These losers come up winners
Knicks valued at $3.5B
The New York Knicks — one of the worst teams in the National Basketball Association for the past three years — keep making Jim Dolan richer. It’s the other parts of his empire that look questionable.
Fans may point fingers at Dolan, 62, for the Knicks’ oncourt struggles, but the team’s value has surged to $3.5 billion, according to Macquarie Research, which based its figures on the $2.2 billion sale of the Houston Rockets last week.
The Knicks, part of the Dolan family’s Madison Square Garden Co., are “Jimmy’s toy,” said analyst Paul Sweeney — a glamorous asset in the world’s biggest media market.
The rising fortunes of Madison Square Garden are separating the Dolans’ major holdings into winners and losers, fueling speculation that the family will part with their underperforming cable assets. Those include controlling stakes in MSG Networks, which airs Knicks and New York Rangers games, and AMC Networks, the home of “The Walking Dead” and other hits.
MSG Networks is coming up on the two-year anniversary of its split from Madison Square Garden. A conservative tax attorney would say the family can sell assets starting next month without endangering the tax-free status of the spinoff, according to Brandon Ross, an analyst at BTIG Research. That’s among the reasons the Dolans would be willing to sell MSG Networks to the right suitor at the right price, according to a person familiar with the matter.
“Everyone is looking to Oct. 1 as the date that MSG Networks really comes in play,” Ross said.
The television business is in a period of upheaval as consumers shut off their cable subscriptions, turning away from channels like MSG and AMC and toward Netflix, Facebook and Snapchat for enter- tainment. Dolan himself has called attention to the shifting landscape.
“Viewing habits are changing, and how people get the game and how they view it is also changing,” he said during a panel at the International Consumer Electronics Show earlier this year. “And I don’t know that those old monetization vehicles are going to continue to work.”
A spokesman for Madison Square Garden and MSG Networks declined to comment.
As executive chairman of both companies, Jim Dolan is the most prominent family member in the business, though his 90-year-old father, Charles, remains chairman of AMC and is on the boards of the others. The family controls all three through a collection of trusts and investment vehicles.
Wall Street is betting that hosting live sports and concerts is a better business than broadcasting them on TV. Shares of Madison Square Garden, which owns the iconic New York arena and other venues in addition to the Knicks and Rangers, are up 42 percent since the split with MSG Networks, which is up just 14 percent in that span. AMC has sunk 19 percent.
The Dolans seem to be making the same calculation, investing heavily in Madison Square Garden. The company just completed a $1 billion renovation of the famous arena and plans to bring a new venue to Las Vegas.
Revenue from TV rights is expected to keep growing, and the Knicks and Rangers are playing to near-capacity crowds.
MSG Networks’ revenue increased 3 percent last year by demanding higher rates from pay-TV providers. MSG and its sister channel, MSG Plus, charged $6.55 per subscriber combined in 2016 — higher than any other regional sports network, according to SNL Kagan.