The Olympics: Powered by Microsoft and Adobe

Comcast's NBC is providing live streaming of the Sochi Winter Olympics to cable subscribers, using Adobe to monetize the stream across all platforms and Microsoft to provide the back-end service. What does this mean for these three companies?

Feb 10, 2014 at 11:00AM

As the 2014 Winter Olympics begin in Sochi, Russia, many people around the world will look to watch various events live on smartphones, tablets, and other devices. NBC, a subsidiary of Comcast (NASDAQ:CMCSA), will be providing live streams to cable subscribers of every event, much like it did for the 2012 Summer Olympics in London. The London streams were plagued with problems, however. This time around, NBC is partnering with both Adobe Systems (NASDAQ:ADBE) and Microsoft (NASDAQ:MSFT) to ensure that Sochi is not a repeat of London.

What this means for NBC
The fear for broadcasters in the past was that online streaming would eat into TV viewership, reducing advertising revenues in the process. Adobe provides a way to effectively monetize the streams across all devices with its PrimetimeTV platform. This allows NBC to not only outsource much of the technical work involved in streaming the Olympics, but also ensure that it's able to maximize its advertising revenue. Adobe's service also includes authentication, making sure that only those with cable subscriptions through one of NBCs partners can watch the streams.

While the rise of streaming services like Netflix (NASDAQ:NFLX) have threatened the traditional cable TV business model, live events like the Olympics could provide enough reason for people to continue to subscribe to cable. Live sports is something that Netflix doesn't offer, and the enormous amount of money tied to broadcasting rights is likely enough to keep Netflix from considering this for quite some time. NBC paid $4.38 billion in order to secure the rights to air the next four Olympics, an amount roughly equivalent to Netflix's annual revenue. Netflix recently announced that it would spend about $3 billion on content in 2014, less than what NBC has paid to secure the Olympics, making it clear that Netflix doesn't have the resources to secure major sporting events.

If the Olympic stream goes off without a hitch, we could start seeing a lot more live sporting events available on all manner of devices, provided that you have a cable subscription, of course. This gives cable providers like Comcast a meaningful advantage over streaming services like Netflix, at least for sports fans.

What this means for Adobe
Adobe is mainly known for its software, such as Photoshop, but the company has been embracing the cloud and significantly altered its business model over the past few years. The company has shifted from selling software licenses to selling subscriptions to its Creative Cloud, a service that delivers all of Adobe's software for a monthly fee. Along with this shift, Adobe has been pushing into other areas as well, and one of these is a service that allows broadcasters to deliver video to any device while utilizing an advanced advertising and analytics system.

NBC teamed up with Adobe in 2012 for the London Olympics, but the back end of the system was handled by Google's YouTube. This year, Microsoft's Azure cloud is providing the muscle, and if everything goes as planned, the experience should be much smoother for viewers. Adobe's push into media services seems to be paying off, and the Olympics could lead to more business for the company.

What this means for Microsoft
Microsoft's Azure is providing the back end to Adobe, doing the transcoding and streaming work on the fly. Microsoft has reportedly dedicated 10,000 cores of Azure to the Olympics to ensure that there aren't any problems, and the vast scale of the system is perfect for this type of application.

Microsoft's cloud revenue has been growing fast, and with former chief of the enterprise and cloud division taking over as CEO, Microsoft's future is heavily tied to its cloud services. The Olympics is a big test for Azure, and if the system can handle the massive loads involved in delivering live HD streams to millions of viewers, it will show the versatility and usefulness of Microsoft's cloud infrastructure.

The revenue received by Microsoft is likely a drop in the bucket for the company, but if Azure performs well, it could open up new opportunities for the cloud division. Microsoft is shifting from a software company to a devices and services company, and providing the back end for streaming the Olympics is a significant step in the right direction.

The bottom line
Cloud technology has caught up with people's desire to stream events live on any device, and the Sochi Olympics provide both Adobe and Microsoft a proving ground for their respective services. By providing live streams to cable subscribers, NBC has given people a real reason to stay with cable instead of cutting the cord, and big sporting events may end up being cable's savior in a world where streaming services seem to be taking over.

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Timothy Green owns shares of Microsoft. The Motley Fool recommends Adobe Systems and Netflix. The Motley Fool owns shares of Microsoft and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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