Many media observers thought NBC would walk away from the Olympics. After all, it lost $233 million on the 2010 Games and is likely to take a bath on the 2012 Games. The network's new owner -- Comcast Corp. -- is a cable company known for being fiscally conservative and had been sending signals that it did not want to spend recklessly on big-ticket items.
But NBC agreed to shell out $4.38 billion to the International Olympic Committee to hold on to the Games through 2020. Its bid easily topped the $3.4 billion News Corp.'s Fox offered for the same period. Walt Disney Co.'s ESPN only bid $1.7 billion on the 2014 Games in Sochi, Russia, and the 2016 Games in Rio de Janeiro and didn't want to risk more on future Olympics without knowing what cities would host or what the media landscape would look like.
The price tag has NBC's rivals wondering if the company didn't once again over extend itself on the Olympics. But Comcast Chief Executive Brian Roberts was adamant that the Games would be profitable for the company.
The odds that the Olympics will generate almost $4.4 billion in ad revenue seems unlikely. Comcast and NBC will look elsewhere to drive revenues from the Olympics. The subscription fees that the company currently charges distributors to carry its sports channel Versus will no doubt go way up. Currently, according to industry consulting firm SNL Kagan, Versus gets 36 cents per subscriber, per month, from cable and satellite operators. That pales in comparison with ESPN, which gets north of $4 and ESPN2, which receives almost 60 cents.
Putting a lot of Olympic content on Versus will give Comcast the leverage to jack up the fees. Also, keeping the Olympics will make NBC's affiliates very happy and allow them to get more money from distributors in so-called retransmission consent fees. A chunk of that goes back to Comcast.
There was also a prestige factor at play. ESPN has just about every major sport out there and is a huge empire. The Olympics would be a nice addition, but not crucial to its long-term survival by any means. Fox also has lots of sports and though the Games would be one more sign of legitimacy for the bad boy network of broadcast TV, not having them won't hurt it in any fashion.
But NBC has been the home of the Olympics for more than a decade. It is a bragging right and also has been the one bright spot at the company in recent years. With its prime time struggling, losing the Games would have been seen, fairly or not, as a sign that NBC was inching toward irrelevance.
For all the talk about how the new owners were going to be tougher when it came to buying sports, there was also a fear of being branded as the people who lost the Olympics and drove another nail into the coffin of NBC.
"It is significantly more important to them than anybody else," said one rival bidder.
Roberts seemed to acknowledge as much in his remarks after the network's winning bid was announced.
"I absolutely wanted to win for the team," Roberts said, adding that the network "poured our heart and soul" into the presentation to the IOC.
Now they will have to pour their heart and soul into squeezing every last dime out of the Games.
-- Joe Flint
Photo: Comcast Chief Executive Brian Roberts at announcement of NBC's winning Olympics bid. Credit: International Olympic Committee.