NBC's Weak Upfront Stalls Winter Olympics Ad Sales

NBC's poor upfront advertising market is now having a ripple effect on its Winter Olympics advertising sales, according to a number of industry media buying and selling executives.

Next February's television advertising sales of the Torino Winter Olympics in Italy have stalled--and the chief culprit is prime time. NBC has sold 65-70 percent of its inventory so far, according to executives.

"NBC's prime time was always looked to to bail out selling the Olympics, which always carried a lot of inventory," said one veteran media agency executive. "This is the first Olympics where they won't have that."

In the past, when NBC had a strong prime-time market, the network was able to use it to lure advertisers into buying up Olympics telecasts, offering advertisers good deals on highly desirable prime-time inventory. That is no longer the case.

NBC took major hits in last year's upfront, where it rolled back pricing anywhere from 2 to 3 percent on cost-per-thousand [CPM] pricing. Media buying executives also said that NBC, as well as other networks, sold less inventory in this upfront than in previous years--just over 70 percent.

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NBC's drop from first to fourth place in adults 18-49 ratings led to an overall drop for the network by a whopping $800 million, to around $1.9 billion in last June's upfront sales market. This was a dramatic change for the network that for virtually ten years led the upfront advertising market.

An NBC spokesman wouldn't comment. But according to executives, the network is close to a number of big Olympic deals that will be announced soon. Some of those deals are part of bigger United States Olympic Committee sponsorship deals, which allows advertisers to use the marks and logo of the USOC.

More expensive advertising/sponsorship pacts are struck with the International Olympic Committee that can set back sponsors $50 million for multi-year deals. IOC sponsors include The Coca-Cola Company, The Eastman Kodak Co., General Electric, John Hancock, McDonald's Corp., Omega, Panasonic, Samsung, Visa USA, and technology companies Atos Origin and Lenovo. Most, if not all, are already TV sponsors worldwide--including NBC in the United States.

Most of these and other endemic Olympic advertisers account for about 50 percent of NBC's sales revenue goals. In the past, NBC easily met its advertising sales goals--for example, $900 million for its Summer Olympics in Athens.

These Winter Olympics ad goal efforts are somewhat less, according to industry executives. Winter Olympics can typically be rated somewhat less than summer games. European-based games can also be a slight negative because of the time zone differences between the United States and Europe. As a result, there is less live TV coverage.

The Athens Summer Olympics in 2004 posted a 14.4 rating/25 share in prime time, and a 6.6 rating/19 share overall. Two years earlier, the Salt Lake City Winter Olympics posted a 19.2 rating/31 share in prime time, and a 12.6/26 overall.

Helping out NBC could be an expected rise in advertising dollars in the fourth-quarter scatter market. Some media buying and selling executives are anticipating that this will result in a slight rise in CPMs from the upfront period.

For the first two weeks of the season--except for a glimmer of hope from the new show "My Name Is Earl"--NBC ratings could have a rough year again, and it could wind up in fourth place.

This has industry executives sounding out the call that NBC could be in trouble once again when the upfront market comes around next May/June 2006. Media buying executives don't expect NBC to lose another $800 million, but analysts almost certainly believe the network will fall from its perch as the priciest in terms of cost per thousand for the key adults 18-49 demographic.

While price will vary per advertiser, some sources say that generally, NBC is roughly around $28.50 per thousand 18-49 demo viewers. CBS is probably next, and then Fox and ABC.

Considering ABC's continued improvements, which could be at the $26.50 level, ABC could leapfrog over other networks. CBS may move to number one.

Networks are loath to drop CPMs--a key indicator of the value of their TV shows. From time to time, some networks, including cable networks, become overpriced--such as USA Network a few years ago--and need to roll back pricing. This past season, A&E Network, according to media buyers, lowered pricing for some of its advertisers.

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