Sphere Entertainment (SPHR) Risk Analysis

Advertising revenues depend on a number of factors, many of which are beyond our control, such as: (i) team performance; (ii) whether live sports games are being played and the number of live games available for telecast on our programming networks; (iii) the popularity of our programming; (iv) the activities of our competitors, including increased competition from other forms of advertising-based media (such as Internet, mobile media, other programming networks, radio and print media) and an increasing shift of advertising expenditures to digital and mobile offerings; (v) shifts in consumer viewing patterns, including consumers watching more ad-free content, non-traditional and shorter-form video content online, and the increased use of ad skipping functionality; (vi) increasing audience fragmentation caused by increased availability of alternative forms of leisure and entertainment activities, such as social networking platforms and video games; (vii) consumer budgeting and buying patterns; (viii) the extent of the distribution of our networks; (ix) changes in the audience demographic for our programming; (x) the ability of third parties to successfully and accurately measure audiences due to changes in emerging technologies and otherwise; (xi) the health of the economy in the markets our businesses serve and in the nation as a whole; and (xii) general economic trends in the advertising industry. A decline in the economic prospects of advertisers or the economy in general has in the past altered, and could in the future alter, current or prospective advertisers' spending priorities, which could cause our revenues and operating results to decline significantly in any given period. Even in the absence of a general recession or downturn in the economy, an individual business sector that tends to spend more on advertising than other sectors may be forced to reduce its advertising expenditures if that sector experiences a downturn. In such case, a reduction in advertising expenditures by such a sector may adversely affect our revenues. See "-Operational and Economic Risks-Our Operations and Operating Results Have Been, and May in the Future Be, Materially Impacted by a Pandemic or Another Public Health Emergency, Such as the COVID-19 Pandemic. The pricing and volume of advertising has been affected by shifts in spending away from more traditional media toward online and mobile offerings or towards new ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising spots and advertising exchanges, some or all of which may not be as advantageous to the Company as current advertising methods. In addition, we cannot ensure that our programming will achieve favorable ratings. Our ratings depend partly upon unpredictable and volatile factors, many of which are beyond our control, such as team performance, whether live sports games are being played, viewer preferences, the level of distribution of our programming, competing programming and the availability of other entertainment options. A shift in viewer preferences could cause our advertising revenues to decline as a result of changes to the ratings for our programming and materially negatively affect our business and results of operations.

We incurred operating losses of approximately $341 million, $273 million and $166 million for Fiscal Years 2024, 2023 and 2022, respectively. We expect these significant operating losses to continue. In addition, we have in prior periods incurred operating losses and negative cash flow. There is no assurance that we will have operating income, adjusted operating income, or positive cash flow in the future. Significant operating losses may limit our ability to raise necessary financing, or to do so on favorable terms, as such losses could be taken into account by potential investors and lenders.

