SBJ/June 13-19, 2011/Olympics

For Fox and ESPN, fun but no Games

It didn’t quite have the feel of a celebration. But it certainly didn’t feel like a funeral, either.

As ESPN and Fox Sports executives hung out together in the back lobby of the ornate Palace Hotel in Lausanne last Tuesday afternoon — still hours before the International Olympic Committee awarded U.S. media rights to the 2014-2020 Games — both networks figured NBC would be awarded the Games.

Fox executives told SportsBusiness Journal that they suspected their bid would not be big enough before they even traveled to Switzerland. ESPN executives said they viewed their bid as a long shot at best, but thought they might have a chance if NBC, as rumored, submitted a lowball bid.

At best, ESPN and Fox executives thought the IOC might put off making a decision for a few more weeks to try to drive up a bid. But with NBC executives nowhere in sight on Tuesday afternoon — apparently, they were all upstairs in NBC Universal CEO Steve Burke’s suite — ESPN and Fox executives assumed that at least one bid would be big enough.

ESPN and Fox had submitted bids that were well below the $2 billion for two Games that the IOC was expecting. ESPN bid on only two of the Games, offering $1.4 billion. Fox’s bid for two Games was in a similar range: $1.5 billion. Its bid for four Games was $3.4 billion.

The mood in the back lobby of the old-style European hotel, though, hardly felt like defeat. With a persistent rain falling outside, the two groups engaged in lots of drinking and lots of laughing. And they appeared to be having lots of fun. To veteran media observers, the scene was surreal, with two oftentimes bitter rivals hanging out together like old friends: George Bodenheimer and John Skipper alongside David Hill and Randy Freer.

The top executives at both networks really got to know each other at the end of April when they started forming a joint bid for the Pac-10’s media rights. Combined, ESPN and Fox beat out NBC for those rights.

At the Lausanne hotel on Tuesday, when someone joked that it was fitting to see the Pac-10 partners enjoying each other’s company at what should have been such a tense moment, one Fox executive cracked that they were talking about partnering again to win the Olympics.

“Yeah,” said Hill, Fox Sports’ chairman. “We’re taking Sunday, Wednesday, Friday, and they’re taking the rest.”

The mood didn’t change when, at close to 7 p.m., Mike Soltys, ESPN vice president of communications, read an Associated Press alert from his iPhone that NBC was awarded the Games (see related story). Soltys and Lou D’Ermilio, Fox senior vice president of media relations, had been keeping the group abreast of Twitter reports throughout the afternoon. Most had indicated that NBC would win, so the AP alert had come as no surprise.

More than 30 minutes after the group found out that NBC won the Games, Hill’s cell phone rang. It was Richard Carrión, chairman of the IOC Finance Committee, officially telling Hill that Fox would not be getting the Olympic rights. Hill offered his congratulations. The call took about one minute.

Another 20 minutes later, ESPN President Bodenheimer’s cell phone rang. Again, it was Carrión, delivering the same message.

The ESPN/Fox group became more energized once the size of NBC’s bid filtered around the lobby. The $4.38 billion that NBC committed for four Games was nearly $1 billion higher than Fox’s $3.4 billion bid.

If ESPN or Fox couldn’t win the rights, they were hoping that the winning bidder would pay much more. They think such a big payout on the Olympics will make NBC less aggressive when Major League Baseball and NFL rights are available in two years. When they heard NBC’s bid, Fox and ESPN executives smiled, satisfied that the winning bid was so much higher.

After the rights were awarded, IOC officials told ESPN executives that they were expecting a much stronger bid, especially considering that Disney President and CEO Bob Iger traveled to Lausanne for the presentation. ESPN had run the numbers and felt comfortable with a $1.4 billion bid for the 2014 and 2016 Olympics. “We believe we would take a slight loss at those numbers,” one executive said afterward.

To win the Games, ESPN would have needed Disney to commit several hundred million dollars to the bid. In its presentation, ESPN outlined that events would be on Disney channels ABC and ABC Family, in addition to ESPN and ESPN2. But Iger was reluctant to spend that extra money. During ESPN’s presentation on Tuesday morning, Iger raised the possibility of a Disney TOP sponsorship, but never committed to it, sources said.

Iger also advised against bidding for four Games, believing it was too big a risk to commit so much money on the 2018 and 2020 Games, especially when he didn’t know where they would be held.

ESPN finalized its bid two hours before it officially was submitted.

Fox’s bid, meanwhile, was finalized during a late May conference call, which was led by News Corp. President and Chief Operating Officer Chase Carey. Executives on the call were lukewarm about Fox’s ability to monetize the Olympics via its cable channels or broadband site. Fox’s bid was almost completely predicated on advertising revenue.

After running the numbers, Fox sources said they expected to make a slight profit from their bids. But they knew the bids would be a long shot.

As darkness fell on the Palace Hotel, and NBC executives ate dinner with their IOC partners, ESPN and Fox executives went their separate ways, comforted by the fact that their bids were so far below NBC’s that they never really had a chance.

Staff writer Tripp Mickle contributed to this report.

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