Going for the Gold in the Age of Streaming

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In an age of media fragmentation, NBCUniversal is counting on the unique power of the Olympics to bring the world, and mass audiences, together again.

“There’s nothing like the Olympics in media,” NBC Olympics president Gary Zenkel said.

The changing media environment presents challenges even for the 2018 Winter Olympic Games, set to start Feb. 8 in PyeongChang, South Korea. In the past season, even ratings for the mighty NFL were down 10%, and some media buyers expect primetime ratings for the Olympics to erode as well.

Executives are counting on the pageantry of the opening ceremony, the rush of a downhill run, the thrill of a game-winning goal and the precision of a triple axel to still thrill viewers who root for the U.S. to win gold.

The sheer political power of the Olympics on a global stage is even bringing together athletes from warring North and South Korea, who despite nuclear tensions will march as a unified team during the opening ceremonies.

Erosion Hits TV Sports

But TV ratings are eroding across the board. Between delayed viewing, growing video-on-demand choices and the proliferating streaming options, viewer behavior has changed since the days when the nation huddled in front of a glowing tube. Live sports was late to be affected, but now, sports fans have options, not all of which are well-measured. That has led to concerns about ad revenues covering the high costs of sports rights.

NBC owns the rights to cover the Olympics on all platforms that exist now or will be invented until its TV contract with the International Olympic Committee runs out in 2032.

So, fans will be able to watch Olympic competition live and on-demand on broadcast, pay TV and streaming platforms, all at the same time. That might dilute the primetime broadcast audience — which will still be huge — but could increase viewership overall.

In all, NBCU plans a Winter Olympics record 2,400 hours of coverage from PyeongChang, including a record number of live hours. That’s up from 1,600 hours four years ago, when the Winter Olympics were in Sochi, Russia.

NBC will have 176 hours on its broadcast network, 369 hours on NBCSN, 46 hours on CNBC and 40.5 hours on USA Network, for a total of 631.5 hours of linear television.

There will be another 1,800 hours of digital content on NBCOlympics.com and the NBC Sports app. There will be a number of firsts. The opening ceremonies will be streamed live. And NBC’s primetime will air live across the country.

“I think we’ve got some great stories, great American stories,” NBC’s Zenkel said. “The Olympics is also still a great business.”

He added: “There are ways to take advantage of the fragmentation and deliver content to different platforms, and then there are ways to take advantage of the uniqueness and the elusiveness of a mass audience coming together in front of a television screen in the United States, which the Olympics has the capacity to deliver consistently.”

NBC will use various forms of new technology, streaming events and working with Intel on technologies including virtual reality and augmented reality. But the primetime broadcast remains the big money-maker.

“I’m going to be a dinosaur and say that in 2032, when this current agreement ends — hopefully there will be another one behind it — the vast majority of people are going to watch more Olympics on a big screen with incredible resolution,” Zenkel said.

Zenkel was in Las Vegas for CES when the College Football Playoff National Championship game was played. “People just gathered. You don’t want to sit somewhere on your own and watch that climax. You want to share it. So I don’t think that’s going to change,” he said. “I do think that the experience, the quality, the depth is going to continue to evolve. You’ll see different camera angles, different content, maybe something mobile. And viewers will want more personalized information.”

In 2010, NBC lost $200 million broadcasting the Winter Olympics from Vancouver. Two years ago, NBC racked up $250 million in profits from the Rio de Janiero Summer Games.

At an Olympic preview event in New York last week, NBC Sports Group chairman Mark Lazarus said he expected the PyeongChang Games to make money, though he wouldn’t say how much. And Zenkel said he expects to Olympics to stay in the black despite high rights fees and an eroding pay TV universe.

“For the amount of investment, it’s now delivering a margin that’s consistent with the way Comcast does business,” Zenkel said.

Going forward, “I think immersive technology and the evolution of media is going to present opportunities to advertisers and distributors that are going to be more valuable to the consumer, more valuable to them,” Zenkel said. “They are going to have more connections to the consumer than they have today.”

