Executive Summary / Key Takeaways

• Madison Square Garden Sports Corp. (MSGS) owns two of the most valuable and iconic professional sports franchises, the New York Knicks (NBA) and New York Rangers (NHL), which are significantly undervalued by the public market compared to recent private market transactions and analyst valuations.
• Despite recent reductions in local media rights fees due to amendments with MSG Networks, MSGS anticipates an overall increase in media rights revenue in fiscal 2026, driven by the NBA's new national media deals.
• The company demonstrates strong operational performance in core revenue streams like ticketing, suites, and sponsorships, with record suite revenues in fiscal 2025 and high season ticket renewal rates for the upcoming 2025-26 seasons.
• MSGS maintains a strong liquidity position and has a history of capital returns, with management indicating a future return of capital program, while also prioritizing debt reduction.
• Key risks include the evolving and challenging regional sports network (RSN) landscape, potential impacts of new NBA national deals on local telecasts, and economic sensitivity affecting ticket and sponsorship sales.

A Premier Sports Empire in a Dynamic Landscape

Madison Square Garden Sports Corp. (MSGS) stands as a unique entity in the professional sports world, owning two of the most storied and valuable franchises: the New York Knicks of the National Basketball Association (NBA) and the New York Rangers of the National Hockey League (NHL). These teams, along with their development league affiliates, the Hartford Wolf Pack and Westchester Knicks, are deeply embedded in the cultural fabric of New York City, playing their home games at the iconic Madison Square Garden Arena. The company's business model is straightforward: monetize the immense popularity and performance of its teams through a diversified revenue mix encompassing event-related income (tickets, concessions, merchandise), media rights, and lucrative sponsorship and suite licenses.

MSGS's journey has been marked by strategic evolution. Originally an indirect subsidiary of MSG Networks, the company underwent a significant transformation with the Sphere Distribution in April 2020, separating its sports assets to focus on its core franchises. This strategic clarity has been a consistent theme, with the company converting to a Nevada corporation in June 2025. This focused approach allows MSGS to leverage its strong brand equity and loyal fan bases in one of the world's largest media markets, a critical differentiator in the competitive sports and entertainment industry.

The competitive landscape for MSGS is multifaceted, extending beyond direct rivalry with other sports teams to encompass broader entertainment options. While direct competitors like Fox Corporation , The Walt Disney Company , Warner Bros. Discovery (WBD), and Endeavor Group (EDR) vie for consumer attention and media rights, MSGS carves out its niche through direct ownership and operation of premium live sports experiences. MSGS's strength lies in its localized brand power and control over its venues, which can translate into greater fan loyalty and potentially more efficient operational execution compared to media conglomerates like DIS, which focus on broader content distribution. However, MSGS's niche focus can also be a vulnerability, potentially leading to revenue fluctuations tied to team performance and a reliance on the New York market.

Leveraging Technology for Fan Engagement and Operational Excellence

While not a technology company in the traditional sense, MSGS strategically embraces and invests in technology to enhance fan engagement, optimize operations, and drive revenue. The company's approach to technological differentiation centers on improving the fan experience, streamlining internal processes, and making strategic investments in emerging areas.

For instance, MSGS leverages digital platforms and social media to deliver compelling content and forge stronger connections with its fan base. The Knicks' playoff run in fiscal 2025, for example, saw the addition of nearly 35% of the 830,000 net new social media followers for both teams during that period, demonstrating the power of digital engagement during peak performance. The company also uses advanced ticketing systems to provide quick access to matches and events, contributing to increased average ticket yields and paid attendance.

Operationally, MSGS utilizes technology for security and athlete development. Its investment in Xtract One Technologies Inc. (XTRAF), a technology-driven threat detection and security solution company, underscores a commitment to enhancing safety at its venues. Furthermore, the Madison Square Garden Training Center in Greenburgh, NY, serves as a professional sports team performance center, implicitly leveraging sports science and data analytics to optimize athlete performance. This operational control over athlete development can foster superior margins through efficient operations. The company also explores innovative merchandise offerings, such as exclusive drops with existing partners and new jersey launches, which are supported by data-driven insights into fan preferences.

The "so what" for investors is that these technological integrations, while not always proprietary, contribute to MSGS's competitive moat by deepening fan loyalty, enhancing the value of its live experiences, and improving operational efficiency. This focus on experiential loyalty helps MSGS compete effectively against the broader media reach of companies like FOXA and the digital content prowess of DIS, by ensuring a premium, engaging, and secure environment for its core product: live sports.

Financial Performance and Strategic Adjustments

MSGS has demonstrated a robust financial trajectory, with fiscal 2024 marking record revenues exceeding $1 billion and adjusted operating income of $172.2 million. Fiscal 2025 continued this trend, with full-year revenues again surpassing $1 billion, reaching $1.04 billion, and adjusted operating income of $38.2 million. This performance was significantly bolstered by strong consumer and corporate demand, particularly for the Knicks and Rangers, and their deep playoff runs. The Knicks' Eastern Conference finals appearance in fiscal 2025, for example, generated the highest per-game gate revenues in team history. Record suite revenues were also achieved in fiscal 2025, driven by expanded event-level club spaces and renovated suites.

