MSG Networks Falls After Draft Lottery Sinks Knicks' Zion Hopes

MSG Networks Falls After Draft Lottery Sinks Knicks' Zion Hopes

(Bloomberg) -- Shares of MSG Networks Inc. tumbled after the New York Knicks failed to secure the biggest star in the National Basketball Association draft lottery: Zion Williamson.

Investors were betting that the 18-year-old Duke University phenom would end up in a Knicks jersey and attract more viewers -- and advertising dollars -- to the local sports channel, even though the team only had a 14% chance at getting the No. 1 pick in the lottery. Instead, a pingpong ball lottery gave New Orleans first dibs on Williamson.

MSG Networks dropped as much as 6.8% to $20.86 in New York -- the lowest point in almost a year. The shares are down about 10% for 2019, while the S&P 500 Index is up 14%. Ratings on the MSG channel have been in sharp decline, which has hurt advertising and negotiations with pay-TV companies, said Brandon Ross, an analyst at BTIG Research.

“There was some hope they’d get Zion and all that would be solved,” Ross said. “That hope was a little misplaced.”

MSG Networks has a contract expiring at the end of the year with the local cable-TV provider Altice USA. If the channel gets dropped from Altice, that would likely have a bigger impact on the business than a single Knicks player.

But the team still has a chance to improve through a trade or by signing someone like Kevin Durant or Kyrie Irving or drafting R.J. Barrett who could provide “that ratings lift,” Ross said.

“Investors should be looking at the off-season instead of hanging their hopes on some pingpong balls,” he said.

©2019 Bloomberg L.P.

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