NBC's $7.7 Billion Olympics Deal: Did the Network Overpay or Get a Steal?

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This story first appeared in the May 23 issue of The Hollywood Reporter magazine.

Did NBC overpay or get a steal on the Olympic Games?

Its preemptive $7.7 billion bid, locking up exclusive rights for the Games through 2032, underscores their significance to NBCUniversal's long-term growth strategy. The recent Sochi Olympics contributed $846 million to the broadcast unit's top line, which exceeded first-quarter expectations with revenue up 72 percent, to $2.6 billion. And that's in spite of lagging ratings (compared with Vancouver in 2010, when the U.S. team performed much better and the locale meant many marquee events were televised live).

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As eye-popping as the price tag seems, it's only a 2 or 3 percent increase per Games from NBCU's 2011 $4.4 billion four-Games renewal, in which it outbid its closest rival by $1 billion. And since Comcast acquired NBCU, executives have stressed cost discipline when it comes to sports rights.

But the new deal also comes as the promise of digital profits is looking rosier; the pact covers all media platforms -- including free-to-air and subscription TV, Internet and mobile. The latter two have become increasingly significant to NBC's Olympics strategy. Overall engagement during Sochi notched a record 242.3 million media exposures thanks to lifts from digital, says NBC. And carrying the world's biggest sporting event for two-plus weeks every two years also is a boon to the company's growing NBC Sports Network, which executives hope can someday rival ESPN.

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NBCU's eagerness to re-up was a given, but the IOC could have opened up the new six-Games contract to other networks. Its May 7 decision to stick with NBC, a negotiation that started in November after the election of IOC president Thomas Bach, was part of a broader strategy to lock down U.S. media rights and send a strong message to other potential partners.

"This kind of agreement needs to have a fair balance between knowing your property is in reliable hands and the financial commitment," said Bach in a conference call after the deal was announced. "The confidence and reliable promotion of the Games' value is key."

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