NBCU's path to Olympics advertising gold

Tech // TV 01.22.2014

Jon Swallen

Chief Research Officer, Kantar Media Intellig…

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  • 539 planned hours of coverage
  • 5,500 estimated minutes of TV advertising

Stats and insights on NBC Universal’s Olympics investment

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-based.

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 economics
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

Editor's Notes

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