NBC Has $1 Billion Schedule Hole With Olympics Postponed
NBC Has $1 Billion Schedule Hole to Plug With Olympics Postponed
(Bloomberg) -- No company pays more to associate itself with the Olympics than NBCUniversal. Now that the 2020 Tokyo Games have been postponed, the Comcast Corp. unit will need to figure out how the unprecedented change will affect one of its most valuable relationships.
First, the bad news: NBC is losing a massively popular event when other sports are also dark, and new shows aren’t being shot because of coronavirus concerns. The two-week Olympic Games provide thousands of hours of programming, and typically draw 25 million viewers to prime time each night. NBC called the last Summer Games, the 2016 Rio Olympics, the “most successful media event in history.”
That said, the games have been postponed, not canceled. And while there will be some inconveniences, a delay of as much as a year won’t have a material impact on the company’s bottom line, according to media consultant Lee Berke.
“Certainly there is money that’s been spent up front, some of which can be shifted over, some of which is subject to loss,” Berke said. “But overall, as long as the 2020 games are played in 2021, then NBC will be substantially whole.”
Payments Delayed
Another piece of good news: Olympics broadcasters don’t make the bulk of their payments until the games actually happen. According to International Olympic Committee member Dick Pound, the IOC receives only 5% to 10% of the fees on the front end, with the vast majority coming upon delivery of the games.
“The broadcast revenues are heavily loaded at the time of the games,” Pound said.
The IOC on Tuesday announced that the 2020 Tokyo Games would be delayed due to the coronavirus pandemic, to a date no later than next summer. It’s an unprecedented announcement -- games have been canceled due to war, and they’ve been boycotted, but they’ve never been rescheduled.
“Given the unprecedented obligation we all face to contain Covid-19 globally, we fully understand the decision,” the network said by email. “NBCUniversal is actively working with our advertising partners to navigate this postponement, and we’re exploring all options to best serve their brands and our consumers this year, and into 2021.”
NBC is in the final year of a $4.4 billion deal, since extended, that covers the four Olympics through 2020. It’s unclear how that contract was structured, but there could be around $1 billion that NBC doesn’t need to pay the IOC until the 2020 games happen.
Ad Sales
NBC did, however, already sell ads to air during the games. The network said earlier this month that it had surpassed $1.25 billion in ad sales for the Tokyo Games, with around 10% of inventory still remaining. That’s a record for the network, eclipsing the $1.2 billion it sold for the 2016 Rio Games.
That was just around the time the Olympic movement was starting to discuss a possible disruption to the games because of the coronavirus, which hadn’t yet been declared a pandemic. Comcast Chief Executive Officer Brian Roberts said at that time that NBC anticipates disaster scenarios in its contract language and also has insurance for big expenses.
“So there should be no losses should there not be an Olympics,” he said. He added, however, that there would be profit lost.
It’s unclear how those provisions and that insurance would treat games that are simply postponed, as opposed to games that are canceled. Comcast shares were down 1% to $33.79 at 10:55 a.m. Tuesday in New York.
Rights Extension
To make things even more complicated, NBC is deeply tied to the Olympics for another 12 years. In 2014, it negotiated a rights extension to its current deal, agreeing to pay $7.75 billion for the next six planned games. It is also part of a three-way joint venture with Team USA and the Los Angeles 2028 organizing committee, which created a one-stop shop for Olympic marketing from 2021 through 2028.
One could argue that losing the Olympics comes at the worst possible time, since the pipeline for scripted shows, reality shows and movies is starting to run dry for a lot of networks.
Berke mentioned another possibility: If sports are able to resume this summer, there might be an overwhelming amount of sports content to compete with. Set for NBC alone, there are the Triple Crown horse races, NHL playoffs, golf’s Ryder Cup and, later in the summer, college football.
Should the games take place next summer, that’ll will likely be a more spread-out sports schedule. It’s also an off year for the Winter Olympics, and both the men’s and women’s World Cups in soccer.
“Presuming we get started up relatively soon, there will be a substantial amount of sports,” Berke said. “Sports bumping into one another that have never been in close proximity before. Virtually every broadcast network may be becoming a sports network.”
©2020 Bloomberg L.P.