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SBJ/May 30 - June 6, 2011/OlympicsPrint All
The Olympic flame burns atop the stadium in Beijing for the opening ceremony of the 2008 Summer Games.
Dick Ebersol’s abrupt resignation from NBC has upended all assumptions about the future of the Olympics on TV.
Still, the longtime NBC executive’s legacy is expected to hover over proceedings next week in Switzerland as NBC, ESPN, Fox and possibly a combined CBS/Turner bid compete for Olympic media rights.
Under Ebersol’s leadership, NBC was widely considered the front-runner to continue its 20-year run as the nation’s Olympic network. Given Ebersol’s abrupt May 19 resignation, however, Olympic and media experts now confess it’s impossible to guess which party the International Olympic Committee will choose as its future broadcast partner or how much the winning bidder will pay.
The IOC, which is selling the rights to the 2014 and 2016 Olympics next week in Switzerland, forged strong ties with Ebersol over the last two decades. His absence from the bidding process leaves the IOC without one of its biggest champions and the man who led the previous winning bid of $2 billion for the 2010 and 2012 Olympics.
“Ebersol’s withdrawal casts a different light on this,” said Barry Frank, IMG Media’s executive vice president. “Other bidders believe, as I do, that this is a signal that Comcast wasn’t going to pay what it would take to land this with any certainty. It’s different kind of money now, and it’s in play for everyone.”
Dick Ebersol's departure has left Olympic TV rights bidding more wide open.
The repercussions of Ebersol’s resignation became apparent last week, when sources told SportsBusiness Journal that CBS and Turner started kicking around the idea of making a joint bid. CBS and Turner’s decision to take another look at Olympic rights marked a reversal from weeks earlier, when executives believed the price tag was too high. Network executives believe they have a better shot at winning with Ebersol out of the picture. Executives at ESPN and Fox expressed similar confidence.
There are a number of reasons for the networks’ optimism. The IOC sees its broadcast partner as a steward for its brand and wants to partner with a network that plans to showcase the Olympic values, which include peace, sportsmanship and environmentalism. In the past, they could count on Ebersol to do that. In fact, the IOC had become so comfortable with his approach that Olympic observers say if Ebersol were at the table, the IOC would opt for an NBC bid over a comparable offer from another network.
“You have to be sure the partner you’re entrusting your brand with will care for it how you want it cared for,” said Michael Payne, an independent consultant and the former director of TV and marketing at the IOC. “Ebersol was a known entity. Now what is the differential when it comes to similar bids?”
NBC’s bid will be based on the idea that it will carry through on Ebersol’s vision better than other networks since most of Ebersol’s acolytes still are in important jobs at the network. Gary Zenkel, the network’s Olympics president, is expected to be part of the bid, along with Comcast’s Brian Roberts and NBC Sports’ new top executive, Mark Lazarus. Most of the producers and sales executives who have worked with the IOC for years remain.
But while its new parent company, Comcast, has said it plans to make a strong bid, it hasn’t signaled the same unwavering commitment to the Olympics as Ebersol. During an earnings call in February, NBC Universal CEO Steve Burke said the company didn’t plan to lose $220 million on future Olympics the way it did on the Vancouver Games, adding that the network would be “disciplined” in its bid.
“Comcast would be more comfortable winning by a dollar than by $200 million,” said Neal Pilson, a television rights consultant who worked on the IOC’s last TV rights sale in 2003. “That’s not as easy as it might appear.”
That could open the door for ESPN. The network is in strong financial position, courtesy of guaranteed cash flow from subscription fees, and it proved it has the capability of covering big events with its broadcast of the 2010 World Cup.
Fox’s bid is expected to highlight its broadcast presence, which is important to the IOC. In addition, it has a plethora of cable channels it could utilize. But Fox’s bid the last time was for just $1.3 billion, $700 million less than what NBC offered.
“They were so clearly out of the box, you had to wonder if they were trying,” Pound said.
The IOC will be hoping that all of the networks make significant bids this time. U.S. television money accounts for more than half of the $3.8 billion in TV revenue the IOC receives. For the 2005-08 quadrennium, it made up 34 percent of the organization’s total revenue, which includes global TV rights, sponsorship, licensing and ticketing.
The IOC has said it expects the rights to the 2014 and 2016 Olympics to fetch at least $2 billion. But after NBC’s $220 million loss in Vancouver, media experts question if networks will step forward to pay such a handsome fee. It doesn’t help that one of the two Olympics up for bid is in Sochi, a relatively unknown Russian city that doesn’t carry the same hospitality cachet as previous Winter Games did for advertisers.
