• by Diane Mermigas , June 17, 2011

Comcast wisely used a page from NBC's playbook and agreed to pay up for another decade of exclusive Olympic Game rights. But the real test will be whether the new controlling owner of NBC Universal can leverage one of television's remaining great live events as a platform for innovation -- not just marketing.

Broadcast networks historically have bet big on the global sports spectacle to generate viewer and advertiser support for their news and entertainment programming across cable, home video and Internet platforms. As the nation's dominant cable provider, Comcast sees the Olympics as powering new subscribers and fees across its triple-play services on television, online and on mobile.

It is an ironic tip of the hat to the experimental pay-per-view "triple-cast" of the 1992 Barcelona Olympics, which NBC partnered with Cablevision, that although it was decades ahead of its time, it lost about $100 million. The simulcast and delayed telecast of Olympic events on broadcast and cable networks have since become routine. That is why Comcast must innovate with its new 10-year claim to the games. There are reasons to expect it.

*Steve Burke, Comcast NBCU CEO and president, worked at Disney/ABC in the glow of then-ABC Sports and News president Roone Arledge's live TV innovations -- from slow-motion plays and in-your-face crisis coverage (the 1972 Munich Olympics hostage tragedy). The affinity for sports shared by Burke and Comcast chairman Brian Roberts is evident in the company's creation of and support for The Golf Channel, 12 regional sports networks and Comcast Sports with its full spectrum of live events, talk shows and original programs.

Comcast also recently committed $2 billion for National Hockey League telecast rights over the next 10 years. Comcast rode NBC's creative coattails, which includes focusing on participants and storytelling, in making its winning $4.4 billion bid for four summer and four winter Olympic Games through 2020.

(Paying $1 billion more than the next best offer from Disney's ESPN or News Corp.'s Fox leaves room for turning a profit on the next decade of Olympics Games, according to Comcast. But analysts only see more Olympics losses ahead. The good news, according to CitiGroup analyst Jason Bazinet, is that the new Olympics price tag only represents 2% cost growth over the next four Olympics, compared with the nearly 14% per annum in spiraling cost NBC has encountered.

Comcast plans to mitigate costs by charging higher adverting rates and higher distribution fees for access to its affiliated TV stations and TV networks that carry the games. It also will charge separately to stream the Olympics on mobile devices, including tablets and smartphones. Also, its agreement with the International Olympic Committee to create a new Olympics Channel could represent new revenues streams.

*Predictability aside, imagine what Comcast could charge if it offered marketers and consumers something really innovative -- like more intimate interactive links between each other and Olympics athletes or other participants. Redefining the real-time, as well as delayed Olympics experience via interactive video, text and transaction, creates a whole new value proposition and source of revenues. Such innovation is the only way to alter what analysts say is the strained balance of NBC's Olympics generating three-quarters of its revenues from conventional advertising. Digital magic is the only way Comcast can reach beyond its Xfinity IP and VOD services to create synergies to offset its initial $14 billion cash and asset investment in NBCU's broadcast and cable portfolio.

If Comcast doesn't do it, someone else will. Consider Netflix recently surpassing Comcast as the largest subscription video provider with a streaming premium content model that is not yet 2-years-old. Cable's TV Everywhere is already history.

*Despite $300 million in incremental programming investment to fortify NBCU's cable networks and to revitalize NBC's floundering prime-time schedule, Comcast has the financial resources to spur technical innovation for the Olympics that can pay off for decades after the games. Bazinet makes the case that much of the advertising growth the past several years and stretching out to 2012 at NBC's broadcast division can be attributed to the Olympics.

Even noting Olympics losses (about $375 million from the last winter/summer games and an anticipated $250 million from the 2012 summer games), proceeding without the Olympics was not an option. Now, Comcast must invest in its Olympics investment. The skilled executive and production team of recently departed, longtime NBC Sports president Dick Ebersol should be infused with a healthy dose of new creative blood, drawing from video game and other unconventional talent pools.

*Comcast comes to NBCU with a blank slate. While it must tread carefully, it is obliged to upend the delicate balance among affiliates, advertisers and producers, given the radically changing times. By the time Comcast NBCU covers the last Olympic Games in this new series, there will be fewer local TV stations, defined more by their powerful hyper-local ties than by their network program affiliations. Broadcast and cable networks will coexist as glorified production sources with very different economics and operational structures. Tech-empowered consumers will rely on permission-based delivery of only the most relevant transactional marketing, content and services.

That's the future media market for which Comcast NBCU must innovate.