Games Score Big
As Olympic ratings rise, so do NBC's profits
By Paige Albiniak and Anne Becker -- Broadcasting & Cable, 8/22/2004 8:00:00 PM
Thanks to some superb American performances, ratings are up. The 2004 Summer Games in Athens got off to a slow start—11% below the 2000 opening ceremonies in Sydney. Then swimmer Michael Phelps faced Ian Thorpe in the men's relay—and a couple of gold medals later, the games caught ratings fire. By press time last Thursday, Athens was up 8% in households and 13% in viewers compared to Sydney.
That's all good NBC, which invested $793 million in the games, then sold $1 billion in ads. Going in, NBC expected to earn at least $50 million in profit from the Olympics, down significantly from the $75 million it made in Salt Lake City.
The first few days were lethargic in terms of viewership. But as U.S. athletes started collecting medals, and ratings kept building, NBC started selling some of the ad space reserved for possible make-goods. Ads sold for approximately $750,000 per 30-second spot, and NBC hopes to stick to that price.
Some analysts initially worried that the Olympics wouldn't attract big audiences, forcing NBC to provide make-goods. Others fretted about brand dilution—spreading coverage over the so-called "networks of NBC"—CNBC, MSNBC, Bravo and now USA and NBC HD. Would NBC be forced to dole out cable make-goods? Now it's unlikely. NBC sold cable ads mostly as bonuses to prime-time buys, with cable ads running around $10,000 each.
Indeed, analysts say the extended coverage—1,210 hours, more than three times that of Sydney—is pushing people to prime time and upping the numbers.
"If these ratings hold, NBC and advertisers should be happy," notes Magna Global's Lisa Quan. "Few things on broadcast TV achieve the same ratings as four years ago."
While the commercial load can seem heavy, analysts estimate there are the same number of spots in prime time during the Olympics as any other night. The commercial pods are shorter, about two minutes apiece. They just come more frequently.
"I haven't noticed more clutter or heard any comments from clients," says Lyle Schwartz, managing partner, Group M, Mediaedge. "But clutter is always an issue we have to keep an eye on. The more commercials there are, the harder it is for consumers to differentiate and retain the information in them."
The numbers are phenomenal, says Roy Rothstein, vice president and director of National Broadcast Research, Zenith Media. "How can anyone be complaining?" Rothstein asks. "Key demos like adults 18-49 are getting a 10 rating in prime time."
The unexpected ratings bounce is also a multilevel payoff for Olympic advertisers that use it for more than hawking their wares. The Olympics help build their brands, searing company names—Xerox, Toyota, Visa, McDonald's, Budweiser—into the American consciousness, alongside wholesome images of Hamm winning the gold or the U.S. women blowing the longstanding 800-freestyle relay world record out of the water.
In fact, Morgan Stanley media analyst Richard Bilotti says the Olympics are the only major sporting event worth the expense. Broadcasters routinely lose hundreds of millions of dollars on baseball, football and basketball.
Aaron Cohen, media buyer for Horizon, cites another bonus. "The spots shown on the Olympics are more creative than those shown on the Super Bowl," he says. "They're very specific to the Olympics, and they are getting as much or more attention than the programming itself."
So far, viewers have seen swimming sensation Phelps cross the Atlantic in a Visa spot and watched the Jamaicans tragically drop the baton in Bud Light's 4-foot relay team many times a night. But for advertisers that choose to participate in the Olympics, it's much more than just a place to run spots.
"This is a long-term project that requires company support. [Commercials are] only part of being an Olympic sponsor," says Bill McKee, a Xerox company spokesman. Xerox's commitment to the Olympics, like many advertisers, only starts with the company's 30-second spots. Xerox also provides on-site services for the games, sending some 200 engineers to live in Athens and work on the venues for more than a year.
McDonald's, a top Olympics sponsor since 1976, also set up three Olympic venues to feed athletes, coaches, journalists and spectators. The Ronald McDonald House has sponsored a pediatric playroom in an Athens hospital.
Besides stellar performances from U.S. athletes, NBC has enhanced production, airing events with an MTV-feel. The network also keeps viewers informed about what's coming—graphics announce attractions such as "Phelps vs. the Thorpedo in 13 minutes." These visual aids have kept viewers glued to their screens.
"NBC learned a lot from the last time," says Steve Sternberg, executive vice president and director of audience analysis, Magna Global USA. "The broadcasts are crisper."
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