Every four years, patriotism and human interest drive viewership
and advertising sales for a range of winter sports which, hockey
excepted, receive scant attention otherwise. Come February 6, NBC
Universal will begin airing a record-setting 539 hours of TV
coverage and 1,000 hours of live streaming video content as the
exclusive US owner of the rights to carry the 2014 Winter Olympics.
Kantar Media mined our database for statistics and insights into
the economics of the Winter Games for NBCU:
Still a TV event
Even with a 2.5-fold increase in live streaming video content,
from 400 hours in 2010 to 1,000 hours this February, the Winter
Games remain primarily a TV event. More than 90% of total video
consumption and more than 90% of all Games-driven ad revenue are
TV ad spending for the Games peaked in 2006 at $851 million when
NBCU used its cable channels to add 70 hours of programming
coverage and create extra inventory. For the 2010 Games, sales of
ad time took place during the 2009 recession; lower demand led to a
5% drop in ad revenue to $809 million.
More ad time
For the Sochi Games, NBCU's planned 539 hours of TV coverage
amounts to a 21-point increase over 2010. The growth comes mainly
from expanded coverage on the media company's cable properties. In
2010, about 55% of the total programming hours and commercial time
aired on their cable networks. In 2014, the cable networks are
expected to account for about 65%.
Total commercial time should increase accordingly and provide
some financial upside. If the ratio of paid commercial time per
hour is comparable to prior years, the 2014 Games could contain
upwards of 5,500 TV ad minutes.
Ad pricing and audience dilution
The blended average price for a 30-second spot in the 2010 Winter
Olympics, across all network and cable channels, was $94,300, up
slightly from the 2006 Winter Games but down from the average price
of $100,100 in winter 2002. The amounts paid by individual
advertisers vary considerably depending on a range of negotiable
factors, but overall, the blended average price is being diluted by
more hours of coverage on cable networks (where ad rates are
cheaper) and during off-peak hours (when ad rates are cheaper).
Another outcome of more cable programming hours is audience
fragmentation, as viewers do their Olympics tuning across the
spectrum of available channels and hours and also watch events
online. This programming strategy tends to inflate the overall
number of Olympics viewers even as the average audience per channel
and per spot shrinks. Ad revenue growth has thus become more tied
to available inventory than to average price.
Ad revenue vs. rights fees = tough
Even with more ad time available for sale, TV ad revenue has not
kept pace with escalating Olympics rights fees and higher
production costs associated with more coverage. The 2010 Winter
Games in Vancouver marked the first time the rights cost more than
TV ad spending brought in, at $820 million to $809 million. NBCU
has other revenue streams for monetizing the Olympics, most notably
digital advertising, which has been growing thanks to expanded
streaming video coverage. However, external estimates still place
digital at less than 10% of total ad revenue. For NBCU, Olympics
economics are getting tougher.
Source: Kantar Media