NBC Universal Expects to Lose Money on Winter Olympics

Higher Rights Fees, Lagging Ad Sales Don't Bode Well for Profitability of Games Broadcast This Year

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NEW YORK (AdAge.com) -- NBC Universal expects to lose money on its broadcast of the Olympics for the first time in recent memory, according to the company's top sports executive, who cited sluggish early ad sales and a rise in the cost of obtaining rights to cover the event.

Dick Ebersol
Dick Ebersol Credit: NBC
Ad sales have picked up lately, but not enough to put the Olympics in the black, said NBC Sports president Dick Ebersol, speaking Sunday before a gathering of television critics in California.

"Fortunately for us, over the last, oh, four months, sales, which were slow in the spring and in the early summer, as you can imagine, because of the economic recession in this country, suddenly in the last four months have taken off, and we are well on our way now to doing the same kind of number that we did in Torino and Salt Lake City before that," Mr. Ebersol said. "The rights have gone up considerably in these years, and we will, for the first time in all of my years at NBC, lose money on an Olympics, but it won't be because the sales did not finally come around."

The remarks show how even a big-ticket TV event such as the Olympics has seen hard changes as the economy slumps.

Rights fees for sporting events, meanwhile, continue to rise. NBC paid about $2 billion for rights to the 2010 Winter Olympics and 2012 Summer Olympics back in 2003. At the time, the international sporting event was important to the Peacock because it had ceased broadcasting NFL, MLB and NBA contests. NBC has again begun broadcasting Sunday-night football games.

Late buys
However, more recently during tough financial times, advertisers have been holding dollars closer to the vest. In many cases, they are only putting money down at the last minute, making ad sales in the days leading up to particular broadcasts sluggish.

The Olympics have some value beyond the straightforward ad revenue they attract. Networks also use the Olympics, for example, to heavily promote their other programming. You can expect to see NBC use these Winter Games to tout the new lineups sparked by moving Jay Leno out of his 10 p.m. slot and back into late-night.

The final results also won't be clear until the competition concludes. A large chunk of ad money for NBC's 2008 Summer Olympics came in for the event after it had started. Indeed, some buyers at the time theorized that NBC had held back some inventory in the hopes of securing a better price for it as the Olympics gained momentum.

Some of the Olympics' success also depends on whether viewers become intrigued by particular athletes, such as swimmer Michael Phelps in the 2008 Summer Olympics. Those games reached what is now touted as the largest number of viewers for any televised event -- 214 million across 17 days.

But it does now seem that the 2010 Winter Olympics will belie NBC's earlier claims of confidence.

Back in 2003, Mr. Ebersol argued that the Olympics still held a business promise that other major sports events were losing, partly because the Olympics takes place just every two years and attracts a broader audience than other sports telecasts. "The business of big-time American sports has gotten out of hand," he said then. "That is not true of the Olympics."

At the time that NBC's winning bid for the 2010 and 2012 Olympics was announced, NBC Chairman Bob Wright told The Wall Street Journal that the price of the Olympics "is certainly very high" -- but added, "We think that it's recoverable and beneficial to us."

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