However, the first quarter of fiscal 2026, ended September 30, 2025, reflected a shift in revenue dynamics. Total revenues decreased by $13.853 million, or 26%, to $39.454 million compared to the prior year period. This decline was primarily attributed to a decrease in league distributions unrelated to national media rights fees and a $2.253 million reduction in local media rights fees. The latter was a direct consequence of amendments to the Knicks and Rangers local media rights agreements with MSG Networks, which included a 28% reduction for the Knicks and an 18% reduction for the Rangers, effective January 1, 2025, and the elimination of annual rights fee escalators. These agreements now expire at the end of the 2028-29 season. Concurrently, MSGS received penny warrants for a 19.90% equity interest in MSG Networks, accounted for as an equity method investment.

Despite these local media rights adjustments, MSGS maintains a strong liquidity position. As of September 30, 2025, the company held $48.634 million in cash and cash equivalents and had $258 million in additional available borrowing capacity under its existing credit facilities. Deferred revenue obligations stood at $302.021 million, primarily from tickets, suites, sponsorships, and local media rights. Net cash used in operating activities for the three months ended September 30, 2025, increased to $84.954 million, largely due to changes in working capital, including higher prepaid expenses and accounts receivable. The company has also prioritized debt reduction, making $55 million in repayments under its Rangers revolving credit facility in fiscal 2024, bringing its outstanding borrowings to zero.

Management has stated that a $1 reduction in local media rights fees does not translate to a dollar-for-dollar reduction in cash flow due to offsetting factors like decreased revenue sharing expenses and income taxes.

Outlook and Growth Catalysts

Management expresses confidence in MSGS's ability to drive long-term shareholder value, anticipating revenue growth across all in-arena categories in fiscal 2026. This outlook is supported by several key initiatives and market trends. The average combined season ticket renewal rate for the 2025-26 seasons is approximately 90%, with season ticket prices raised for the Knicks. The company plans to continue optimizing pricing and sales mix for individual and group tickets. Further, the ongoing renovation of several suites is expected to generate incremental revenue in fiscal 2026.

A significant catalyst for future revenue growth is the NBA's new national media deals with Disney , NBCUniversal, and Amazon (AMZN), which commence in the upcoming 2025-26 season. These deals are expected to provide a step-up in average annual value and increased escalators, leading to an overall increase in MSGS's media rights revenue in fiscal 2026, even with the reduced local media rights fees. The NHL also recently announced a new 12-year Canadian national media rights agreement starting in the 2026-27 season.

MSGS is also poised for growth in marketing partnerships, building on new multi-year agreements with partners like Abu Dhabi's Department of Culture and Tourism (Knicks official patch partner), Lenovo, and Motorola (MSI), and renewals with Verizon (VZ), Pepsi (PEP), and Benjamin Moore. The Rangers' 100th anniversary season in 2025-26, with special offerings and initiatives, including GAME 7 as the first-ever official jersey patch partner, is expected to further boost fan engagement and revenue. While not providing specific AOI guidance for fiscal 2026, management expects higher team operating expenses, including increased team personnel compensation and luxury tax, particularly for the Knicks, given their current roster.

Risks and Competitive Headwinds

Despite the optimistic outlook, MSGS faces several pertinent risks. The evolving regional sports network (RSN) landscape presents a significant challenge. The amendments to local media rights agreements with MSG Networks, resulting in reduced fees and shortened contract terms, highlight the industry's volatility. Furthermore, the NBA's new national media deals, while beneficial for national revenue, will reduce the number of exclusive live telecasts available to RSNs, potentially impacting local fan engagement and further pressuring local media rights fees. The Rangers Credit Agreement includes an event of default if MSG Networks experiences a bankruptcy or insolvency event, which could restrict MSGS's ability to borrow under its revolving credit facilities.

Economic sensitivity also poses a threat, as revenue streams from ticket sales and sponsorships are susceptible to downturns in consumer spending. Changes in tax regulations, such as the expansion of Section 162m of the U.S. Internal Revenue Code, effective for MSGS's fiscal year ending June 30, 2028, could limit tax deductions and increase income tax expense. The company also has potential interest rate risk exposure on its credit facilities, with a hypothetical 100 basis point increase in floating rates potentially increasing annual interest expense by approximately $2.70 million.

The competitive landscape, while offering opportunities, also presents challenges. Larger, more diversified media companies like The Walt Disney Company (DIS) and Fox Corporation (FOXA) have extensive global reach and significant resources for digital innovation, which could outpace MSGS's more specialized operational focus. While MSGS benefits from its iconic brand and venues, it must continuously innovate in fan experience and digital content to remain competitive against a wide array of entertainment options.

Conclusion

Madison Square Garden Sports Corp. presents a compelling investment case rooted in the enduring value of its iconic professional sports franchises, the New York Knicks and New York Rangers. Despite recent adjustments to local media rights agreements, the company is strategically positioned to capitalize on growing national media deals and robust in-arena demand, driving anticipated revenue growth in fiscal 2026. MSGS's commitment to enhancing fan engagement through operational improvements and targeted technological investments, coupled with its strong liquidity and disciplined capital allocation, underpins its long-term potential.

However, investors must weigh these strengths against the inherent risks of the evolving RSN landscape and broader economic sensitivities. The company's ability to effectively leverage its unique brand, optimize its revenue streams, and adapt to shifts in media consumption will be crucial in unlocking the significant intrinsic value that analysts believe is currently discounted in its stock price. With a clear focus on its core assets and a proactive approach to market dynamics, MSGS aims to translate the passion of its fan base into sustained shareholder returns.