We are highly leveraged with a significant amount of debt and we may continue to incur additional debt in the future. As of June 30, 2024, the principal balance of our consolidated debt outstanding was approximately $1.4 billion, $849 million of which is due prior to June 30, 2025 and is classified as short-term on our condensed consolidated balance sheets. As a result of our indebtedness, we are required to make interest and principal payments on our borrowings that are significant in relation to our revenues and cash flows. These payments reduce our earnings and cash available for other potential business purposes. Furthermore, our interest expense could increase if interest rates increase (including in connection with rising inflation) because our indebtedness bears interest at floating rates or to the extent we have to refinance existing debt with higher cost debt. In September 2019, certain subsidiaries of MSG Networks Inc., including MSGN Holdings L.P. ("MSGN L.P."), entered into a credit facility consisting of an initial five-year $1.1 billion term loan facility and a five-year $250 million revolving credit facility (the "MSG Networks Credit Facilities"). The outstanding borrowings under the MSG Networks Credit Facilities are due at maturity on October 11, 2024. The MSG Networks Credit Facilities are the obligations of our indirect subsidiaries MSGN L.P., MSGN Eden, LLC, Regional MSGN Holdings LLC and certain subsidiaries of MSGN L.P., and none of the Company, Sphere Entertainment Group or any of the subsidiaries of Sphere Entertainment Group (collectively, the "Non-Credit Parties") are party to the MSG Networks Credit Facilities. On December 22, 2022, MSG Las Vegas, LLC ("MSG LV"), entered into a credit agreement providing for a five-year, $275 million senior secured term loan facility (the "LV Sphere Term Loan Facility"). All obligations under the LV Sphere Term Loan Facility are guaranteed by Sphere Entertainment Group. None of the Company, MSG Networks Inc., MSGN L.P., or any of the subsidiaries of MSGN L.P are parties to the LV Sphere Term Loan Facility. On December 8, 2023, the Company completed a private unregistered offering (the "Offering") of approximately $259 million in aggregate principal amount of its 3.50% Convertible Senior Notes due 2028 (the "3.50% Convertible Senior Notes"). Our ability to have sufficient liquidity to fund our operations and refinance our indebtedness is dependent on the ability of Sphere to generate significant positive cash flow. There can be no assurance that guests, artists, promoters, advertisers and marketing partners will continue to embrace this new platform and that Sphere will generate revenue and adjusted operating income in line with our expectations. Original immersive productions, such as Postcard From Earth, have not been previously pursued on the scale of Sphere, which increases the uncertainty of our operating expectations. To the extent that our efforts do not result in viable shows, or to the extent that any such productions do not achieve expected levels of popularity among audiences, we may not generate the cash flows from operations necessary to fund our operations. Our future operating performance, to a certain extent, is subject to general economic conditions, recession, fears of recession, financial, competitive, regulatory and other factors that are beyond our control. To the extent we do not realize expected cash flows from operations from Sphere, we would have to take several actions to improve our financial flexibility and preserve liquidity, including significant reductions in both labor and non-labor expenses as well as reductions and/or deferrals in capital spending. Therefore, while we currently believe we will have sufficient liquidity from cash and cash equivalents and cash flows from operations (including expected cash flows from operations from Sphere) to fund our operations and, at a minimum, make a required quarterly amortization payment of $20.6 million on the MSG Networks Credit Facilities, no assurance can be provided that our liquidity will be sufficient in the event any of the preceding uncertainties facing Sphere are realized over the next 12 months. In addition, our ability to make payments on, or repay or refinance, our debt, and to fund our operating and capital expenditures, also depends upon our ability to access the credit markets. If we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we may need to refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital, which may be dilutive to our stockholders. We cannot provide assurance that we could effect any of these actions on a timely basis, on commercially reasonable terms or at all, or that these actions would be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from effecting certain or any of these alternatives. Even if our future operating performance is strong, limitations on our ability to access the capital or credit markets, including as a result of general economic conditions, unfavorable terms or general reductions in liquidity may adversely and materially impact our business, financial condition, and results of operations. The failure to satisfy the covenants, including any inability to attain a covenant waiver and other requirements under each credit agreement could trigger a default thereunder, acceleration of outstanding debt thereunder and, with respect to the LV Sphere Term Loan Facility, a demand for payment under the guarantee provided by Sphere Entertainment Group. Additionally, the LV Sphere Term Loan Facility and the MSG Networks Credit Facilities (together, the "Credit Facilities") each restrict MSG LV and MSGN L.P., respectively, from making cash distributions to us unless certain financial covenants are met. Any failure to satisfy the covenants under our Credit Facilities could negatively impact our liquidity and could have a negative effect on our businesses. The terms of the indenture governing the 3.50% Convertible Senior Notes do not restrict us from incurring additional indebtedness, including secured indebtedness. As of June 30, 2024, (i) the principal balance of the Company's indebtedness (excluding subsidiaries) was approximately $258.8 million under the 3.50% Convertible Senior Notes and (ii) the principal balance of indebtedness of the Company's subsidiaries was $1.125 billion, all of which is senior secured indebtedness. In addition, as of June 30, 2024, MSGN L.P. had the ability to utilize approximately $113 million of its $250.0 million revolving credit facility and not have been in violation of the terms of the MSG Networks Credit Facilities. The ability of MSGN L.P. to draw on its revolving credit facilities will depend on its ability to meet certain financial covenants and other conditions. This leverage also exposes us to significant risk by limiting our flexibility in planning for, or reacting to, changes in our business (whether through competitive pressure or otherwise), the entertainment and video programming industries and the economy at large. Although our cash flows could decrease in these scenarios, our required payments in respect of indebtedness would not decrease. In addition, the indenture governing the 3.50% Convertible Senior Notes does not place any limitations on our ability to incur debt or create liens securing indebtedness. If we incur secured indebtedness and such secured indebtedness is either accelerated or becomes subject to a bankruptcy, liquidation or reorganization, our assets would be used to satisfy obligations with respect to the indebtedness secured thereby before any payment could be made on the 3.50% Convertible Senior Notes that are not similarly secured. The indenture governing the 3.50% Convertible Senior Notes also does not restrict our subsidiaries from incurring additional debt, which would be structurally senior to the 3.50% Convertible Senior Notes. If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify. Our Credit Facilities restrict the ability of our subsidiaries to incur additional indebtedness, including secured indebtedness, but if the facilities mature or are repaid, our subsidiaries may not be subject to such restrictions under the terms of any subsequent indebtedness. As described under "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in this Annual Report on Form 10-K, while the conditions with respect to the MSG Networks Credit Facilities raise substantial doubt about the Company's ability to continue as a going concern, for the reasons stated under Note 2. Accounting Policies - Liquidity and Going Concern, to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K with respect to the lenders' recourse under the MSG Networks Credit Facilities, we have concluded that the conditions raising substantial doubt about the Company's ability to continue as a going concern have been effectively alleviated as of the date of this Annual Report on Form 10-K, and that the Company would be able to continue as a going concern for at least one year beyond the date of issuance of the condensed consolidated financial statements included in this Annual Report on Form 10-K. Management will conduct its review of the Company's ability to continue as a going concern prior to issuing the Company's financial statements after each quarterly or annual period. There can be no assurances that we will be able to continue to effectively alleviate the conditions with respect to the Company's ability to continue to be a going concern in the future. In addition, we have made investments in, or otherwise extended loans to, one or more businesses that we believe complement, enhance or expand our current business or that might otherwise offer us growth opportunities and may make additional investments in, or otherwise extend loans to, one or more of such parties in the future. For example, we had previously invested in and extended financing to Holoplot in connection with Sphere's advanced audio system, and on April 25, 2024, we completed the acquisition of the remaining equity interest in Holoplot that we did not previously own. To the extent that such parties do not perform as expected,including with respect to repayment of such loans, it could impair such assets or create losses related to such loans, and, as a result, have a negative effect on our business and results of operations.

