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Behind Comcast's Gold Rush

After losses in Vancouver and more to come
in London, Comcast chairman and CEO Brian Roberts insisted
that last week’s $4.4 billion Olympic Games bid by its
NBCUniversal unit will make money.

But according to some people who follow the media giant
closely, the path to profitability will depend heavily on higher
fees and ad sales, which could be harder to find as the games
cachet dwindles and the global economy finds its footing.

NBCU (a Comcast-controlled joint venture with General
Electric) bested bids from Fox Sports and ESPN to win the
rights to air the 2012, 2014, 2018 and 2020 Olympic Games. The
win solidifies NBC as the Olympics Network — it has aired every
Winter and Summer Olympics since 2000.

But by outbidding the competition by such a large margin
— Fox reportedly bid $3.4 billion for four games and $1.5 billion
for two, while ESPN/ABC bid $1.4 billion for two — NBC
runs the risk of paying too much for what has become a
programming loss leader. NBC said it lost about $223 million
on the 2010 Vancouver Winter Games and that it expects
to lose another $250 million at the 2012 Summer
Games in London.

“We were blown away by the [NBCU] presentation and
the passion this team has for the games,” International
Olympic Committee member Richard Carrion said, according
to published reports. “I’d be less than honest if I
said the number didn’t come into play.”

Roberts said that the NBCU bid was “disciplined and

“We think this will be a profitable relationship for NBC
Universal,” Roberts continued. “Having eight more years,
we will have an opportunity to build up a lot of the assets
at NBC Universal … It was unanimous among our team
that having [the games] for the longer term will help us
achieve that goal.”

But at least one analyst doesn’t expect the media giant
to turn a profit on the games until at least 2018, and that
will be determined mainly by where they are held. The
IOC selected Sochi, Russia, for the 2014 Winter Games
and Rio de Janeiro, Brazil, for the 2016 Summer Games.
Sites for the 2018 and 2020 Games have not yet been determined.

Wunderlich Securities media analyst Matt Harrigan estimated
that NBCU would lose about $65 million on the
Sochi Games and would break even in Rio.

That is substantially less than the losses sustained in
Vancouver and London, but is mainly due to the lower fee
paid for some contests. According to Carrion, NBCU will
pay $775 million for the Sochi games (it paid $820 million
for Vancouver) and $1.23 billion for Rio (it paid $1.18 billion
for London). As for the Winter Games in 2018, the IOC
commanded $963 million, while the 2020 Games garnered
nearly $1.42 billion.

On the one hand, Harrigan said, it looks like the costs of the
games can be spread across several networks, which will attract
higher carriage and advertising fees. But the difference
between the Fox and NBCU bids — about $800 million — suggest
that the Olympics may not have the cachet they once had.

“On the surface it is not an atrocious deal,” Harrigan said.
“But just playing devil’s advocate, Fox being $800 million behind
in covering the bid is a little worrisome.”

Other analysts tread lightly in analyzing the deal. Morgan
Stanley media analyst Ben Swinburne said that by bidding
$4.4 billion for four Olympics, NBCU’s costs are basically
flat considering the $2.2 billion it paid for two Games — 2010
and 2012. He estimated that with a modest rise in advertising
rates and flat ratings NBCU could cut the losses per Olympics
in half in 2014-2020 versus 2010-2012. And he said higher affiliate and retransmission consent fees could push the games
into the black.

The so-called Olympic surcharge was imposed during
the last round of the Olympics by NBCU, then under GE’s
ownership. Sources indicate that NBCU has already obtained
surcharges from a number of MSOs for some of the
games under the new deal. NBCU is also receiving contributions
from broadcast-network affiliates to support the
Olympics bid.

Insight Communications CEO Michael Willner said he
does not recall any recent conversations with NBCU regarding
an Olympics surcharge, but he would have little
objection to paying the amount he has paid in the
past. If that fee were to rise, however, then it could
become a problem.

“If they ask for more money, then they are contributing
to the problem of spiraling sports costs,”
Willner said. “That is not a good thing.”

Aside from the possibility of higher fees, Roberts
and new NBC Sports Group chairman Mark
Lazarus spoke to NBCUniversal’s array of assets,
platforms and promotional capabilities as key
components for its games gambit.

Lazarus said the rights deal encompasses “TV,
tablets, mobile broadband,” before adding that
it covers all platforms “now known, to be known
and those still to be conceived.”

With those vehicles in place he said there would
be more Olympics coverage on more platforms
than ever before. “It’s all encompassing. That’s
part of the value of our new company ... one of the
great joys of this deal.”

And starting in 2014, each event will be available
live on one platform. It was unclear what that
might mean for London, the broadcast plans for
which are already in place, according to Lazarus.
However, he did say there would be more live
streaming in real-time from next summer’s competition.


Comcast CEO Brian Roberts/NBCU
CEO Steve Burke
— The leaders
put their imprimaturs on their
new company, gaining longterm
Olympic gold via lots of
green. Now, if only NBC could
place in the ratings in primetime.
Meantime, the cache of the
Games will spread throughout the

NBC Sports Group chairman Mark
— In his first major rights
gambit, the cable veteran came
up huge, picking up a quartet of
Games that would have made
his predecessor proud. With
a commitment to new media
and devices that have yet to be
conceived, Lazarus will usher the
Olympics presentation into the
21st century.

Gary Zenkel President, NBC Olympics,
Executive Vice President, Strategic
Partnerships NBC Sports
— NBC’s
business torch bearer and all
those of working on the Games
presumably now have gigs for
the remainder of the decade.
Will Zenkel and crew integrate
NBC’s history of packaging drama
in primetime with a new live
approach to the games?

International Olympics Committee
Despite the NBC’s $223 million
loss in Vancouver and projections
calling for $250 million in red ink
from London, the Games keepers
received another huge check from
their American benefactors — U.S.
TV rights account more than half
of the TV revenue the organization
receives and one-third of its total
revenue from 2005-08.

U.S. Olympic Fans/Viewers — Say
goodbye to tape delays. Under
the new deal, NBCU says all
events will be live on TV or other