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Numbers game: IOC would be taxed without NBC revenues

July 15, 2009 |  1:32 pm

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Want to know why the International Olympic Committee is backing NBC in its dispute with the U.S. Olympic Committee over the U.S. Olympic Network?
 
It is pretty clear from the numbers in the IOC's 2008 tax filing.
 
Tripp Mickle of Sports Business Journal first posted information about the filing Tuesday. His story emphasized the IOC's $383.3 million profit on a record $2.4 billion revenue for the fiscal year that ended Dec. 31, 2008, noting it was 68% greater than the $228.6 million profit from the previous Summer Olympic year, 2004.
 
The revenue figure that struck me was $1.73 billion in global TV rights for the Beijing Olympics.
 
What the filing wasn't required to say is NBC paid $894 million of that -- a little more than half the total.

So the IOC reacted quickly when NBC told top international Olympic officials it was upset that the USOC had shunned a partnership deal with NBC-owned Universal Sports and announced last week it was creating its own network in partnership with cable operator Comcast.

 
I detailed the IOC's point of view in both blogs and stories last week. Its reaction included a strongly worded statement criticizing the USOC's action after the IOC had sent it a cease-and-desist letter, asking the USOC to delay the announcement until some contractual and rights issues could be resolved.

IOC executive board member Richard Carrion of Puerto Rico blasted the USOC for what he characterized as an arrogant, unilateral approach to the situation. NBC sports chairman Dick

Ebersol told me the Chicago 2016 Olympic bid would be badly damaged unless the IOC and USOC worked out a solution to its latest imbroglio.
 
Top USOC officials, including former Chairman Peter Ueberroth and current Chairman Larry Probst, have yet to respond to the points raised by Ebersol.
 
But there is an underlying irony in all this, expressed in the cold math of the IOC tax filing.
 
The IOC and the USOC have been embroiled for three years in a heated dispute over the USOC share of IOC global sponsorship rights and U.S. television rights, a share established in a 21-year-old deal between the parties that was renegotiated 13 years ago. The current deal gives the USOC 12.75% of U.S. broadcast rights.
 
The IOC has argued the U.S. percentage should be diminished because the U.S. share of TV and global sponsorship revenues has diminished. Ueberroth has steadfastly maintained the USOC should not accept less because the U.S. still is the major contributor to those revenues.
 
The IOC's tax filing proves that, at least in the case of television, Ueberroth is dead right.
 
If NBC, whose rights fee for 2008 was more than twice that paid by any other broadcaster, had paid the same amount for Beijing as the next-highest rights holder, (the European Broadcast Union consortium's $443 million for both the 2006 Winter Games and 2008 Summer Games), the IOC's 2008 tax return would have looked a lot different.
 
In that case, every one of the organizations to which the IOC allocates some of its revenue (host city, Olympic Solidarity, international sports federations, national Olympic Committees) would have received less, and the IOC would have had less to add to its reserves.
 
That is a significant reason why the IOC values its relationship with NBC so highly, even if it currently is scheduled to end after the 2012 Olympics. (Carrion told me and other reporters at an IOC meeting in Switzerland last December that he already had informal discussions with NBC and expected the network would be among the bidders for rights beyond 2012).
 
A USOC network would be able to pay the IOC only a pittance for years -- if anything, other than the cost of acquiring archival Olympic footage.
 
So if NBC is upset that either it or Universal Sports will have to compete with the U.S. Olympic Network for rights to sports events or advertising dollars, the IOC has a lot of reasons to take NBC's side.
 
You don't jeopardize 51% of your TV revenue.


-- Philip Hersh

Photo: NBC logo outside NBC Studios in Burbank. Credit: David McNew / Getty Images

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