Carmelo in Company of Rangers May Mean $15 Million Playoff Payday for MSG

It’s been 17 years since both the New York Knicks and Rangers made it to their league finals, giving Madison Square Garden 26 playoff games. Steven Klein says he went to them all.

“There is nothing more exciting in New York and Madison Square Garden than the playoffs,” said Klein, the 50-year-old president of S&M Klein Co., an insurance company in Queens, who has season tickets to both clubs.

The Knicks, led by All-Stars Amar’e Stoudemire and Carmelo Anthony, are already in the playoffs. The Rangers will join them if the Carolina Hurricanes falter. Like Klein, investors of Madison Square Garden Inc. (MSG) will be rooting for the Rangers: The arena stands to generate about $15 million in revenue each round both teams advance, according to Richard Tullo, an analyst with Albert Fried & Co. in New York.

“This is, without a doubt, good news,” said Tullo, who has a “buy” rating on the New York-based company and a price target of $34. MSG fell 10 cents to $27.61 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock is up 7.1 percent this year.

Madison Square Garden will bring in about $750,000 in MSG- owned concessions, $4.1 million in ticket sales and $2.8 million in advertising revenue from arena sponsorships and TV commercials per round for the Knicks and almost as much for the Rangers, Tullo said, basing his estimate on 2009 prices when the Rangers last made the playoffs. Both teams last made the playoffs in 1996.

“This has been a great season for the Knicks and the Rangers both on and off the court and ice,” MSG Sports President Scott O’Neil said in an e-mail. “This is a great time to be a Knicks and Rangers fan, and it looks like just the beginning.”

MSG Earnings

MSG earned $83 million last year with sales of $1.2 billion and ended the year with more than $350 million in cash on hand, Chief Executive Officer Hank Ratner said on a conference call last month. MSG will announce first-quarter earnings on May 6. Analysts estimate the company will earn 27 cents a share with revenue of $320 million, a 4.4 percent increase from a year ago.

According to Forbes magazine, the Knicks took in $81 million in gate receipts in 2010, or $1.98 million each home game. The Rangers took in $62 million in gate receipts in 2010, or $1.51 million a game.

A 30 percent increase in first-round ticket prices calculates to $2.57 million a playoff game for the Knicks and $1.96 million for the Rangers. If both teams play three home games in the first round, that’s $13.6 million in ticket revenue alone.

Ticket Prices

Face-value prices soar as the teams advance. Klein’s 4th- row $330 Knicks regular-season tickets increase to $590 each in the first round, $725 in the second round, $980 in the conference finals and $1,550 for the finals. His Rangers tickets rise from $210 in the regular season to $530 for the Stanley Cup.

Cablevision Systems Corp. (CVC) spun off MSG, which owns the arena, Radio City Music Hall, the Knicks and the Rangers, in January 2010 to focus on its cable operations. MSG shares have risen 27 percent since then.

A championship run from either team could generate between $5 million and $10 million in earnings before interest, taxes, depreciation and amortization from tickets, and “millions more” in ad profit, according to John Tinker, senior media analyst at Maxim Group LLC in New York.

“If either team wins the playoffs, it reminds everyone that the Garden has a huge worth,” said Tinker, who has a “buy” rating on MSG shares. “Madison Square Garden has become part of the conversation again. It’s become relevant.”

MSG Renovations

Another benefit of playoff victories for MSG is leverage to increase its prices next season, after MSG spends $850 million on renovations following the Knicks’ and Rangers’ seasons, Tullo said. Knicks tickets will increase an average of 49 percent; Rangers 23 percent.

The Knicks will play the Miami Heat, Chicago Bulls or Boston Celtics in the first round. If the Knicks play LeBron James’s Heat, the hype around the two-time NBA Most Valuable Player may cause advertising revenue to rise another 20 to 30 percent over estimates, Tullo said.

If the Rangers lose to the New Jersey Devils tomorrow and the Hurricanes win at least one of their final two games, New York is out of the playoffs. The Rangers can make the playoffs with a win and one or two Hurricanes losses, or with a regular or overtime win against the Devils, and two shootout wins by the Hurricanes.

The Garden, now in its fourth location in New York, opened at its current spot on Seventh Avenue between 31st and 33rd streets in 1968. The first two incarnations were at Madison Avenue and 26th Street, giving the arena its name. The third was on Eighth Avenue between 49th and 50th streets.

Both in Playoffs

The Rangers and Knicks both made the playoffs in the same year at the Garden 24 times. The closest they came to winning titles the same year was in 1994, when the Rangers won the Stanley Cup and the Knicks lost the NBA finals to the Houston Rockets.

Even without joint titles, both teams making the playoffs would be welcome news for Klein.

“The drought has been terrible. I miss it very much,” said Klein, of Woodmere, New York. “It also has had a terrible effect on my marriage because I’m home too much.”

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net; Mason Levinson in New York at mlevinson@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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