“Is that $2 billion within range for anyone? NBC has had two good locations in Vancouver and London,” said Mike Trager, a longtime media consultant. “If they plan to announce $500 million in losses, there will be fiscal restraints put on everyone to make this thing come closer to a financial reality.”
Last time, Pilson said, the IOC opened the networks’ sealed bids, and there was a clear winner. He’s unsure that will happen again.
“All of the networks are going to be looking at the bidding and saying, ‘Look, those [NBC] losses are unsustainable,’” Pilson said. “That will determine what they’re willing to invest, which would lead you to the conclusion the numbers will be lower.”
While the IOC is selling only the 2014 and 2016 Olympics, its leaders have said they are open to bids to buy all four Olympics between 2014 and 2020. The ability to amortize the costs over a longer period might compel a network to pay something close to the $4 billion the IOC would want for four Olympics, said Harvey Schiller, the former head of Turner Sports and former president of the U.S. Olympic Committee.
“I think that will be the differentiator,” Schiller said. “Because of the financial demands of the IOC and the federations, they have to have the largest revenues they can have.”
The 2014 World Cup and 2016 Olympics in Brazil have triggered a push by sports marketing agencies to open outposts in the fast-growing South American country.
IMG, Octagon, GMR Marketing, Momentum, Wasserman Media Group, SportsMark and Helios Partners are among the North American agencies that have opened offices or signed joint ventures in Brazil in recent months. Their hope is that hosting the world’s two biggest sporting events within two years will jump-start Brazil’s sports economy and that the country will go from being the center of the sports universe to having viable business long after the last ball is kicked and medal awarded.
Leading Momentum Sports in Brazil are (from left) Marcos “Mala” Lacerda, Chris Weil, Emerson Fittipaldi and Kevin McNulty.
Cameron Parsons, GMR Marketing’s managing director of international, added, “This is a once-in-a-lifetime, two mega sporting events happening two years apart. That provides ability to invest once and be rewarded twice. That’s driving the enormous interest to date.”
The agencies’ move into Brazil reflects a macroeconomic trend in the sports-obsessed country that has seen offshore money pouring into Brazil and some of the country’s wealthiest buying up foreign assets, like Burger King, purchased by Brazilian investment firm 3G Capital last year for $3.3 billion. However, portions of the marketing economy there are developing more slowly than some forecast. IEG notes that sponsorship growth in Central and South America during 2010 was 3.8 percent versus a forecast of 5.7 percent. Nonetheless, it is predicting growth of 5.6 percent for 2011, largely based on the coming World Cup.
Agencies ranging from IMG to Momentum are looking to capitalize on that growth. Brazil has a robust domestic sports marketing industry, but the North American agencies believe that they can lend expertise on the World Cup and the Olympics — two of sports’ most complex properties — to Brazilian and international sponsors. Several are moving into the market largely to support existing clients who do business with FIFA and the International Olympic Committee. But executives at all of the agencies said they plan to stay behind and work in the market long after the 2016 Summer Games.
GROUPM ENTERTAINMENT AND SPORTS PARTNERSHIPS (ESP)
WPP partnered with soccer hero Ronaldo to enter the market, creating the sports marketing firm 9ine.
One challenge agencies face is the market’s skepticism about outsiders. There’s a sense in the country’s sports business industry that this is their time to shine and a fear that North American agencies are looking to swoop in, scoop up World Cup and Olympic business and then abandon the marketplace. Agencies have tried to address that through two strategies: signing joint ventures or buying a Brazilian agency, or setting up an operation staffed by Brazilians.
Wasserman Media Group, IMG, Momentum and Octagon took the former approach. In 2009, Wasserman Media Group became the first to take that step when it formed an alliance with Brazilian basketball agency Martin & Maffia.
IMG has been doing business in Brazil for 30-plus years, but it formed a joint venture called IMX last November with Eike Batista, said to be Brazil’s richest man, because the agency thought Batista could help it better understand the market.
“We never solved the puzzle down there and we were looking for a partner with resources and vast local knowledge — Batista certainly has all of that,” said IMG senior adviser Chuck Bennett, the man spearheading the agency’s Brazil business. While reluctant to provide specifics about IMG’s vision in the market, Bennett said he sees “a booming economy that will provide a long runway of opportunity beyond the two big events” in areas where IMG is strong, like golf, tennis and fashion.
