NBC announced this week that it has sold $1 billion of national television and digital advertising for its coverage of the London Olympic Games. That’s the most ever for an Olympic Games and approximately $150 million more than the total for NBC’s coverage of the 2008 Beijing Olympics.
But here’s the bad news: NBC spent nearly $1.2 million for the rights to the games and will incur another $100 million in production costs.
Now it’s hard to believe that you could generate $1 billion worth of advertising and still lose money, but I’m guessing network executives felt that way in the 50s when the figure was $1 million.
It’s all relative.
NBC, though, believes it actually has reason to be bullish on its latest Olympic investment. After London, the network will shell out $4.38 billion for the 2014 Winter, 2016 Summer, 2018 Winter and 2020 Summer Games.
Technically, the fees per Olympics stays relatively flat. However, the two Winter Olympics are in Sochi, Russia and South Korea. It remains to be seen if those games will produce $1 billion-plus in revenue.
Steve Burke, the CEO for NBC Universal, thinks the company made a good deal.
“We thought getting four games rather than two was a big, big deal,” Burke said. “We wanted to make sure that we got the games at a price that would not cause this company every two years to lose a lot of money. And we believe we’ve done that. The way to think about the four future games is, we get those at the same price that we get London, adjusted for the fact that some are winter and some are summer. Basically, unlike other sports where there are very, very large increases in rights fees when they get renewed, we got a chance to get four more games at roughly the same price.
“So over time, as these properties become more and more valuable in a world that is increasingly fragmented, and over time as you get some media inflation, some other things, we think we’re going to make money on these games.”
It goes beyond money for NBC. Clearly, the Olympics are part of the fabric for everyone associated with the network.
Burke talked of his anxiety during the bid process that he endured in 2011 in Switzerland. He had just come on board after Comcast purchased NBC.
“We knew that it would be a binary moment,” he said. “We would either come home with the Games, or we would come home without the Games, and as the new sort of people showing up in this building, it would have been an awful thing to come home without the Games.”
Burke and NBC wound up with four more Games. It’s a big, big deal in more ways than one.
As Burke says, “They’re very, very much tied up with the brand of NBC, the way that the, this company operates, the soul of the company, the culture of the company.”
And it all begins tonight with 17 straight days of the Olympics.