Media Rights And Franchise Deals Will Drive Upside In Coming Years

Key Takeaways

• New national media rights and expanded global partnerships are likely to strengthen recurring revenue streams and sponsorship opportunities for MSG Sports.
  
• Increased fan engagement and experiential demand, coupled with digital initiatives, will support revenue diversity, pricing power, and long-term earnings stability.
  
• Heavy reliance on core teams, reduced local media revenue, and rising costs increase earnings volatility and threaten sustainable long-term margin and revenue growth.

Catalysts

Operates as a professional sports company in the United States.

• The upcoming ramp-up in high-value national media rights fees for the NBA (beginning in fiscal '26) will offset the recent step-down in local media rights, positioning MSG Sports for an overall increase in recurring media revenue and supporting both revenue growth and higher net margins over the next several years.
  
• Expanded international partnerships and marketing deals-such as with Abu Dhabi's Department of Culture and Tourism-signal rising global interest in the Knicks and Rangers franchises, enhancing sponsorship income and merchandise opportunities, which are likely to boost top-line revenue.
  
• Persistent demand for live sports and premium arena experiences, as demonstrated by record-breaking gate receipts and suite revenues, combined with further investments in arena renovations and hospitality, is expected to drive stable or accelerating event-related revenue and higher average revenue per customer.
  
• Broader social media engagement and digital content initiatives-evidenced by strong growth in follower counts and exclusive in-arena/online merchandise offerings-establish an expanded, youthful fan base and unlock new digital monetization channels, improving long-term revenue diversity and margin potential.
  
• Ongoing consumer prioritization of experiential spending (high ticket renewal rates and playoff-driven demand) provides MSG Sports with robust pricing power and visibility into future ticket and hospitality revenue, supporting earnings stability and making forward growth less sensitive to near-term volatility.

Madison Square Garden Sports Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Madison Square Garden Sports's revenue will grow by 1.6% annually over the next 3 years.
• Analysts are not forecasting that Madison Square Garden Sports will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Madison Square Garden Sports's profit margin will increase from -2.2% to the average US Entertainment industry of 9.4% in 3 years.
• If Madison Square Garden Sports's profit margin were to converge on the industry average, you could expect earnings to reach $102.9 million (and earnings per share of $4.29) by about September 2028, up from $-22.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 80.7x on those 2028 earnings, up from -220.7x today. This future PE is greater than the current PE for the US Entertainment industry at 39.3x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.77%, as per the Simply Wall St company report.

Madison Square Garden Sports Future Earnings Per Share Growth

Risks

• The recently amended local media rights agreements with MSG Networks resulted in substantial reductions in annual rights fees (28% for the Knicks and 18% for the Rangers) and eliminated contractual escalators, with shorter expiration dates. This structural decline in a key recurring revenue stream directly impacts long-term revenue and margin growth.
  
• MSG Sports remains heavily dependent on the performance and popularity of just two core assets-the Knicks and Rangers-making top-line revenue and earnings vulnerable to on-court/ice performance, local economic cycles, and shifting fan interest in New York City.
  
• Although national media rights revenue is set to increase, the evolution of the RSN (regional sports network) landscape and continued decline in traditional linear TV viewership could introduce further uncertainties or downward pressure on future local media revenue, reducing predictability and possibly leading to earnings volatility.
  
• Rising player compensation, luxury taxes, and escalating collective bargaining-related expenses (as highlighted by recent NBA and NHL salary cap and tax increases) will drive higher fixed operating costs, which, if not offset by broader revenue growth, are likely to compress net margins over the long term.
  
• Merchandise and event-related revenues declined year-over-year, and the company noted that growth in these categories can be closely tied to special initiatives (e.g., new jersey launches) or deep playoff runs-raising risk that, without consistent performance or new fan engagement strategies, ancillary and core in-arena revenues could stagnate, impacting top-line growth.

Valuation

• The analysts have a consensus price target of $261.5 for Madison Square Garden Sports based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $314.0, and the most bearish reporting a price target of just $220.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $102.9 million, and it would be trading on a PE ratio of 80.7x, assuming you use a discount rate of 9.8%.
• Given the current share price of $206.36, the analyst price target of $261.5 is 21.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.