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Games Score Big

As Olympic ratings rise, so do NBC's profits 8/22/2004 08:00:00 PM Eastern

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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