NBC Loses Big By Winning Olympic Games

Last Updated Jun 8, 2011 3:08 PM EDT

Hypothetical question: Would you OK a deal where your company spent $4 billion and only expected to get $3 billion back? If your answer was "no", then you didn't just win the rights to the Olympics for NBC Universal.

NBC just paid $4.38 billion for the rights to broadcast the next four Olympics. It has lost or expects to lose at least $500 million on the 2010 and 2012 Games. You do the math. So far no one at NBC has offered a coherent explanation of why next time will be different. An unnamed executive told The Wall Street Journal that the network will

  1. Spread its coverage across its cable, broadcast and digital outlets; and
  2. Get more money via advertising and increased fees from its local affiliates and cable.
Questions about each of those:
  1. This is different from what you've done before ... how?
  2. See above.
What's more the Comcast (CMCSA‎) unit almost certainly overpaid. It bid $1 billion more than the $3.4 billion offered by News Corp.'s (NWS) Fox. Disney's (DIS) ESPN, which is a bit obsessive when it comes to sports, didn't even go for a four-year deal, instead offering $1.4 billion for the 2014 and 2016 Games. Poor fools, you won't win the auction if you try to turn a profit... unless you're the International Olympic Committee.

The locations of these four games are also problematic for any U.S. broadcaster. While the 2016 Summer Games are in Rio De Janeiro, which is in the same time zone as the Midwest, the 2014 ones will be held in Sochi, Russia, which is eight hours ahead of the East Coast. Sites for the two games after that still haven't been picked but South Korea is seen as in the lead for 2018. It is 14 hours ahead of East Coast time, which would mean very few live events for prime-time here in the States.

How bad does a deal have to be to be considered a breach of fiduciary responsibility? Were I a Comcast stockholder, I'd find that question very interesting right now.


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    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.