That's a substantial development for NBC, which last week agreed to pay a stunning $2.3 billion to wrap up broadcast rights for the 2004, 2006 and 2008 Olympics and now must count on solid advertiser support to avoid taking a financial beating on the deal.
Also, longtime Olympic sponsor AT&T is interested in talking with NBC about a deal through 2008.
If the IOC cuts long-term pacts with global sponsors, it clears the way for NBC to approach those marketers with multiyear Olympic ad packages. In another preemptive bid earlier this year, NBC paid $1.25 billion for TV rights to the 2000 Summer and 2002 Winter Games. NBC also will air the 1996 Summer Games, although CBS has broadcast rights for the 1998 Winter Olympics.
Advertisers will be asked to pick up a big part of the tab for NBC. Based on historical Olympic ad inflation rates, sponsors will pay more than $600,000 for a prime-time 30-second ad unit in the 2008 Summer Games, compared with an estimated $380,000 price tag for the '96 Summer Games.
Using the same rate of ad sales growth, NBC will take in $1.041 billion in gross Olympic ad revenues for the 2008 Games. But that may not be enough for the network to see a profit for those Games or any others in between.
NBC is paying $894 million for the 2008 Games and 50% of ad revenues above that figure.
"If you add another $125 million in production and marketing costs on top of the $894 million rights payment, you're talking [about] more than $1 billion in costs. And that's not even factoring in agency commissions," said Bill Croasdale, exec VP-national broadcast at Western International Media, Los Angeles. "Hopefully for NBC, the ad economy will expand a lot by that point, but these are still some pretty big numbers."
How NBC profits from future Olympics will depend more than ever on aggressive selling, astute marketing and creative packaging.
But NBC may not easily be able to pursue one of the most obvious opportunities for a network in its position: multiyear ad packages.
Olympic TV rights contracts require TV networks to offer media deals first to official Games sponsors. And currently, the Olympic movement sells those rights only in four-year increments.
So far, only IBM has re-upped for the TOP 4 package, which covers worldwide Olympic marketing rights for the '98 Winter Olympics in Nagano, Japan, and the 2000 Summer Olympics in Sydney.
But Dick Pound, chairman of the IOC's Television Negotiations Committee, confirmed the IOC is talking to several sponsors about longer-term agreements.
IOC Marketing Director Michael Payne declined comment on specific negotiations, but said the IOC will become increasingly flexible in meeting sponsors' needs.
"We still believe that the classic four-year package is the model, but with that being said, there are some companies that plan for more than four years out, who see the value of having their brands inextricably tied with the Olympic movement. If there is interest in long-term deals, we will respond to the needs of the marketplace," Mr. Payne said.
When CBS packaged ad buys for the '92 and '94 Winter Games, it was able to lock in about 25% of its total sales, said Joe Abruzzese, CBS president of sales. "One deal leads to another deal. If you have multiple-year deals in place, others feel they have to come in," he said.
Technically, NBC can't even begin selling the 2000 Games until CBS wraps up the '98 Games. But NBC already is at work on ways to "change the whole way we're presented on the air," including a joint logo with the IOC, said Dick Ebersol, president of NBC Sports. Specifics won't be announced until after Nagano.
CBS is believed to have closed, or is close to finishing, its first 1998 ad deals, megabuys by Chrysler Corp. and Ford Motor Co. The deals are each expected to fetch about $50 million.
Anheuser-Busch is also believed to have locked up beer category exclusivity for in excess of $25 million and Coca-Cola Co. may have an exclusive deal for non-alcoholic beverages.
Electronic Media contributed to this story.