As of June 30, 2024, the principal balance of debt outstanding under the MSG Networks Credit Facilities was approximately $849.8 and is classified as short-term on our condensed consolidated balance sheets. Under the terms of the MSG Networks Credit Facilities, a $20.6 million required quarterly amortization payment is due between June 30, 2024 and maturity and the remaining outstanding borrowings under the facility of $829.1 million are due at maturity on October 11, 2024. MSG Networks will be unable to generate sufficient operating cash flows to settle the remaining outstanding borrowings under the MSG Networks Credit Facilities when they become due absent action taken by management to refinance the outstanding borrowings. As of the issuance date of the accompanying consolidated financial statements for the year ended June 30, 2024, MSG Networks has not been able to finalize a refinancing of the MSG Networks Credit Facilities with its existing syndicate of lenders. Consequently, MSG Networks has decided to pursue a refinancing through a work-out of the MSG Networks Credit Facilities with its existing syndicate of lenders. If a refinancing of the outstanding borrowings under the MSG Networks Credit Facilities is successfully consummated, through a work-out or otherwise, it is expected to require a cash equity contribution from Sphere Entertainment Group to MSG Networks. In addition, such refinancing may be on terms that are materially less favorable to MSG Networks than the current terms, including providing for covenants for the benefit of existing or new lenders that materially restrict the business of MSG Networks. A refinancing may also require MSG Networks, Sphere Entertainment Co. and/or their respective subsidiaries to make concessions as a condition to the refinancing, which may have an adverse effect on their respective businesses, operating results and financial condition.

