In NBC’s Shadow, Comcast Ponders an Olympic Plunge
Does Comcast cherish the Olympics with the same fervor as did General Electric, which has paid billions to make NBC the network of the Summer and the Winter Games for a generation?
The question arises because Comcast , the nation’s largest cable operator, is close to regulatory approval to buy control of NBC Universal from GE in a deal valued at $30 billion — and because the Olympics are near-certain guarantees of prime-time dominance for 17 nights every two years. (GE is the parent company of CNBC.com.)
As early as next spring, Comcast will face ESPN, Fox and a possible CBS-Turner Sports bid at the International Olympic Committee’s auction for the media rights to the 2014 Winter Games in Sochi, Russia, and the 2016 Summer Games in Rio de Janeiro.
“I don’t think Comcast wants its first move with its new partner to be a negative one and to lose something NBC has had for years,” said Barry Frank, an executive vice president of IMG who has negotiated Olympic deals in the past.
Comcast, which serves 22.9 million of the nation’s 100 million pay-television subscribers, according to SNL Kagan, has done little to tip its Olympic intentions. But it understands the effect of sports through its ownership of Versus, the Golf Channel, 11 regional sports networks, the Philadelphia Flyers and the 76ers.
And its chairman, Brian Roberts, who has won four silver medals and one gold in team squash at the Maccabiah Games, attended the 2010 Vancouver Games.
But Comcast has reason to be cautious about plunging into Olympic economics, where the cost of buying media rights in the United States has soared almost without a dip since CBS paid $50,000 for the 1960 Winter Games in Squaw Valley, Calif.
NBC lost $223 million on the 2010 Games because of the recession and the steep price it paid to carry them; the network could lose more on the 2012 Olympics in London on its highest-ever $1.18 billion rights fee.
“They’re eager to show they can make money running NBC, and the Olympics may not be a way of doing it,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co.
The I.O.C.’s auction for the 2014 and ’16 rights, which has been delayed to avoid the worst of the recession, will test the networks’ desires to demonstrate financial prudence.
Jacques Rogge, the I.O.C. president, said recently that he wanted more than $2.2 billion, which G.E. paid for the 2010 and ’12 rights and for a global sponsorship. But Comcast, without international interests like G.E.’s, has no reason to buy such a sponsorship. G.E. said in 2008 that its sponsorship was paying off with $700 million in contracts for 400 Olympic projects in and around Beijing.
Privately, the I.O.C. thinks the Sochi-Rio media rights could be worth as much as $2.7 billion.
But, Moffett said, “It’s a stretch to imagine making money at $2 billion.”
Network executives say they think that Sochi is less valuable than Vancouver (cost: $820 million) because of its relatively warm winter climate and that Rio should not bring as large a rights fee as a domestic Olympics would have in Chicago, one of the losing bidders in the election to host the 2016 Games.
But Richard Carrion, the I.O.C. member handling the auction, said in an interview, “I think there are plenty of things to make Sochi an exciting place, and Rio is a good summer site.”
Last month, Leslie Moonves, the president of CBS, mindful of NBC’s losses and what the I.O.C. is seeking, seemed to indicate he would bow out of the auction if he could not get a bargain.
“We don’t need to invest in something to lose money,” Moonves told an industry conference, “or just to help the prestige of the network. I think we’re already there.”
Despite its ability to acquire much of what it wants, ESPN has signaled that it will not be profligate in its Olympic bidding, which acts as a preauction brake on the I.O.C.’s optimism.
Last April, ESPN was outbid for the rights to the N.C.A.A. men’s basketball tournament by the combined forces of CBS and Turner, which are paying $10.8 billion over 14 years. ESPN offered 10 percent less than CBS and Turner.
“The N.C.A.A. is instructive,” said John Skipper, ESPN’s executive vice president for content. “We felt we had the best plan. I’m confident we’ll have an excellent Olympic plan, but, like the N.C.A.A., we expect to be aggressive and prudent.”
NBC and Comcast officials declined to comment.