IPG’s Momentum also signed a joint venture, but it partnered with a well-known Brazilian athlete to create Momentum Sports in Brazil. Legendary race car driver Emerson Fittipaldi will serve as one of the agency’s four chairmen.
“There’s great opportunity, not just because of the events coming but in finding ways to reach this new, digitally centered sports fan,” Fittipaldi said. “Large brands want to reach them, and we hope to help them get there in new ways.”
WPP adopted a similar strategy, partnering with Brazilian soccer star Ronaldo to create a sports marketing company called 9ine that launched last September.
Rather than partner with a Brazilian agency, IPG’s Octagon decided to buy one last year. It acquired B2S, a Rio-based sports marketing firm whose client roster includes the Brazilian national soccer team and Anheuser-Busch InBev subsidiary AmBev. Octagon President and CEO Rick Dudley said he expects to double the agency’s business this year.
Where all those agencies zigged, GMR Marketing, SportsMark and Helios zagged. Rather than buy or partner with a Brazilian agency, they’re setting up independent operations in the market. The advantage of doing so, executives said, is that they will have more operational control than they would if they had a partner.
GMR plans to base its operations in Sao Paulo and make the operations the hub for its Latin American business from Mexico to Chile. Parsons, who’s overseeing the effort, said the company is hiring local staff for the office and expects the operation to generate 20 percent to 30 percent of its business locally and the rest servicing existing clients like Visa and Procter & Gamble. The Omnicom Group agency will collaborate with sister agencies like BBDO and RAPP, a digital agency, that have a presence in the market.
SportsMark, another Omnicom agency, has adopted a similar strategy. It recently hired Kevin Smith, who worked on the X Games in Brazil for ESPN, to run its operations in Sao Paulo. The agency will sell hospitality packages for FIFA in North America and manage hospitality services for Visa during both the World Cup and Olympics. As it wins clients and projects, SportsMark President Keith Bruce said, it will add staff.
“We understand the international market and sports platforms of the World Cup and Olympics,” Bruce said. “If we can bring those into play with local expertise, then we’ll be in good shape.”
Atlanta-based Helios Partners is moving into the market in order to assist its existing client and new Olympic sponsor, Dow. It plans to open an office with its parent company, the Amaury Group, in Rio de Janeiro. It has hired one person and plans to hire two more. The group will be charged with servicing Dow and exploring opportunities to create new sports events in Brazil similar to the cycling and golf events Amaury hosts in France.
“Amaury had an interest in Brazil before the Olympics were awarded there,” said Helios Chief Operating Officer Chris Sanders. “This was the first opportunity we had to open up an office together.”
None of the agencies expects that building a business in Brazil will be easy, but several said the market has been more welcoming than one of the country’s BRIC brethren, Russia. After Sochi was awarded the 2014 Olympics, Russians were more skeptical of outside agency advice, while Brazilians, to date, have been more receptive to assistance.
Also, Brazil has “followed a similar path economically to China, but it’s been more broad-based, entrepreneurial growth in Brazil whereas China’s been more centrally planned growth,” Parsons said.
Dudley added, “All the BRIC countries are fast-growing, but Brazil is just the easiest one to do business in.”
As a result, many of the agencies are optimistic that their operations will thrive not only in the next five years but also in the years after the 2016 Olympics.
“People were surprised at the amount of substantive business that did not develop in Beijing,” said David Abrutyn, global managing director of IMG Consulting. “I don’t think, when all is said and done, they will say the same about Brazil.”
George Bodenheimer, President
John Skipper, EVP, Content
Rob Simmelkjaer, VP, Corporate Projects
■ The South Africa Experience: ESPN showed it is more than capable of covering big events during the 2010 World Cup. Its networks aired 64 games live and served up 230 hours of original programming over a month and a half, and the coverage won three Emmys.
■ Mickey Mouse: Disney, ESPN’s parent company, has expressed interest in becoming part of the IOC’s prestigious TOP program. A licensing deal that puts together the Olympic rings and Mickey Mouse would raise the profile of the Olympics among young people.
■ Bandwidth: ESPN owns more sports rights than any other network. How will it juggle MLB games with 26 sporting events taking place nonstop in Rio de Janeiro in the summer of 2016? Where will it put NBA and NCAA basketball games during Sochi in February 2014?
■ Mickey Mouse: The five rings are the most important symbol the Olympics have, and the IOC protects them assiduously. Relinquishing control to a global behemoth like Disney could have as much downside as upside.
David Hill, Chairman
Randy Freer, Co-President
Larry Jones, CFO
■ Broadcast: Fox owns two broadcast networks in the U.S., which would ensure more over-the-air exposure than ever before for the Olympics. The IOC still values broadcast television above all else.