MSG Networks will be unable to generate sufficient operating cash flows to settle the remaining outstanding borrowings under the MSG Networks Credit Facilities when they become due absent action taken by management to refinance the outstanding borrowings. As of the issuance date of the accompanying consolidated financial statements for the year ended June 30, 2024, MSG Networks has not been able to finalize a refinancing of the MSG Networks Credit Facilities with its existing syndicate of lenders. Consequently, MSG Networks has decided to pursue a refinancing through a work-out of the MSG Networks Credit Facilities with its existing syndicate of lenders. In the event MSG Networks is unable to successfully refinance the MSG Networks Credit Facilities through a work-out or otherwise, the lenders would have the right to exercise their remedies under the MSG Networks Credit Facilities, which would include, but not be limited to, declaring an event of default and foreclosing on the MSG Networks business. In the event of an exercise of post-default rights or remedies, the Company believes the lenders would have no remedies or recourse against the Non-Credit Parties pursuant to the terms of the MSG Networks Credit Facilities. MSG Networks and its subsidiaries may also decide to seek bankruptcy protection prior to the lenders exercising their rights. If lenders exercise remedies or foreclose on the MSG Networks business, or if MSG Networks decides to seek bankruptcy protection, Sphere Entertainment Co. may no longer be entitled to any value in, or results of operations from, the MSG Networks business.

The Credit Facilities contain, and future credit facilities are expected to contain, a number of restrictive covenants that impose significant operating and financial restrictions on certain of our subsidiaries and may limit our ability to respond to changes in our business or competitive activities, or to otherwise engage in acts that may be in our long-term best interest, including restrictions on our subsidiaries' ability to: - incur indebtedness;- incur liens;- make investments;- sell and/or otherwise dispose of assets;- engage in transactions with affiliates;- make certain restricted payments;- enter into certain restrictive agreements;- enter into sale-leaseback agreements;- enter into certain swap agreements;- change our line of business;- prepay and/or modify the terms of certain indebtedness; and - consolidate, merge or sell all or substantially all of our assets. In addition, the restrictive covenants in the Credit Facilities require certain of our subsidiaries to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may be unable to meet them. A breach of the covenants or restrictions under the Credit Facilities or our other indebtedness outstanding from time to time could result in an event of default under the applicable indebtedness. These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results and our substantial indebtedness could adversely affect the availability and terms of our financing.

Borrowings under our facilities are at variable rates of interest and expose us to interest rate risk. Interest rates have increased significantly (including in connection with rising inflation), and, as a result, our debt service obligations on our variable rate indebtedness have increased significantly even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, have correspondingly decreased. Further increases in interest rates will cause additional increases in our debt service obligations. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

Holders of the 3.50% Convertible Senior Notes will have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the Indenture) at a purchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date (as defined in the Indenture). In addition, we will be required to make cash payments in respect of the 3.50% Convertible Senior Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make purchases of notes surrendered therefor or notes being converted. In addition, our ability to repurchase the notes or to pay cash upon conversion of the notes is limited by the agreements governing our existing indebtedness (including the Credit Facilities) and may also be limited by law, by regulatory authority or by agreements that will govern our future indebtedness. Our failure to repurchase 3.50% Convertible Senior Notes at a time when the repurchase is required by the Indenture or to pay cash payable on future conversions of the 3.50% Convertible Senior Notes as required by the Indenture would constitute a default under the Indenture. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness (including the Credit Facilities). If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 3.50% Convertible Senior Notes or make cash payments upon conversion thereof.

