NBC Olympics: Who Wins
Comcast gets Games; Versus could be top medalist.
So much for Comcast going cheap on the Olympics.
The NBCUniversal parent, which recently expressed concern over NBC's $223 million loss on the 2010 Vancouver Games, on June 7 outdueled Disney's ABC/ESPN and News Corp.'s Fox with a $4.38 billion bid for U.S. broadcast rights not just for the Sochi Russia Games in winter 2014 and Rio de Janeiro Games in summer 2016 but also the following two Games.
The winning bid -- which included an emotional plea from NBC's longtime Olympics host Bob Costas, who was joined in Lausanne, Switzerland, by Comcast chairman and CEO Brian Roberts and NBCUniversal CEO Steve Burke -- was followed by a pledge to air every event live via the various Comcast and NBC assets, in either traditional media or digital.
"This deal encompasses every platform known today or to become known between now and the time that this deal comes up," says Mark Lazarus, NBCU's new sports chief. "It is for television. It is for tablet. It is for mobile. It is for broadband. It is for every now known or to-be-known or still-to-be conceived set of rights."
Despite the multiplatform goals, analysts believe the big winner of the Olympics derby is Versus, Comcast's struggling sports network whose carriage fees are expected to rise sharply.
"Versus now goes from zero to 60 as a viable sports-focused channel with retaining the NHL rights, picking up NBC programming like Notre Dame football and the Olympics," says Greg Busch, exec vp at GMR Marketing. "Versus, once it's rebranded, will be a huge player in the sports space."
The long-term commitment to a franchise that has been associated with NBC since 1988 is also seen as a vote of confidence in the flagship network by the new NBCU bosses, especially with sports guru Dick Ebersol's exit. "People at NBC must be very happy," says Wunderlich Securities analyst Matthew Harrigan. "This shows that Comcast is committed to realizing value from the NBC network and stations long term." Comcast acquired a controlling stake in NBCU in January.
The deal came as a surprise to some observers after Comcast execs said they would bid carefully for sports packages, including the Olympics. "It seemed like News Corp. wanted to be a serious dark- horse contender, and Disney/ESPN would have liked it, too, for a change," says Miller Tabak analyst David Joyce.
Comcast execs maintain that despite the hefty price tag, the Olympics will be profitable for NBCUniversal. But the Vancouver loss marked the first time that the U.S. network airing the Olympics didn't make money. And observers have predicted more losses for next year's Olympics in London.
"The 2012 London Games have a price tag of about $1.2 billion and could show the same loss," says Marci Ryvicker, analyst at Wells Fargo. "At this point, we continue to see the Olympics as less of a financial decision and more of a strategic and branding initiative."
Experts have said that $1.5 billion to $1.7 billion in ad revenue will be generated by the 2014 and '16 Games, with network carriage-fee increases and other revenue streams necessary to turn a profit.
But Joyce cites the financial benefits for NBCU beyond advertising, including NBC's ability to launch traditional shows and create interest in new channels. Such benefits are hard to quantify.
"They can get positive effects on increased carriage rates for the networks that will eventually carry the Olympics," Joyce says, adding he wouldn't be surprised if Versus, which will be rebranded, adds "Olympics" to its name. Still, even with the Olympics and other A-list sports content, Versus likely won't challenge ESPN anytime soon.
"ESPN just has such a head start that I'm not sure that this deal alone makes Comcast's sports channels head-to-head rivals to ESPN," Busch notes.
And what will remain of the Ebersol legacy at NBC?
Predicts Busch,"I don't think they will depart from what Dick built from a storytelling perspective." But expect more live coverage and a shift of events to sibling cable nets.