Question of the Day - 25 January 2023

When the MSG (short for Madison Square Garden Company) Sphere was originally announced in February 2018, no price tag was revealed, but construction was scheduled to start that year and be completed in 2020. Ground was broken in September 2018, but that was the end of the original schedule. Four months later in January 2019, the completion date was pushed back to sometime in 2021. 

In August 2019, nearly a year after the 17,500-seat arena started going up behind the Venetian, the price tag for the project was finally announced by MSG, which put it at $1.2 billion. However, the general contractor immediately disputed that, citing a cost of $1.7 billion. Thus began some negotiations over the difference. Either way, the cost was a shock to MSG investors, who sold off enough stock to drop the share price nearly 10%. 

Six months later in February 2020 just before the pandemic, the price settled at $1.66 billion. The increase from MSG's original estimate was attributed to "improvements to the venue and overall guest experience." By comparison, T-Mobile Arena, with 1,000 more seats, cost $350 million to build, $1.3 billion less.

A month later at the end of March 2020, construction was suspended due to fears of the spread of the coronavirus; it wasn't resumed for five months, when a skeleton crew returned to the site to prepare for the forthcoming return to full-scale construction. 

By May 2021, a variety of factors caused the price to jump again, from $1.66 billion to $1.83 billion. That wasn't entirely unexpected, given the substantial costs of shutting down and starting up construction, plus changes in design and impacts from COVID, such as rising commodity and labor costs. 

Construction continued on the $1.83 billion budget for another year and a half, until a couple of months ago; in late November 2022, the price tag went up again, all the way to $2.18 billion. The additional $350 million (again, the entire budget of T-Mobile) was blamed on inflation and supply-chain issues and the complexity of the project. 

By another comparison, the 65,000-seat Allegiant Stadium cost $1.9 billion to complete.

Analysts believe that the price could continue going up for all the same reasons: complexity, inflation and the continuing rise in commodity and labor expenses, supply-chain delays, the ongoing recovery from the COVID suspension, and overhead expenses against postponed revenues. 

MSG is reportedly taking steps to ensure it has the funding to finish the Sphere. The big one is the possible sale of Tao Group, whose worldwide operations include 17 restaurants, nightclubs, and day clubs in Las Vegas. The New York Post reported that MSG could net $275 million from such a sale. 

In short, though the original announced price tag was $1.2 billion, that was apparently low. The amended $1.7 billion amount was probably closer to the starting budget, so the cost of the Sphere has gone up more like a half-billion dollars. That's not insignificant, by any stretch of the imagination, but it's half of the billion bucks in the question.