NBCUniversal expects to lose money on London Olympics
NBCUniversal is expected to lose money on its coverage of the London Olympics, which begins next month, although the company’s sports chief declined to predict how steep the losses could be.
“The jury is still out, we don’t know where we’ll end up,” NBC Sports Group Chairman Mark Lazarus said Wednesday during a conference call with reporters to discuss the company’s coverage of the Olympics, which begin July 27.
David Joyce, a media analyst with Miller Tabak & Co., has predicted that NBCUniversal could lose more than $100 million on the London Games.
NBCUniversal is paying a staggering $1.18 billion for the television rights to the event, part of a long-term deal that was negotiated in 2003 when General Electric Co. was majority shareholder of the broadcasting company.
The $2-billion contract with the International Olympic Committee, which covered U.S. rights to the 2010 Winter Olympics in Vancouver and this year’sin London, proved to be financially disastrous. NBCUniversal ended up losing $223 million two years ago on the Vancouver games -- the broadcaster’s first substantial loss covering an Olympics.
NBC sales executives have been busy this year selling advertising time for the company’s unprecedented coverage, Lazarus said.
NBCUniversal is planning 5,535 hours of coverage on nine channels, including the NBC broadcast network, cable channels MSNBC, CNBC, Bravo, NBC Sports Network (formerly called Versus), Spanish-language network Telemundo and online platforms. That represents 2,000 more hours than NBC provided during the 2008 Summer Olympics in Beijing.
For perspective, said Gary Zenkel, president of NBC Olympics, consider that the company provided 171 hours of events on one channel -- NBC -- during the 1996 Summer Olympics in Atlanta.
NBC executives hope the swarm of coverage for the London games, including a high-profile Internet social media campaign, will stoke fan interest, ratings and advertising sales.
The company has nearly 400 full-time workers in London preparing for the event, which includes building and wiring a 75,000-square-foot broadcast facility inside Olympic Park, Zenkel said.
Production costs, including staffing, are estimated at $100 million, said Joyce. That means NBCUniversal’s expenses could top $1.3 billion.
“We’re not predicting that we will necessarily be profitable,” Lazarus said of the London Games. In addition to ad sales, Lazarus said, the company receives financial contributions from TV station affiliates and cable and satellite TV providers, which helps defray its costs.
The “wild card,” Joyce said, will be the level of interest among advertisers for time on the additional channels, which will highlight lower-profile sports, as well as for the online streaming. However, he said, the sheer volume of available commercial spots on the various platforms could actually depress pricing, making it more difficult for the company to maintain its premium rates.
This will the first Olympics for cable giant Comcast Corp.since it assumed a 51% interest in NBCUniversal in January 2011. It will also be NBC’s first without its longtime sports chairman, Dick Ebersol, the architect of its Olympics coverage for more than two decades who abruptly left the company a year ago -- just as Comcast was preparing NBC’s bid for the next round of Games.
Comcast-controlled NBCUniversal clinched the rights to four additional Olympics, 2014 through 2020, with a bid of $4.38 billion.
Comcast plans to use the Games to showcase and stock its NBC Sports Network, which the company is trying to build into a cable sports powerhouse to better compete with Walt Disney Co.'s ESPN. Executives are confident that, beginning in 2014, they can bring home the gold.
“The deal we made for the four Games will be a profitable deal for us when the final scores come in,” Lazarus said.
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