In the event the conditional conversion feature of the 3.50% Convertible Senior Notes is triggered, holders of 3.50% Convertible Senior Notes will be entitled to convert the 3.50% Convertible Senior Notes at any time during specified periods at their option. If one or more holders elect to convert their 3.50% Convertible Senior Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A Common Stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their 3.50% Convertible Senior Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 3.50% Convertible Senior Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The terms of the 3.50% Convertible Senior Notes require us to repurchase the 3.50% Convertible Senior Notes in the event of a fundamental change. A change of control of our company would trigger an option of the holders of the 3.50% Convertible Senior Notes, as applicable, to require us to repurchase the 3.50% Convertible Senior Notes. This may have the effect of delaying or preventing a change of control of our company that would otherwise be beneficial to our stockholders.

In connection with the pricing of the 3.50% Convertible Senior Notes, we entered into privately negotiated capped call transactions with hedge counterparties. The capped call transactions cover, subject to customary anti-dilution adjustments substantially similar to those applicable to the 3.50% Convertible Senior Notes, the same number of shares of Class A Common Stock that will initially underlie the notes. The capped call transactions are expected generally to reduce potential dilution to our Class A Common Stock and/or offset potential cash payments we are required to make in excess of the principal amount of converted notes, in each case, upon any conversion of notes, with such reduction and/or offset subject to a cap. If the market price per share of our Class A Common Stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions. In addition, to the extent any observation period for any converted notes does not correspond to the period during which the market price of our Class A Common Stock is measured under the terms of the capped call transactions, there could also be dilution and/or a reduced offset of any such cash payments as a result of the different measurement periods. The hedge counterparties (and/or their respective affiliates) may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A Common Stock and/or purchasing or selling our Class A Common Stock or other securities of ours in secondary market transactions prior to the maturity of the 3.50% Convertible Senior Notes (and are likely to do so, to the extent we exercise the relevant election under the capped call transactions, following any repurchase, redemption or conversion of the notes (whether upon a fundamental change or otherwise)). The effect, if any, of these activities on the market price of our Class A Common Stock or the 3.50% Convertible Senior Notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could cause or prevent an increase or a decline in the market price of our Class A Common Stock or the 3.50% Convertible Senior Notes, which could affect the ability of holders to convert the notes and, to the extent the activity occurs following conversion or during any observation period related to a conversion of notes, it could affect the amount of cash and/or the number and value of shares of our Class A Common Stock holders receive upon conversion of the 3.50% Convertible Senior Notes.

