US Insights

Rio 2016 another golden Games for advertisers?

Jon Swallen

Chief Research Officer, Kantar Media Intelligence North America

TV 07.26.2016 / 17:45

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Will NBCU’s promised “most live Olympics ever” send ad revenue above or below 2012’s record $1.33 billion?

Like the athletes themselves, sponsors of the XXXI Olympic Games, opening in Rio de Janeiro on August 3, hope to earn marketing gold.

While the road to Rio has been marked by controversy and adverse publicity, the Summer Olympics remain sure to attract an enormous US audience on both TV and digital platforms. With ad volume and revenues both comparatively high for the 2012 Games, Rio could build on this trend to reach new heights. NBCUniversal (NBCU) says its networks and digital platforms will serve up some 6,755 hours of programming for the Games, or roughly 356 hours of coverage per day over the course of 19 days, creating many opportunities for brand engagement.

From Kantar's Added Value: Will Rio, Brazil and global anxiety break the Olympics brand?

2012 TV ad revenue set a record. National TV ad spending in the 2012 Summer Olympics reached a record of $1.33 billion (edging the previous high of $1.29 billion set in 2004), according to Kantar Media’s database, and generated the most TV ad revenue of any sporting event that year. These results represented a sharp increase from the 2008 games, when a looming recession repressed ad rates. Digital advertising brought in an additional $60 million in 2012, according to NBCU.

The closest competitors in 2012 were the NCAA Men’s Basketball Tournament, which was supported by $1.01 billion in TV ad revenues, and the NFL post-season (including the Super Bowl), which generated $976 million. In 2016, those two events produced $1.21 billion and $1.37 billion of TV spending, respectively, raising the question of whether the Games this year will again eclipse these sums.

Key Numbers

  • 6,755 hours of NBCU programming
  • 356 hours per day for 19 days

The 2012 London Games set another record with NBCU airing 1,023 hours of Olympic coverage on its broadcast and cable TV networks, an increase of more than 25% from 2008. Those Beijing Games yielded 826 hours of coverage, the 2004 Athens Games 804 hours.

Media rights fees soar 175% in 20 years. Domestic rights fees for the Summer Olympics have increased 175% over the past 20 years and broke the billion-dollar threshold for the London Games. Future fees will rise at a slower pace, however. The International Olympic Committee (IOC) pairs a Winter and Summer Games together and sells the media rights as a package. NBCU, which has the US rights locked up through 2032, will see its fees increase from $2 billion for the 2014-2016 pairing, to $2.6 billion in 2030-2032 for an average increase of 7% per cycle.

More hours of coverage = more ad inventory. As linear TV coverage of the Summer Olympics has expanded, so have opportunities for commercial time. The growth has been driven by expanded coverage on NBCU cable and Spanish-language properties. At the 2012 London Games, 74% of programming hours and 76% of ad time were on these complementary channels.

Despite the diffusion of Olympics programming, the NBC broadcast network gets an overwhelming majority of the viewing and this will be true again in 2016, especially as it continues to show the popular swimming, diving, gymnastics, and track and field competitions. In addition, NBC’s sister networks traditionally finish their daily Olympics coverage by primetime, creating a clear field for the broadcast network. (Some primetime cable programming from Rio will focus on niche sports.)

In 2012, the NBC telecasts had an average 20% more paid ad time per hour as compared to cable networks on a like-for-like daypart basis. Within NBC’s full-day Olympic schedule, primetime had the heaviest ad load of any daypart. Squeezing more sponsor message into higher-rated programming is a monetization strategy: NBC primetime was responsible for about 45% of ad revenue from the 2012 games.

Ad pricing. The blended average price for a 30-second unit in the 2012 Summer Olympics, across all network and cable channels, was $93,200, up from $73,100 in pre-recession 2008 and $89,100 in 2004. The amount paid by individual marketers can vary considerably depending on a variety of factors. These include how much ad time is purchased, the mix of premium and non-premium inventory, sponsorship positions and packaging of TV spots with digital inventory.

One outcome of more programming content is audience fragmentation as viewers distribute their Olympic viewing across the expanding array of linear and digital options, leading to declines in average unit rates given the lower available audience. However, having more choices can increase the aggregate number of Olympics viewers even as the average audienceper channelandper spotdeclines. Ad revenue growth thus becomes more dependent on volume than average price.

Concentrated ad spending. The number of marketers buying TV time in the 2012 Games declined in comparison to the prior two Summer Olympiads, and spending became more concentrated among the Top 10 sponsors. Many top-tier sporting events are seeing similar consolidation as certain advertisers are drawn to the offers of category exclusivity, sponsorship opportunities, and a DVR-proof viewing audience.

With these extra benefits come additional costs, including the price of TV spots. Advertisers with deep pockets are in a stronger position to execute this strategy and in doing so, they squeeze out other marketers.

The 10 largest TV advertisers in the 2012 Olympics spent a total of $596 million, or 45% of all TV ad revenues, up from 40% in 2008 and 34% in 2004. In each Olympics, most of the top spenders also have top-level sponsorship deals with either the global IOC or the domestic United States Olympic Committee (USOC). These deals entitle companies to different marketing rights in various regions, category exclusivity and the use of designated Olympic images and marks. The leading categories of advertisers thus basically reflect the Top Advertiser list because these exclusivity deals limit access by the advertisers’ chief competitors.

Source: Kantar Media

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