Is anyone excited about the 2010 Vancouver Games starting tonight? The Winter Olympics, which looked so promising years ago, are turning into a dreadful event for broadcaster NBC.
The network has aggressively bid for recent Games, reportedly far outpacing bids from rival networks. That strategy looked like a winner during previous Olympiads. For example, NBC reportedly booked ad revenue $200 million higher than its broadcast rights expense for the Torino Olympics. With the 2010 Olympics taking place in North America, enabling better scheduling of live events, the Peacock was riding high.
But then that pesky economic collapse got in the way, leading Forbes to call the Games a "financial disaster." The magazine suggested NBC would collect $130 million less in advertising than 2006's Torino Olympics, despite paying $200 million more for Vancouver's broadcast rights. All told, General Electric
To be fair, since Immelt's estimate of $200 million in losses, ad sales have reportedly picked up. NBC still expects to lose money; the size of the loss appears to be narrowing.
However, Jay Leno-size storm clouds are once again brewing over the Games. Olympic events tend to do best when there's a storyline for viewers to follow, such as Michael Phelps' run at the Beijing Olympics. Coming into this year's games, a lot of hope was pinned on skiing sensation Lindsey Vonn.
Most every Olympic preview leads with her as a key figure for this year's Games. Aside from NBC banking on her, Vonn also has contracts with athletic-apparel company Under Armour
Unfortunately, Vonn recently suffered a deep bruise on her shin. There are hopes that she'll be able to participate in the five Olympic races she's targeting, and her injury should add intrigue to any initial events she's featured in, but this is an ominous sign for NBC.
How could this hurt the Peacock Network? NBC's targeting 200 million viewers to tune into the Games, a 9% increase over the extremely successful 2006 Torino Games. Most of the advertising legwork has already been completed, but a failure to reach certain ratings thresholds could run afoul of ratings guarantees with large advertisers, further pushing the Games into the red.
Assuming NBC doesn't miss ratings enough to trigger any guarantees, a recent Variety article notes an even bigger threat to NBC. The Olympics have become a loss leader for the network, offering future benefits that offset their initial expense. Not hitting its projections for this year's Games could hurt the company's attempts to sell future Olympics advertising, and reduce efforts to showcase its struggling programming to a large audience. If these Olympics come in below expectations, the network may have to reassess its bidding strategy on future Olympics, opening the door to rivals like Disney's
With NBC losing the NBA, MLB, and NASCAR in the past decade, while featuring failed concepts such as the ill-conceived XFL, the Olympics has been one of NBC Sports' few bright spots. Aside from regaining the NFL, NBC Sports has enjoyed very few recent victories to build off. Once you consider the strength that ABC has with its slate of ESPN programming, and Fox with its regional sports channels, NBC Sports is falling even further behind its rivals.
With or without Lindsey Vonn, the network needs to create a buzz and rise above criticisms of its previous Olympics coverage. NBC Sports is becoming a deathbed patient, fast. Of all the major networks, NBC is the worst-positioned to accept any kind of failure right now.
But hey, even if NBC loses future Olympics, there'll always be Tennis Night in America.
Eric Bleeker owns shares of no companies listed above. Walt Disney is a Motley Fool Inside Value selection and a Motley Fool Stock Advisor pick. Under Armour is a Motley Fool Rule Breakers recommendation. Under Armour is a Motley Fool Hidden Gems selection. Procter & Gamble is a Motley Fool Income Investor pick. The Fool owns shares of Procter & Gamble and Under Armour. Try any of our Foolish newsletter services free for 30 days. The Fool's disclosure policy has fond memories of the NBA on NBC, back in the golden age of hoops.