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Olympics mailbag: Media rights, London Games
Published June 15, 2011
Question: Is a property like Monday Night Football, with its 18-week run each year, worth more than concentrated Olympics bursts every two years? ESPN thinks so?
Answer: ESPN obviously places more value on its NFL contract than it does on the Olympics. ESPN pays more for the NFL than NBC does for the Olympics, and gets more use out of it, integrating the NFL into programming year-round on all its platforms. NBC, on the other hand, values the Olympics much more than the other networks. NBC Sports is more closely identified with the Olympics than it is with any other sports property. Over the years, NBC has used Olympic programming to drive distribution of its cable channels, to increase the money that distributors pay for its cable channels, and to roll out broadband and mobile services. It seems clear that NBC’s need to keep the Olympics trumped ESPN and Fox’s desire to acquire them.
Answer: NBC’s rights fee historically has accounted for more than a third of the IOC’s quadrennial budget. During the current 2009-12 quadrennial, the IOC is receiving $3.8 billion in television rights worldwide. Of that, NBC is contributing $2 billion. The IOC also pulls in about $1 billion in sponsorship money.
Question: Why does the IOC in some countries grant non-exclusive rights for the Games?
-- Ian Cropp
Answer: In certain territories, such as China, the IOC grants rights on specific media platforms such as broadcast and Internet, so you end up with more than one partner in the territory. In the U.S., NBC Universal acquired rights across all platforms. The reason the IOC does that is because it’s the best way to maximize its revenue in those markets. For example, if it split up the rights in the U.S., NBC Universal would be unwilling to pay as much, because it would be uncomfortable signing a long-term deal that wouldn’t offer it protection if a new, unanticipated platform develops, like the tablet has in the last few years.
Question: Even if NBC had had a terrible pitch, wouldn’t it still have won by bidding $800 million more than any other network?
-- Scott Kirkpatrick
Answer: It’s easy to look at the disparity between NBC’s bid and the Fox and ESPN bids and decide that the IOC simply picked the highest bidder. But it doesn’t always work like that. Put it this way: Do you think the IOC would have awarded the games to The WB network if it bid $800 million more than NBC? We don’t. In a case like that, the IOC would have worked with a known broadcaster, like NBC, to try and sweeten its bid a little. In the late 1990s, Fox tried to get Olympic rights for Sydney, but the IOC wasn’t comfortable enough with Fox yet to award it the rights. That said, the IOC was comfortable with all three networks that went to Lausanne, and the high bidder last week almost certainly was going to walk away with the rights.
Question: Can you give your thoughts on why NBC's bid was so much higher than the others?
Answer: NBC needed to keep the Games. NBC Sports is closely identified with the Olympics. If NBC’s new owner, Comcast, lost the Olympics, it would be more difficult to convince other sports properties to do business with NBC. Comcast has two full-time sports channels in Versus and Golf Channel. It needs to send a message to the sports community that it is a serious bidder. We think that was accomplished.
But the bid is about more than just Comcast. The fact that NBC lost more than $200 million in Vancouver has been well-reported. But the Olympics have been a good business for NBC. Its cable channels pick up extra money from cable and satellite operators when they carry the Olympics. It rolled out impressive broadband and mobile applications with the Olympics. NBC has built a business plan around the Olympics for the last two decades. It would have been difficult for NBC to see that go away.