In September 2019, certain subsidiaries of MSG Networks Inc., including MSGN L.P., entered into the MSGN Credit Agreement providing for the MSG Networks Credit Facilities. All obligations under the MSGN Credit Agreement are guaranteed by the MSGN Holdings Entities and the MSGN Subsidiary Guarantors. All obligations under the MSGN Credit Agreement, including the guarantees of those obligations, are secured by the MSGN Collateral, consisting of certain assets of MSGN L.P. and each MSGN Guarantor, including, but not limited to, a pledge of the equity interests in MSGN L.P. held directly by the MSGN Holdings Entities and the equity interests in each MSGN Subsidiary Guarantor held directly or indirectly by MSGN L.P. On October 11, 2024, the outstanding principal amount under the MSGN Term Loan Facility of $829.1 million matured without repayment and an event of default occurred pursuant to the MSGN Credit Agreement due to MSGN L.P.'s failure to make payment on the outstanding principal amount on the Maturity Date. On that date, MSGN L.P., the MSGN Guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and the Supporting Lenders entered into the Forbearance Agreement, pursuant to which the Supporting Lenders agreed, subject to the terms of the Forbearance Agreement, to forbear, during the forbearance period, from exercising certain of their available remedies under the MSGN Credit Agreement, including with respect to or arising out of MSGN L.P.'s failure to make payment on the outstanding principal amount under the MSGN Term Loan Facility on the Maturity Date. The Forbearance Agreement was superseded by the Transaction Support Agreement and the forbearance period expired on April 24, 2025. On April 24, 2025, MSG Networks Inc., MSGN L.P., certain other subsidiaries of MSG Networks Inc., the Consenting Lenders, the Teams and the Company (together with the Consenting Lenders and the Teams, the "Consenting Stakeholders") entered into the Transaction Support Agreement with respect to the restructuring the MSGN Term Loan Facility, amendments to the media rights agreements between MSG Networks and the Teams and certain other matters (collectively, the "Proposed Transactions"). Pursuant to the Transaction Support Agreement, the Consenting Stakeholders agreed to support the Proposed Transactions on the terms set forth in the Transaction Support Agreement and to use commercially reasonable efforts and timely take all reasonable actions necessary to support, implement and consummate the Proposed Transactions. Under the Transaction Support Agreement, the Consenting Lenders have agreed to forbear from exercising certain of their available remedies under the MSGN Credit Agreement with respect to or arising out of (i) MSGN L.P.'s failure to make payment on the outstanding principal amount of the MSGN Term Loan Facility on the Maturity Date, (ii) the failure to deliver the budget of the MSG Networks Inc. and its subsidiaries for the following year by March 31, 2025 (which, if not cured by April 30, 2025, would have resulted in an event of default), (iii) a failure to maintain a total leverage ratio of less than 5.50:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis and (iv) a failure to maintain an interest coverage ratio of not less than 2.00:1.00 for the MSGN Holdings Entities and MSGN L.P. and its restricted subsidiaries on a consolidated basis, in each case, until the earlier of the date on which the termination of the Transaction Support Agreement is effective with respect to the Consenting Lenders and the date on which the Proposed Transactions are consummated. If MSG Networks is not able to achieve a refinancing or work-out of its indebtedness (including as contemplated by the Transaction Support Agreement), the Company believes it is probable that MSG Networks Inc. and/or its subsidiaries would seek bankruptcy protection or the lenders would foreclose on the MSGN Collateral. In the event of an MSG Networks bankruptcy, the MSG Networks entities whose operations represent the entirety of our MSG Networks segment would be deconsolidated from our consolidated financial statements effective as of the bankruptcy filing date. In the event of bankruptcy proceedings, MSG Networks Inc. and/or its subsidiaries (and in certain circumstances, its creditors) may elect to investigate and potentially assert claims against the Company and certain of its directors and officers, including for potential claims related to fraudulent transfers, unlawful distributions and payments, veil piercing, alter ego theories, breaches of contracts and unjust enrichment. If such claims are brought, the claimants could seek, among other relief, avoidance of alleged fraudulent transfers and/or unlawful distributions, and monetary damages. In addition, the Company's stockholders may elect to assert claims against the Company and its directors and officers for breaches of fiduciary duties relating to the Company's ownership of MSG Networks Inc. and its subsidiaries. Further, the Company would incur legal fees and other expenses in connection with defending any claims. The ultimate court-approved structure and organization of MSG Networks post-bankruptcy could also result in adverse tax consequences to the Company, including the loss of NOLs as a result of any debt extinguishment. These potential consequences, including any claims could materially and adversely affect the Company's financial condition and results of operations.

