Sphere Entertainment’s New Playbook: Smaller Venues, Less Risk, Bigger Returns
The $2.3 billion Las Vegas Sphere looked like a financial disaster at first glance, but a deeper look reveals why smaller venues may be the key to making the entire model work.
Sphere Entertainment, the holding company behind the $2.3 billion Las Vegas Sphere, announced plans this week to build its second U.S. venue in National Harbor. Located 15 minutes outside Washington, D.C., the smaller-capacity venue (6,000 seats vs. 17,600 seats) will cost about $1 billion to build and has a targeted opening date of 2030.
Local politicians say this project will support 4,750 jobs once the venue is fully operational, generating more than $1 billion in annual economic impact. I, for one, am skeptical of those numbers. But let’s not miss the forest for the trees. This announcement represents a strategic pivot for one of the world’s most ambitious live entertainment experiences (and a key reason why the stock is up 100% in 6 months).
The Sphere’s flagship venue in Las Vegas currently makes money in four ways:
The Sphere Experience: These are ticketed immersive productions. Think of it like the movie theater model. The Sphere spends $80 million to $100 million to develop movies like Postcard from Earth or The Wizard of Oz for its 160,000-square-foot, 16K x 16K-resolution screen. There are multiple showtimes per day, year-round, allowing them to monetize the building when there is no major event.
Concert Residencies: The Sphere signs multi-show concert engagements with major artists. U2 inaugurated the venue with 40 shows, grossing an estimated $244.5 million. Along with premium-priced ticket sales ($400+), these events drive incremental spend from food and beverage, merchandise, and luxury suites. The Sphere helps offset production costs and splits profits with the performing artist.
Exosphere Advertising: The Sphere’s 580,000-square-foot exterior serves as a high-impact advertising surface. According to an internal presentation leaked by Ad Age, the Sphere charges brands $450,000 for daily packages, $650,000 for weekly packages, or up to $2 million for special events, such as the Super Bowl. These prices include working with the Sphere’s 300+ person design team on the creative, and the company estimates that each advertising package receives an estimated 4.7 million daily impressions (300,000 in-person, 4.4 million online).
Corporate Events: When the Sphere's interior isn’t being used for concerts or movies, it can be rented for corporate events. This includes Delta’s takeover at CES and Hewlett-Packard’s corporate keynote, as well as the 2024 NHL Draft.
If you have followed the Sphere’s financial performance over the last 12 to 24 months, you’ve probably seen headlines that say the venue is performing poorly. Last quarter, the Sphere reported $174.1 million in revenue, yet still recorded an operating loss of $84.4 million. This YouTube video, titled “How Las Vegas Sphere Became a $2.3 Billion Failure,” has 530,000 views all by itself, and there are dozens of others like it.
While these sensationalized headlines might help increase a YouTube video's click-through rate, they also fail to explain what is really happening at the Las Vegas Sphere.