Pivotal Research analyst Brian Wieser noted that rights costs for sports such as the Olympics are rising faster than revenue is growing. “That means you’ve got margin erosion. That seems to be an inevitability,” Wieser said.

Sports might not be as good a business as it used to be, but it’s still profitable. It is also an important factor in relationships a programmer has with its distributors and advertisers.

“The challenge is figuring the benefits from a promotional perspective, from a brand aura perspective and from using it as a justification for improved affiliate sales,” he said.

A Super Olympic Lead-In

NBC has made a huge bet on sports; it’s in the unique position of having Super Bowl LII on Feb. 4, followed by the Olympics starting on Feb. 8. Dan Lovinger, executive VP for sports sales at NBCU, said as of last week, the Super Bowl was nearly sold out.

“The Olympics is a different phenomenon because it’s over the course of 18 days,” he said. “But overall, we’re extremely well-sold.”

Lovinger expects that ratings will be similar to those of the Sochi games but that Olympicad sales will surpass $900 million for PyeongChang, topping Sochi.

Some ad buyers speculate that there is still a fair amount of Olympic ad inventory available. “They represent as if they’re in perfectly good shape, but I think they’re a little bit desperate,” one media buyer said. “It’s still a big-ticket item, but I think we’re going to have some opportunities towards the last minute.”

But live sports remain powerful despite short-term market issues.

“I think the age of big events being able to drive huge audiences is by no means over,” Daniel Dao, executive VP and managing partner of Havas Sports & Entertainment, said.

Media companies have to find the right ways to distribute content to audiences where those consumers are already viewing it, Dao said, which creates choices. “All that choice actually presents opportunities.”

With an increasing amount of Olympic content streaming online, NBC is selling based on a Total Audience Delivery metric that instead of tallying households, as TV used to, counts people age 2 and up, creating a metric that’s the same across TV and digital platforms.

That will allow NBC to deliver viewers to advertisers whether they’re watching on TV or online. “So if we see a spike in consumption on our digital platforms, we can move our delivery to those digital platforms and deliver on a campaign promise more effectively,” Lovinger said. “It gives us a little bit of flexibility to take advantage of those changes and viewing habits, because the Olympics typically does lead a lot of these viewing consumption changes.”

Differentiating between TV and digital viewers is getting trickier.

“We saw, as an example, in Rio over 30% of all digital minutes consumed were consumed through connected TVs. That’s up from 0% in Sochi, because there were no connected TVs in Sochi,” Lovinger said. “That number may grow. It may grow to 50% in PyeongChang.

NBCU is also selling digital-only packages to some advertisers for the first time.

For Jim Bell, the executive producer of the games, the Olympics isn’t just a sporting event, but a human event. “The Olympics remain the ultimate thrill. And for those of us who’ve been around it, like so many of my colleagues for so many years, each one presents a whole new set of opportunities, challenges, risks, fun, cuisines, local dialects,” he said.

Presenting the Olympics has obviously changed from the days when there was a single primetime broadcast to now, when every event is televised or streamed live.

Coverage Is Changing, Too

“In 1996, you had a situation where some of the most historic events at those Olympics with the U.S. Women’s Soccer team and the U.S. Women’s Basketball team were being relegated to 30-second highlights. And people couldn’t see them,” Bell recalled. “So it’s nice that that is no longer the case.”

That changes the way some material is produced, such as athlete profiles.

“We have become more selective about profiles. The profile lengths have probably tightened up a little bit,” Bell said.

Some of NBC’s profiles are being re-edited to fit platforms like Snapchat, and to better connect with Snapchat’s audiences.

“I think there’s an expectation that want to be able to tell someone’s story in a pretty short amount of time,” Bell said. “But I think there is still an appetite for people to connect with these athletes from around the world.”

That’s another thing that makes the Olympics unique. “For example, you’re going to see in PyeongChang the Nigerian women’s bobsled team. And it now appears we’re going to have two figure skaters competing from North Korea,” Bell said. “What other event could make people care about Nigerian bobsledders and North Korean figure skaters?”

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.