The outstanding principal amount under the MSGN Term Loan Facility of $829.1 million matured without repayment on October 11, 2024, and an event of default occurred pursuant to the MSGN Credit Agreement due to MSGN L.P.'s failure to make payment on the outstanding principal amount on the Maturity Date. On October 11, 2024, MSGN L.P., the MSGN Guarantors, JPMorgan Chase Bank, N.A. and the Supporting Lenders entered into the Forbearance Agreement pursuant to which the Supporting Lenders agreed, subject to the terms of the Forbearance Agreement, to forbear, during the forbearance period, from exercising certain of their available remedies under the MSGN Credit Agreement, including with respect to or arising out of MSGN L.P.'s failure to make payment on the outstanding principal amount under the MSGN Term Loan Facility on the Maturity Date. The Forbearance Agreement was superseded by the Transaction Support Agreement and the forbearance period expired on April 24, 2025. On April 24, 2025, MSG Networks Inc., MSGN L.P., certain other subsidiaries of MSG Networks Inc. and the Consenting Stakeholders entered into the Transaction Support Agreement with respect to the Proposed Transactions. Pursuant to the Transaction Support Agreement, the Consenting Stakeholders agreed to support the Proposed Transactions on the terms set forth in the Transaction Support Agreement and to use commercially reasonable efforts and timely take all reasonable actions necessary to support, implement and consummate the Proposed Transactions. If MSG Networks is not able to achieve a refinancing or work-out of its indebtedness (including as contemplated by the Transaction Support Agreement), the Company believes it is probable that MSG Networks Inc. and/or its subsidiaries would seek bankruptcy protection or the lenders would foreclose on the MSGN Collateral. Even if MSG Networks is able to achieve a refinancing or work-out of its indebtedness, we expect such refinancing would be on terms that are materially less favorable to MSG Networks than the current terms, including providing for covenants for the benefit of existing or new lenders that would materially restrict the business of MSG Networks. A refinancing may also require MSG Networks, Sphere Entertainment Co. and/or their respective subsidiaries to make concessions as a condition to the refinancing, which may have an adverse effect on their respective businesses, operating results and financial condition. In addition, the refinancing contemplated by the Transaction Support Agreement would also result in adverse tax consequences to the Company, including the elimination of approximately half of the Company's NOLs as a result of the debt extinguishment.

The outstanding principal amount under the MSGN Term Loan Facility of $829.1 million matured without repayment on October 11, 2024, and an event of default occurred pursuant to the MSGN Credit Agreement due to MSGN L.P.'s failure to make payment on the outstanding principal amount on the Maturity Date. See "- Events of Default Exist Under the MSG Networks Credit Agreement; Although MSG Networks Is Pursuing a Work-out of Its Credit Facilities, There Can Be No Assurances That It Will Be Successful; Even if a Refinancing is Successfully Consummated, We Expect It Would Be on Terms Materially Less Favorable to MSG Networks Than the Current Terms." In the event MSG Networks is unable to successfully refinance or achieve a work-out of the MSGN Term Loan Facility (including as contemplated by the Transaction Support Agreement), the lenders would have the right to exercise their remedies under the MSGN Credit Agreement, which would include, but not be limited to, foreclosing on the MSG Networks business. In the event of an exercise of post-default rights or remedies, the Company believes the lenders would have no remedies or recourse against Sphere Entertainment Co., Sphere Entertainment Group and the subsidiaries of Sphere Entertainment Group (collectively, the "Non-Credit Parties") pursuant to the terms of the MSG Networks Credit Facilities. If MSG Networks is not able to achieve a refinancing or work-out of its indebtedness (including as contemplated by the Transaction Support Agreement), the Company believes it is probable that MSG Networks Inc. and/or its subsidiaries would seek bankruptcy protection or the lenders would foreclose on the MSGN Collateral. If lenders exercise remedies or foreclose on the MSG Networks business, or if MSG Networks Inc. and/or its subsidiaries decide to seek bankruptcy protection, Sphere Entertainment Co. may no longer be entitled to any value in, or results of operations from, the MSG Networks business.

