NBC's Olympics May Lose Money Now But Make It Later, Thanks To Digital Video
NBC will probably lose money on the 2012 London Summer Olympics. But don't worry. It might only be $100 million in red ink, after spending $1.18 billion on the games. That really isn't so bad, considering that the 2010 Vancouver Winter Olympics, which cost NBC around $820 million, put it about $223 million into the hole.
But here's the good news: NBC says it will probably make money on the next four Olympics, which will cost around $4.4 billion total.
That may seem to counter profit-challenging trends resulting from the TV rights fees for almost all major sports events -- such as the NFL, the NBA and Major League Baseball.
First, there doesn't seem to be much price escalation on the TV fees for the next four Olympics, which will average around $1.1 billion apiece.
We can assume some of the usual positives TV executives throw around regarding sports in today‘s changing digital world: They’re live, they’re DVR-proof, they still provide a place for big TV promotion; and the Olympics are one of the remaining "events" when it comes to broadcast television.
If you don't believe any of this, perhaps we should add NBC’s hint that some 100 million cable, satellite and telco TV homes will have access to some 3,500 hours of the London Olympics, amounting to virtually every single second of every single event.
This TV Everywhere-like deal means that virtually 90% of U.S. TV homes -- some 100 million out of 115 million -- can choose to see the games digitally. Hopefully, NBC will sell some digital advertising, but that won’t be enough to make the games profitable.
During the 2008 Beijing Games, NBC offered a number of real-time complete events -- but not all of them. Monetization on the digital front wasn't a major objective then. I doubt that atitutude will continue in London.
I watched the entire men's road cycling race live from Beijing -- almost six hours of non-stop coverage (with no live audio commentary). Shockingly, there were only three or four commercial/promo breaks in the action. All were for General Electric (which was then the majority owner of NBCUniversal) and around 15 seconds long.
Four years later, I'm expecting a few more video ads during the London men's road cycling race. (In 2008, I could have used the break to get away from my laptop. Today, tablets make things more mobile).
It doesn't take a rocket scientist to guess that upcoming Olympics should do better advertising-wise when it comes to digital video.
This should makes a few Olympics fans thankful -- and create more stress elsewhere. Future live digital video Olympic efforts will shift more of the burden to how NBC sells digital TV/video advertising in the games.