NBC Drops $4.83 Billion To Broacast Next Four Olympics

So reporteth the Wall Street Journal:

NBCU's bill will be divided into four parts. It will pay $775 million for 2014, $1.226 billion for 2016, $963 million for 2018 and $1.418 billion for 2020, the IOC said. NBC lost $223 million on the 2010 Vancouver Games and is projecting a $250 million loss for London next year.

In a news conference in Lausanne, Switzerland, Tuesday, Comcast Chief Executive Brian Roberts said he believes the new deal will be profitable but didn't provide specifics. The company has said it plans to spread its coverage across its cable and broadcast networks as well as its digital outlets. The company is betting on the uptick in the ad market and increases in fees from cable companies and TV stations to defray the costs, a person familiar with the matter said.

One big beneficiary is likely to be NBCU's Versus cable sports network, which has long lagged ESPN. "It will finally now become a big-time national sports network," said Rick Gentile, the former executive producer of CBS Sports.

Acknowledging the need to cater to diehard fans and mainstream viewers, NBC Sports Chairman Mark Lazarus said NBCU will show every event live on some platform, in addition to sticking with its taped prime-time coverage.

 For me, the really interesting part of this story is the last sentence of the first paragraph: NBC lost $250 million or so on broadcasting the Vancouver Winter Olympics, even with all the hottest events being broadcast during primetime in America.  And, from what I can find, NBC has lost money on every Olympics broadcast since it started broadcasting them in the 80's.  So why on Earth would NBC fork over nearly five billion for the rights to broadcast something that has been a money loser?

Well, as the above "source familiar with the negotiations" notes, NBC is betting on an increase in ad revenue to offset its expected increase in costs, as the network vows to show all events live on some format (hello modern pentathlon on Nat Geo International!).  While a continuing uptick in ad revenues would be huge for NBC, remember that Comcast now owns 51% of NBCUniversal.  By my count, this means that, between NBC and Comcast, there are around 20 channels (not to mention many more websites) on which NBC will be able to broadcast the Olympics and this is where I think the real money is to be made: Comcast can now hold other cable companies such as Time Warner over a barrel to carry Comcast-owned channels that will be showing Olympic content.  Do you want to explain to your subscribers why they can't watch live curling at 3am?  Didn't think so...

Other interesting things about this deal: It was rumored that Fox actually offered more money than did NBC.  What tipped the scales in NBC's favor were, apparently, two things 1) the IOC's familiarity with NBC over the last 20 or so years and 2) the fact that NBC apparently brought 17 execs to Lausanne to pitch the deal and that this apparently greatly excited IOC members (many IOC members, like FIFA members, love nothing more than to be told and shown how important they are, so credit NBC for that).  Other articles have speculated that merely the status that comes with being the Network That Broadcasts the Olympics will help spark general interest in NBC programming and raise ratings, though no amount of Olympic rings underneath the NBC logo can force me to watch The Event.

There are, of course, huge risks involved for NBC; the network bid blind on the 2018 (it is generally thought that South Korea is the front-runner) and 2020 Games and is likely to be staring at a dearth of high-profile events being broadcast during primetime in the US.  Not to mention that the network is going all-in on the Olympics without Dick Ebersol, the long-time head of NBC Sports, who has presided over every NBC Olympic broadcast since 1992 and who recently resigned after the merger of Comcast and NBC.  Ebersol has long been considered one of the brightest executives in the business and made a cottage industry out of identifying and telling the best in human interest stories from each Olympics.  The absence of Ebersol reportedly unnerved even the IOC, so there's a lot of pressure on NBC to get London right in 2012.  NBC has bet a huge of money that it will.