MSG Networks' success is dependent upon affiliation relationships with a limited number of Distributors. Existing affiliation agreements with major Distributors expire during each of the next several years, including during calendar year 2024, and we cannot provide assurances that we will be able to renew these affiliation agreements or obtain terms as attractive as our existing agreements in the event of a renewal. Any such non-renewal would result in a material negative effect on our affiliation revenues, operating income and adjusted operating income. For example, we were not able to renew our affiliation agreement with Comcast when it expired in September 2021, which caused a reduction in annual affiliation revenue, operating income and adjusted operating income. Affiliation fees constitute a significant majority of our MSG Networks revenues. Changes in affiliation fee revenues generally result from a combination of changes in Distributor affiliation rates and/or changes in subscriber counts. Reductions in the license fees that we receive per subscriber or in the number of subscribers for which we are paid, including as a result of a loss of or reduction in carriage of our programming networks or a loss of subscribers by one or more of our Distributors, have in the past adversely affected (e.g., the non-renewal with Comcast) and will in the future adversely affect our affiliation fee revenue. For example, our distribution revenue declined $42.6 million in Fiscal Year 2024 compared to Fiscal Year 2023. Subject to the terms of our affiliation agreements, Distributors from time to time introduce, market and/or modify tiers of programming networks that impact the number of subscribers that receive our programming networks, including tiers of programming that may exclude our networks. Any loss or reduction in carriage would also decrease the potential audience for our programming, which may adversely affect our advertising revenues. See "-If the Rate of Decline in the Number of Subscribers to Traditional MVPDs Services Increases or These Subscribers Shift to Other Services or Bundles That Do Not Include the Company's Programming Networks, There May Be a Material Negative Effect on the Company's Affiliation Revenues." Following the launch of MSG+, a DTC and authenticated streaming product, which is available on a free, authenticated basis to subscribers of participating Distributors (including all of MSG Networks' major Distributors), as well as for purchase by viewers on a DTC basis through monthly and annual subscriptions, as well as single game purchases, distribution revenue for our MSG Networks segment now includes both affiliation fee revenue earned from Distributors for the right to carry the Company's networks as well as revenue earned from subscriptions and single game purchases on MSG+. Losses in monthly subscribers of MSG+, including during the off-season, would adversely affect our distribution revenues. Our affiliation agreements generally require us to meet certain content criteria, such as minimum thresholds for professional event telecasts throughout the calendar year on our networks. The impacts of the NBA and NHL national broadcast agreements, including the new NBA agreements that are scheduled to begin with the 2025-2026 NBA season, could result in fewer professional event telecasts of our teams made available to us for broadcast and impact our ability to meet these criteria. If we do not meet these criteria, remedies may be available to our Distributors, such as fee reductions, rebates or refunds and/or termination of these agreements in some cases. For example, we recorded $10.7 million in Fiscal Year 2022 for affiliate rebates. In addition, under certain circumstances, an existing affiliation agreement may expire, and we and the Distributor may not have finalized negotiations of either a renewal of that agreement or a new agreement for certain periods of time. In certain of these circumstances, Distributors may continue to carry the service(s) until the execution of definitive renewal or replacement agreements (or until we or the Distributor determine that carriage should cease). Occasionally, we may have disputes with Distributors over the terms of our affiliation agreements. If not resolved through business discussions, such disputes could result in administrative complaints, litigation and/or actual or threatened termination of an existing agreement. The loss of any of our significant Distributors, the failure to renew on terms as attractive as our existing agreements (or to do so in a timely manner) or disputes with our counterparties relating to the interpretation of their agreements with us, could result in our inability to generate sufficient revenues to perform our obligations under our agreements or otherwise materially negatively affect our business and results of operations.

The Company's amended and restated certificate of incorporation acknowledges that directors and officers of the Company (the "Overlap Persons") may also be serving as directors, officers, employees, consultants or agents of an Other Entity, and that the Company may engage in material business transactions with such Other Entities. The Company has renounced its rights to certain business opportunities and the Company's amended and restated certificate of incorporation provides that no Overlap Person will be liable to the Company or its stockholders for breach of any fiduciary duty that would otherwise occur by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in our amended and restated certificate of incorporation) to one or more of the Other Entities instead of the Company, or does not refer or communicate information regarding such corporate opportunities to the Company. These provisions in our amended and restated certificate of incorporation also expressly validate certain contracts, agreements, arrangements and transactions (and amendments, modifications or terminations thereof) between the Company and the Other Entities and, to the fullest extent permitted by law, provided that the actions of the Overlap Person in connection therewith are not breaches of fiduciary duties owed to the Company, any of its subsidiaries or their respective stockholders. See the Sphere Entertainment Co. Policy Concerning Certain Matters Relating to Madison Square Garden Entertainment Corp., Madison Square Garden Sports Corp. and AMC Networks Inc., including Responsibilities of Overlapping Directors and Officers filed as Exhibit 10.33 to this Form 10-K for more information.