NBC Rings Up Sydney Profit

NBC, which absorbed months of criticism over its decision to show the Sydney Games entirely on tape, made more than $50 million in profit from its broadcast of last year’s Olympics.

The precise figure could not be confirmed, but a profit of any sort is noteworthy because NBC’s initial projection, when it bought the rights to the Sydney Games in 1995, was that it stood to lose perhaps $75 million on the 17-day telecast.

The extent of NBC’s financial turnaround from Sydney was disclosed amid a series of meetings here this week involving Olympic officials and sponsors. Several sources familiar with the figure confirmed that it was greater than $50 million.

NBC executives declined to comment for the record on the issue, but Randy Falco, the network president, said in an interview, “We don’t view the Sydney Olympics in any way other than a smashing success.”

NBC paid $3.5 billion for the U.S. rights to all the Olympics, Winter and Summer, through 2008. With the Salt Lake Winter Games only 13 months away, senior NBC officials said they remain convinced that--despite the criticism and low ratings from Sydney--the Olympics remain a sound investment.

“It remains maybe the key critical asset for us going forward,” Falco said.

Dick Ebersol, NBC Sports chairman, said the Olympics remain “the strongest television franchise in the U.S. and in the world.”

NBC’s Sydney Olympics coverage resulted in the lowest ratings for a Summer or Winter Games since 1968. The move to show the Games on tape also drew what Falco called “a constant drumbeat” of criticism from around the nation.

NBC chose to show the Games on tape because of the time difference. Sydney was 18 hours ahead of Los Angeles, 15 hours ahead of New York.

Tape delay enabled the network to present events during prime-time viewing hours in the States. But that meant that many results had been reported on the Internet, on other TV networks and on radio, and at length in some morning papers by the time they aired on NBC.

NBC’s $3.5-billion Olympic investment included $705 million for the Sydney Games. The network also spent at least $125 million in production costs.

Said Ebersol: “When you have this kind of money involved, you have to put it on when you can reach the largest possible audience.”

From the outset of its on-air coverage, NBC announcers made it plain they were showing the Games on tape. They also explained why.

“I’m not sure I understood why [the criticism] persisted,” Falco said. “It wasn’t just the 17 days of the Olympics, this thing went on for weeks and months. In the end, it started to get a little unfair. Very unfair.”

The average Nielsen rating for the 17 nights of telecasts was 13.8--meaning 13.8% of U.S. homes were tuned in to the Games.

That rating was 36% lower than the 1996 Atlanta Games, which NBC also televised.

Perhaps most significant, the ratings were 20% lower than NBC had predicted it would get, 17.5 to 18.5, and about 15% worse than sponsors were promised, 16.1.

The ratings prompted NBC to show extra commercials from early in its coverage to satisfy advertisers.

How, then, could it make a profit of more than $50 million?

Because it had built a cushion into the schedule that freely allowed the airing of the “make goods,” as the extra commercials are called. Instead of cutting into coverage of the Games, the network made up the time by showing fewer promotional spots for its fall schedule.

And because, bottom line, it sold $900 million in commercials for the Sydney Games.

Its original Sydney sales goal had been far lower: $780 million.

To compare, in Atlanta NBC sold $680 million in commercials. That was then a record.

The network made a $70-million profit from its televising of the Atlanta Games.

In a wrap-up report from Sydney, NBC calls the profit “tens of millions” of dollars.

When it bought the rights to the Sydney Games, NBC did so as part of a package with Salt Lake City. On top of the $705 million for Sydney, the network paid $545 million for the rights to the Salt Lake Games.

The thinking among network executives was that even if NBC lost money on Sydney, it would make it all back, and probably more, in Salt Lake. A domestic Games, with a home-team feel, typically offers an enormous profit upside.

That the network unexpectedly made money in Sydney has only fueled the conviction at NBC that it remains on the right course heading into Salt Lake 2002, the network’s first Winter Games since 1972--even given the low ratings from Sydney.

Perhaps the core problem was the calendar, several observers said. By September, kids were back in school, parents at work and summer vacation was a fading memory. Influential IOC member Dick Pound of Canada, who negotiated the deals that awarded NBC the rights to the Games through 2008, said of Sydney, “It was not as successful, ratings-wise, as [NBC] might have hoped. But that perhaps was a combination, I think, of September and bad time zones.”

Then again, NBC’s 13.8 average from Sydney was 21% lower than the Seoul Games in 1988. NBC televised those Games too. And, like Sydney, the Seoul Games began in mid-September.

Another explanation: the fragmenting TV landscape.

In 1988, there were four over-the-air networks and 20 cable channels. Today, the average home gets more than 60 channels, and all the networks are finding it tougher to attract viewers, in particular teens and young men, to sporting events such as the Olympics.

For example, the weekly wrestling extravaganza “WWF Smackdown!” is shown Thursday nights on UPN. Twice during the Games, on Sept. 21 and Sept. 28, “WWF Smackdown!” went head to head with the Games. UPN spokeswoman Patti McTeague said wrestling dominated among boys 12 to 17.

“I don’t think people are any less passionate about the Olympics, and what they stand for,” IOC marketing director Michael Payne said. “But there’s so much more to distract them now.”

Even so, over the course of the Olympics, NBC’s ratings from Sydney easily trumped the three other over-the-air networks. And over the 17 days, 185 million people tuned in to coverage of the Games on NBC and its two cable arms, CNBC and MSNBC. The telecasts reached 84% of all U.S. households with TV sets and delivered an average of 59 million viewers a night, according to NBC research.

“Now if you were in the newspaper business,” Falco said, “you’d call that circulation.”

Or a ripple effect: Ratings for MSNBC for the 17 days were up 181%, according to NBC’s research. For CNBC, 88%. For its morning show, “Today,” up 25%. For local news shows airing on NBC affiliates, up 30%. NBC’s Olympic web site, https://nbcolympics.com, attracted more than 5.6 million “unique visitors” during September.

“And that,” Falco said, “is what the game is all about.”

In Salt Lake City, NBC is planning to deliver essentially the same package, a mix of features and Games action, but with one key difference. Some of the most popular events, such as figure skating, will be shown live across the United States--an easy thing to do from the Mountain time zone.

A mix of other sports, among them Nordic skiing and hockey, will be shown live during the afternoons on CNBC or MSNBC.

“Hockey fans and fans of the Olympics will be able to get as much hockey as they want,” NHL Commissioner Gary Bettman said.

But some glamour events--Alpine skiing, for example, which is typically run in the late mornings or early afternoon--will be taped and held for prime-time.

At a news conference last week in Pasadena, Ebersol reiterated, “The business imperative that I’m given, with this kind of advertising money on the line, is to get the biggest possible audience at night.”

As for the features, they will be back. How many, and how weepy, remains to be seen.

Tentative plans are for the network to be on the air for 3 1/2 hours a night from Salt Lake City, from 7:30 to 11 p.m., perhaps a bit longer on figure-skating nights.

In Sydney, NBC was on for five hours nightly--perhaps half an hour or hour too long, Ebersol now says. In Salt Lake City, he said, “Obviously we have fewer hours every night on the air, so obviously there will be fewer features in our effort to get more and more sport on the air.”

Ebersol indisputably remains in charge. As the ratings slid in Sydney, some critics called for him to step down. He says that would be absurd. So do other top decision-makers at NBC.

Referring to “the smashing success,” Falco declared: “That success in the main is attributable to Dick Ebersol.”