Acquiring the rights to the Olympics is often a case of want, not need. They provide 17 days of highly rated programming and blanket the Internet. But they lack the week-to-week power of N.F.L. games like those that NBC carries on Sunday nights, which is the network’s highest-rated program.
Dick Ebersol, who has run NBC’s sports division since 1989, adores the Olympics, produces them and would probably have left if another network had acquired them. He is part of the Olympic movement, was a close friend of the former I.O.C. president Juan Antonio Samaranch and is a recipient of the committee’s highest honor, the Olympic Order.
In two stealthy moves in 1995 — one of which came shortly after Fox Sports thought it had pre-empted NBC on the 2000 Summer Games in Sydney, Australia — Ebersol acquired the rights to the Olympics from 2000 to 2008. Then he outbid Fox by $700 million at the auction for the 2010 and ’12 rights, for which ESPN offered only a plan to share revenue with the I.O.C.
Now, Ebersol’s sealed bids at the coming auction will be made with Comcast’s financial analysis and approval. The purse strings will be held by Roberts, not by Olympic-friendly G.E. chairmen like Jack Welch or Jeffrey Immelt. Instead of working for top NBC executives like Bob Wright or Jeff Zucker, Ebersol will report to Stephen B. Burke.
Wright, who as the chairman and chief executive of NBC Universal was part of a small group that plotted the network’s extended era of Olympic domination, said that the economic projections that justified a bid could be undone by a bad economy years later, which occurred in Vancouver.
“I don’t think anybody at this stage thinks they have to have the Olympics to survive, or that the Olympics will change their business model in a significant way to take a big business risk,” said Wright, now an adviser to Lee Capital Partners. “So Comcast certainly doesn’t have to have the Olympics to make NBC Universal successful.”
But a rationale can be made for cash-rich Comcast to follow GE’s aggressive example. Analysts say that Comcast can help to monetize its rights fees by selling Olympic video-on-demand packages to its millions of broadband customers and that Olympic advertisers could flock to reach its millions of cable and broadband subscribers.
Comcast could raise Versus’s low profile by packing it with Olympic events like those that have been on NBC Universal-owned networks like USA, CNBC and MSNBC. With golf returning as an Olympic sport in 2016, the Golf Channel would carry the sport.
Putting the Olympics on Versus could also be a major step toward becoming a stronger rival to ESPN, especially if Comcast stocks it with cable rights to the N.F.L. (the league could create a new package out of expanding to an 18-game schedule), extends its N.H.L. deal and pursues a Major League Baseball contract.
“Comcast is buying NBC in large part to go out and beat up ESPN,” said Susan Crawford, a professor at the Benjamin N. Cardozo School of Law, who is writing a book about the Comcast-NBC Universal deal.
Skipper, of ESPN, said, “It’s not hard to see how Versus could be helpful to their bid.”
With the Olympics — and more — Versus could expand beyond its 75 million subscribers and raise the average 30-cents-a-subscriber fee it charges pay-TV operators . ESPN charges an industrywide high fee of about $4.50 but is not planning on trying to persuade operators to pay more if it buys the Olympic rights. ESPN intends to show everything live, even at Sochi time, an alteration to a policy begun at ABC and continued at NBC.
Crawford said that if Comcast made a strong challenge to ESPN, then “the foreclosure value of keeping ESPN out of the Olympics is higher than the market value of the Olympics.”
But if Comcast does not follow GE in making a blowout bid, it could cajole the I.O.C. to sell the rights to four Olympics, not just Sochi and Rio, Crawford said.
At least one network has already asked to buy the four Games through 2020, according to two sports industry executives with different roles in the coming auction who spoke on the condition of anonymity.
Carrion, of the I.O.C., said that the organization would prefer not to let one company make a pre-emptive bid but that he would consider asking if the networks want to buy the rights to four Olympics through 2020 “because this is a long-term investment.”
Until the auction, the I.O.C. and the networks will joust publicly about what the next Olympic Games are worth. As G.E. proved by underwriting NBC’s ambitions, all it takes is one network to show the greatest desire for the Olympics to satisfy the I.O.C.
“Don’t underestimate them,” Wright said of the I.O.C. “They’re a very smart, savvy crowd.”