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Volume 22 No. 19
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NBC bullish on profitability of Sochi Olympics

NBC Sports executives are more optimistic about the Sochi Games than they have been about any Winter Olympics in the last decade.

Ad sales are strong, internal research suggests viewership will be high, and the event is expected to be “comfortably” profitable.

“We’ll be profitable, comfortably,” NBC Sports Group Chairman Mark Lazarus said during a dinner NBC hosted for Olympic advertisers and executives last week at New York’s Russian Tea Room. “Rights fees in the world are going up and up and up. When push comes to shove on [the] Sochi and Rio [Olympics], the deal was pretty flat, but [our profitability] is really indicative of the strength of the market. Sponsors are supporting it because of the ratings and the family viewing.”

NBC agreed to pay $775 million for the rights to the Sochi Games. The price tag is slightly less than the $820 million the company spent on the 2010 Vancouver Games when NBC’s then-parent company, General Electric, reported a $233 million loss on the event.

But Lazarus said the combination of its lower rights fee and a strong ad market means the company won’t incur a loss on the upcoming Winter Olympics.

Advertising sales have been so strong that Seth Winter, NBC Sports executive vice president of ad sales, said the company is positioned to sell out its first Olympics in more than a decade. Ad inventory is more than 90 percent sold for the Sochi Games, a major reversal from the 2010 Vancouver Games when it was only 70 percent sold less than 100 days before the opening ceremony.

“I’ve never walked into a Games feeling we’re this well sold,” Winter said. He added that he is concerned NBC Sports may not have “enough inventory to meet the demand in the marketplace.”

NBC still has several key categories available, including beer and technology, and Winter expects to find advertisers in those categories in the coming months. He attributed the sales success for Sochi to demand among ad buyers for the strong ratings that the Olympics historically have delivered over 17 days. He also said NBC’s move to divide categories into more refined segments helped sales. He pointed to banking as an example. NBC sold retail, online trading, consumer banking and other categories. It landed deals with TD Ameritrade and Citi.

NBC’s research shows that awareness of the Winter Olympics is at record levels. A survey of Nielsen subscribers that NBC conducts showed that intent to watch the Sochi Winter Olympics is at more than 52 percent, and NBC Sports chief marketer John Miller said that’s before the company has made its final promotional push around the Games. He expects the intent to view to rise closer to the Games and believes the addition of a day of competition on Feb. 6, the day before Sochi’s opening ceremony, will boost viewership for the ceremony.

“My sense is there will be a significant number of people surprised by [Feb. 6],” Miller said. “Then social media will explode between the 6th and the 7th [of February]. More people will watch the opening ceremony, and the number of people who watch the opening ceremony often affects how many people view the Olympics.”

NBC and ad buyers did not discuss any specific ratings projections or share what guarantees have been offered to advertisers. The Vancouver Games averaged a 13.8 rating and 24.4 million viewers for its 17 prime-time broadcasts.

Miller and other NBC executives acknowledged that few Americans know about the actual host location of Sochi, but they’re not concerned about that.

“The stage of the Games is the Winter Olympics,” Miller said. “The location flavors it, shapes it a little, but the Winter Olympics is fascinating to people whether it’s Sochi or Cleveland.”

NBC hopes to overcome the lack of knowledge about Sochi by emphasizing that this is a Russian Olympics. They believe that recent political news about the country has raised Russia’s profile in the U.S., and they hope to capitalize on that.

Over the past year, Russia has been in the news for everything from granting Edward Snowden asylum to brokering a deal between the U.S. and Syria to remove chemical weapons from the Middle Eastern country. Russian President Vladimir Putin also wrote an editorial in The New York Times, and the country’s anti-gay propaganda law has generated extensive news articles in the West about protests and potential boycotts.

“What people do know [about Sochi] is it’s Russia,” Lazarus said. “We believe in the mystery of Russia, and people want to understand Russia. There’s a curiosity around that with the American population.”