SBD/May 8, 2014/Media

IOC Opts For Long-Term Financial Stability With NBC Deal Vs. Open-Market Bidding

Roberts (l) and Bach (r) discussed a long-term deal in Sochi in February
IOC President Thomas Bach yesterday said the governing body decided to sign a long-term extension with NBC rather than sell its Olympic rights on the open market because it trusts the broadcaster and felt the deal offered financial stability for the next two decades. His comments came shortly after the IOC and NBC Sports finalized a $7.65B deal for the ’22-32 Olympics. The deal represents a 15% increase on average for each Olympic Games from NBC’s current agreement, a $4.38B deal for the ’14-20 Olympics. However, the increase is below that seen by many major sports properties in the U.S., which have been closer to 40%. Bach said that was not the main issue for the IOC. Olympic officials noted that NBC in '11 outbid its closest competitors, Fox and ESPN, for the Olympic rights by more than $1B. Bach said, “This kind of deal is not only about money. Maybe in one deal you can have one or more dollars more and have your product destroyed. We are thinking long term in the IOC. ... The balance has to be there between the protection of the Games, the promotion of our values and financial consideration.” Comcast CEO Brian Roberts said that deal ensured NBC would continue to build on its successful broadcasts of the ’12 London and ’14 Sochi Games, which were the first to take place under Comcast ownership. He noted that both of those events were “profitable.”

DEAL DETAILS: Bach said the IOC first discussed the possibility of doing a long-term deal over dinner with NBC Olympics President Gary Zenkel in N.Y. last November. He met with Roberts about it in Sochi in February, and the parties signed the deal today. In addition to the rights to the IOC agreement, NBC negotiated a separate deal with the USOC for rights to the ‘22-32 Olympic Trials. Financial terms of that deal were not disclosed, but USOC CEO Scott Blackmun said it was a considerable increase from the current agreement. Blackmun said, “We all saw this as a long-term partnership where we didn’t have to worry about auctions.” Bach also has commissioned a study of the viability of an Olympic network, but he said that the deal with NBC does not contemplate creating one in the U.S. He added, “We will wait for this feasibility study (for a network to be done), and see where to take it from there.” The new IOC-NBC deal breaks down by each quadrennial to be: $2.5B for ’22 and ’24; $2.55B for ’26 and ’28; and $2.60B for ’30 and ’32 (Tripp Mickle, Staff Writer).

PLANNING FOR AN UNCERTAIN FUTURE: In N.Y., Richard Sandomir in a front-page piece writes the agreement "captures just how technologically frenetic the media landscape is." Such deals once "had to contemplate only television, but smartphones and tablets have become an increasingly large segment of the viewing audience, and no one can guess how people will watch sports" in '32. The new Olympic contract "acknowledges this, stipulating that NBC will have the exclusive rights to broadcast the Games on whatever technology emerges between now and then." Comcast is "wagering that it will continue to profit from the Olympics however technology develops -- and that consumers will not flee in droves from the bundle of channels that cable, satellite and telephone companies rely upon for revenue." RBC Capital Markets Managing Dir David Bank: "One of the risks would be bundle-busting," He said the Olympic deal "is a brilliant defensive move but profitability is harder to determine because you don’t know what the ecosystem will be." More than ever, Comcast and NBC execs "see the Olympics as part of the company’s programming foundation." Horizon Media Research Dir Brad Adgate: "NBC’s probably going to win its first season in 10 years in adults 18 to 49, and the Olympics played a part in it" (N.Y. TIMES, 5/8).

OUT OF NOWHERE: The WALL STREET JOURNAL's Matthew Futterman writes the deal "shocked sports media analysts, who have grown used to the unprecedented rights agreements of recent years." Former CBS Sports President Neal Pilson said that the deal "represented an insurance policy against economic downturns or political unrest that could threaten the Games." There is a "white-hot market for major sports rights in the U.S. these days." Nearly every major league or sports association "has announced new, long-term media rights agreements that roughly double their current fees." However, since NBC outbid the other U.S. networks by about $1B in the most recent auction, it is "possible the IOC feared an absence of a competitive market and made the best deal it thought it could" (WALL STREET JOURNAL, 5/8). USA TODAY's Nancy Armour writes NBC is "easily the largest of any of the IOC's broadcast partners, and that money helps keep the Olympic movement afloat." Bach said that some of the money "will be used to help pay for future games ... as well as providing funds to national organizing committees and international sports federations." Given NBC's "largesse and that of other big U.S. sponsors like Coca-Cola, Visa and McDonald's, critics have said it's time the IOC does something for the United States." The USOC is considering a bid for the '24 Summer Olympics, and Chair Larry Probst hopes that it will "make a decision by the end of the year" (USA TODAY, 5/8). REUTERS' Karolos Grohmann noted Dallas, L.A. and Boston "are among a list of cities interested in bidding for the Games with the IOC opening bidding next year and a decision to be taken" in '17 (REUTERS, 5/7). FORBES' Tom Van Riper noted NBC "has wrapped itself in Olympics more closely over the past two decades as it’s scaled back on other sports," notably MLB and the NBA, "big properties that played major roles in its past." While NBC does carry the NFL and NHL, the net's "sports identity these days is mostly tied to the Olympic rings" (FORBES.com, 5/7).
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