Las Vegas Sphere: Launch Costs Eclipse Revenues in High-Stakes Gamble

Las Vegas likes to gamble, and the opening of The Sphere arena in September was certainly a gamble for its operator. Fresh data shared on Wednesday highlighted the risks and potential rewards.

Five years in the making, the $2.3 billion marvel stands 366 feet tall and opened with Irish rock band U2 bringing the world’s largest 16K high-resolution LED screen to life.

The Sphere Entertainment Company said the arena’s opening brought in event-related revenues of $4.1 million, supplemented by $2.6 million from sponsorship and advertising.

Eyeing The Sphere’s Costs

The revenue was a fraction of its first quarter’s direct operating expenses, which totaled $7.8 million.

The breakdown of these expenses reveals $2.8 million in venue operating costs and $2.2 million in event-related expenditures, both directly tied to the Sphere’s operational debut.

Moreover, the direct operating costs encompassed $2.1 million related to advertising spending leading up to Darren Aronofsky’s October premiere of “Postcard from Earth,” the mainstay act at The Sphere Experience.

Analysts have raised questions about whether the revenue from events, sponsorships, and advertising can scale up to offset the substantial initial investments. Tickets for the specialized “Sphere Experience,” range from $90 to $250. U2’s performances at the venue have consistently sold out, and the band has since scheduled an additional 11 shows for January and February 2024.

Despite initial budget overruns and financial challenges at parent company Madison Square Garden Entertainment, the venue’s opening did give a 10% boost for investors.

Sphere Entertainment CEO James Dolan remained optimistic about the Sphere’s unique potential.

“We’re building positive momentum across Sphere and remain confident that we are well positioned to drive long-term value for shareholders,” Dolan said.

Next-Level Out-of-Home Advertising  

Kevin Bartanian, founder of Kevani, an Out of Home (OOH) media specialist company, said the Sphere was already on its way to becoming a global landmark with the publicity, or so-called earned media, it has received in a very short period. 

“You can see how it already engages positively with audiences on an emotional level worldwide,” Bartanian said. “Consumers expect to have genuine connections with brands. Iconic media destinations like the Las Vegas Sphere help create that connection.”

While Bartanian declined to speculate on the cost of digital out-of-home campaigns for the venue, he expected the Sphere to be dominated by campaigns using creative content tied to localized events or concerts “to create energy and a synergistic moment.” 

The Sphere literally markets itself to visitors by being such a prominent landmark just off The Strip with eye-catching video screens. Its 580,000-square-foot surface is covered by 1.2 million LED screens that have rotating external visual eye-candy and marketing messages.

Owners hope that Vegas’ upcoming attraction schedule will help expose visitors to the venue. The Las Vegas F1 Race on November 19, as part of the 2023 Formula One World Championship, is highly anticipated. As is the 2024 Super Bowl in February next year. Whether any of that will overflow on the LEDs screens of the Sphere, remains to be seen. 

“The Sphere quite literally occupies people’s space,” Bartanian said. “You’re in the physical world. You have a chance to impact someone’s day. The way an architect thinks about activating a public space is the way you should think about how your ad’s relationship will be with the public.” 

Perhaps lead singer Bono said it best in an interview shared on the band’s social media: “It’s not showbiz as usual. Sometimes it takes a grand madness to build a place that we’ve never experienced before.”