For television giant NBC Universal, the Winter Olympics in Vancouver is shaping up to be a bumpy downhill ride. The network, weighed down by overpaying for rights fees, expects to lose at least $250 million on its coverage of the event, which begins tonight.
Adding to the burden have been sluggish ad sales that - at least initially - helped dig NBC deeper into the financial hole. On top of that, there are few star U.S. athletes to whip up excitement. And on Wednesday, the United States' No. 1 female skier, Lindsey Vonn, revealed that she bruised her shin during practice last week and might not be able to compete.
NBC Universal's parent company, General Electric, recently agreed to sell NBC Universal to Philadelphia-based Comcast, though that deal is awaiting government approval.
Then there's the weather. British Columbia's unseasonably warm temperatures have melted snow and increased the chances of competition-halting fog on Cypress Mountain. Organizers have been bringing in truckloads of powder from hundreds of miles away.
All the behind-the-scenes drama might even make for a good reality series on one of NBC's cable networks - were not so much at stake, including what impact it will have on future rights bidding and staging of the Games. Indeed, the Olympics are the "ultimate reality show and no one really knows how it is going to turn out," said Alan Wurtzel, NBC Universal president of research.
But NBC Universal, GE and the International Olympics Committee weren't planning on this kind of a nail-biter. Network executives had expected to grab ratings gold in large measure due to the game's Pacific time zone locale, allowing more than half the country to watch the events live.
"There are not any major breakout stories or known stars," said Greg Kahn, an executive vice president at the advertising firm Optimedia.
NBC is planning 835 hours of coverage over 17 days on the NBC broadcast network and cable channels USA, MSNBC, CNBC and Universal HD. Advertisers hope that millions of viewers will catch Olympics fever, with some companies shelling out $500,000 to $600,000 for prime-time commercials on the network.
Sponsor expectations are not entirely unfounded. Live sports events on TV have been drawing huge audiences in recent years. Last Sunday's Super Bowl on CBS set a record with 106.5 million viewers.
But the Olympics will be facing strong competition from American Idol, Lost, House and The Big Bang Theory, shows that have been attracting large audiences for rivals Fox, ABC and CBS.
Indeed, four years ago, American Idol drew more viewers than the Winter Olympics in Turin, Italy, said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. "This time around, that's going to be key to the ongoing strength of the Olympics. Is this something that the prime-time network audience really cares about?"
The stakes are enormous. The IOC in the last two years has lost several major sponsors, including Johnson & Johnson, Kodak and laptop maker Lenovo, a blow for the organization that already heavily relies for support upon TV money from the U.S.
More than half of the IOC's income from international broadcasters comes from NBC Universal, and the IOC within the next year will auction the broadcast rights for 2014 and 2016 Games. Disappointing ratings for the Vancouver Games would make it difficult for the IOC to again fetch top dollar.
General Electric got itself in its Olympics-sized financial fix in 2003 when it bid $2 billion for the television rights for Vancouver and the 2012 Summer Olympics in London. GE's bid was $900 million more than the next closest bidder, Rupert Murdoch's Fox network. "They bid a lot higher for these Games than they needed to," said Dominic Caristi, a professor at Ball State University's Digital Policy Institute.
NBC executives now acknowledge their estimates for 2010 revenue were faulty. They expected continued advertising growth, not a recession that would hammer the economy and flatten ad budgets.
NBC will pay $820 million for the TV rights to the Vancouver Games, about $150 million more than its current estimates for advertising revenue. In two years, GE will write another whopping check, this one for $1.1 billion, to broadcast the events in London. GE separately agreed to spend $200 million to become a global sponsor of the Olympics.