experience.

"The Sphere Experience will come in two parts," said Dolan. "The first part consists of a series of exhibits that chronicle technology's impact on the development of view and potential. It will begin with a replica of Gutenberg's printing press and take you through the creation of a metaverse and the development of AI."

That, however, is only the opening act.

"It will then continue in the main venue bowl, where guests will be fully immersed in a multisensory cinematic journey from Academy Award nominated director Darren Aronofsky," the CEO added.

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