■ The Kids Are Alright: Fox has the youngest audience of all U.S. broadcast networks, finishing first in the 18-49 demographic for seven consecutive years. If the IOC wants to reach a new generation, Fox is a good place to be.
■ Bad Bid: IOC members still privately chafe at Fox’s bid in 2003. At $1.3 billion for the 2010 and 2012 Olympics, the bid was seen as a low-ball offer and was never seriously considered.
■ Homer Simpson: Fox’s brand of irreverent, smash-mouth broadcasting in the United States would make for an uncomfortable marriage with the IOC’s ideals.
Brian Roberts, Chairman and CEO, Comcast
Mark Lazarus, Chairman, NBC Sports Group
Gary Zenkel, President, NBC Olympics
■ Hello, Old Friend: Dick Ebersol may be gone, but NBC has been a steward for the Olympic brand in the U.S. for more than 20 years. The IOC is comfortable with it and knows many of the producers and executives.
■ Imagination at Work: GE has agreed to extend its $100 million, four-year sponsorship of the Olympics as part of NBC’s overall bid.
■ Goodbye, Old Friend: Ebersol had deep relationships throughout the IOC, and its members expressed surprise to hear the longtime executive had resigned so abruptly.
■ Shallow Pockets: Comcast executives have not been shy about telling Wall Street that they will be fiscally prudent when acquiring sports rights. It remains to be seen how this will affect their Olympic bid.
International Olympic Committee
Jacques Rogge, IOC President
Richard Carrión, IOC, Executive Committee
Timo Lumme, Director, TV & Marketing Services
Joe Calabrese, Partner, O’Melveny & Myers
Similar to what it did leading to the Vancouver Winter Games, the USOC plans another 100-day-out event at Rockefeller Center that will showcase sponsors and Olympic sports.
The efforts are part of what the USOC’s marketing department is calling its “Road to London” program, a one-year undertaking that will include experiential and digital marketing initiatives. The organization briefed its partners on the plans in London during a sponsor workshop in early May.
“We’re trying to expand the window of relevant Games activation and deepen engagement with fans leading into the London Games,” said John Pierce, the USOC’s managing director of marketing services. “This gets us out in front, giving us more and earlier opportunities to tell stories of athletes, which is what we believe the brand is centered around.”
In the past, the USOC has looked to sponsors to help underwrite the costs of some of its marketing initiatives. Sponsors and agency consultants in attendance in London said that wasn’t the case with the USOC’s 2012 marketing program and praised the organization for undertaking the effort independently.
“The USOC is taking more control over their brand, whereas in the past they wanted sponsors to take the lead in promoting their brand,” said Gary Pluchino, senior vice president of IMG Olympics, which works with GE, Allstate and other Olympic sponsors. “It’s an integrated strategy, which is new for the USOC, and they have an activation calendar that’s over one year in duration that sponsors can latch onto on the experiential side and the broadcast side and digital side.”
The program will begin this summer with the organization’s “Join Team USA” initiative. USOC sponsor Anheuser-Busch is incorporating the USOC into its activation plans at three summer events — Taste of Chicago, Fair St. Louis and the Coke Zero 400 at Daytona International Speedway. The USOC will bring Olympians to those events and set up fan experiences within A-B’s activation footprint. The on-site activations will be designed to encourage donations to support Team USA.
The USOC plans to build on that in 2012 by activating at seven Olympic Trials events. It will build out multisport experiences at trials for swimming, track and field, gymnastics, diving, wrestling and other events. It marks the first time the organization has set up fan experiences at a trials event, and the goal is to give spectators a sense of other sports in the Olympic family, Pierce said.
It also plans to hold its second, 100-day-out event April 12 at Rockefeller Center. The event will be similar to the one it held before the Vancouver Games and will showcase USOC sponsors and Olympic sports.
On the digital front, the USOC will launch a “Road to London” mobile application for phones and tablets in January. The application will include athlete biographies, news, Olympic Trials information and a daily video report.
The USOC has set a goal of adding 5 million Facebook fans by the end of the 2012 Olympics. It has more than 500,000 fans today, up from 80,000 fans in 2009. Its leaders see Facebook as a critical tool to generating donations, selling merchandise and connecting sponsors with Team USA fans. It will add a donation feature to its Facebook page this summer.
“We have aggressive goals because we think it’s an amazing opportunity for one-to-one communication and engagement with self-proclaimed fans,” Pierce said.