Welcome to the OlympicsThis year, the Games return to their ancient birthplace, Athens. So why is NBC throwing its big bash for advertisers in Bermuda? 6/06/2004 08:00:00 PM Eastern
Few industry perks can compare to an all-expenses-paid trip to the Olympics.
|OLYMPICS RIGHTS DEALS|
|Source: Magna Global USA|
|NBC Universal||Summer 2012||$1.18B|
|NBC Universal||Winter 2010||$820M|
|NBC Universal||Summer 2008||$894M|
|NBC Universal||Winter 2006||$613M|
|NBC Universal||Summer 2004||$793M|
In 10 weeks, VIPs of NBC will enjoy swank hotels, hip parties, and the best tickets to the top events in exotic Athens, the birthplace of the Olympics.
But that's not the way a lot of big advertisers, affiliates, and others important to the network will experience this year's Summer Games. When the Olympic torch is lit, they'll be 4,800 miles away, watching the Games on giant screens on a pink sand beach at NBC's alternative viewing site: Bermuda.
About half of NBC's invited clients will be there, at a five-star resort enjoying scuba diving, horseback riding, and poolside cocktails. Fear is a factor: Some industry executives are rejecting the lavish junket to Athens, frightened of a terrorist incident. Others dread Olympic traffic jams and the searing heat.
"Security is without a question an issue," says Aaron Cohen,
president of Horizon Media, which buys nearly $1 billion in ads. He has been to four of the Olympic games as a guest of TV networks over the past 15 years but plans to decline invitations this year, he says, not just because of terrorism but also because of the heat.
Throwing a party in Bermuda to celebrate the 28th Olympic games being held in picturesque Greece may strike people outside the TV business as odd. For NBC, though, the Bermuda party reflects a far more critical mission: wooing its largest clients—advertisers. In this business, relationships mean more than ratings.
It's less important for advertisers to be physically in Athens, as long as they're putting their commercials on NBC's air. The network is trying to sell a record $1 billion worth of advertising across its TV portfolio, including Bravo, USA Network, MSNBC, CNBC, and Telemundo. In addition to recouping its $793 million rights fee plus additional production and promotion costs, NBC sees the Olympics as a prime platform to hype its fall schedule.
For clients spending so much money, a choice of playgrounds for schmoozing was an easy call. It "was the right thing for them to do from a business standpoint in the current situation," says the head of a major ad agency who declined an NBC invitation to Athens because of security concerns. The executive is undecided about Bermuda. Fewer people will make the trip to Athens, he says, but they'll make up for the time in Bermuda. "This kind of trip is important to advertising-agency people and clients."
Other executives say the weather is a bigger deterrent than the threat of terrorism. "To me, when you have five kids, you don't go to the Olympics in Athens in the summertime," says Comcast Cable President Steve Burke, who has declined an invitation from NBC's cable group.
NBC minimizes the fears over security. Spokesman Mike McCarley notes that, during the 1998 Winter Olympics, CBS threw a big advertiser event in Aspen, Colo., for clients who didn't want to travel to Nagano, Japan. NBC also had a similar event in Bermuda during the 1996 Summer Games in unexotic Atlanta.
"This is nothing new," says McCarley, adding that NBC is getting plenty of RSVPs on its invitations. "There is more demand for Athens trips than we have rooms available."
Bermuda should be fun. Clients will rotate in three- or four-day stays at the Elbow Beach Bermuda, a Mandarin Oriental hotel with 55 acres of botanical gardens and the island's trademark pink beaches. Don't want to watch the women's shot put preliminaries? Take a dip in the Olympic-size, climate-controlled pool, go snorkeling, or, of course, play a round of golf. Enjoy the barbecue at the Seabreeze Cafe.
In Athens, guests will be put up in a smaller hotel and discouraged from wandering too much. At past Olympics, NBC clients primarily used public transportation. This time, clients report, NBC is asking them to stick to NBC transport. Crime against tourists ison the rise at popular sites, particularly in Athens, according to the U.S. Department of State.
Security, of course, has been an increasingly critical concern at the Olympics. The Athens Organizing Committee says security costs have already hit $1.7 billion—quadruple those for the 2000 Sydney Games. In Salt Lake City two years ago, virtually all spectators walked through metal detectors. Advertisers who went to the 1992 Summer Games in Barcelona, Spain, recall that, every time they boarded an NBC-chartered bus, security guards swept underneath with mirrors mounted on long poles to look for bombs. (Basque separatists were the threat that year.)
For both the Barcelona and the Sydney games, NBC's VIP guests were housed on a cruise ship docked in the harbor. Aside from alleviating a hotel-room shortage, NBC executives liked how much easier is was to control access and keep everyone around for onboard parties. "It was like being on a cruise in port," says the agency chief. "Every time you got back, there was food and entertainment, and you could go to events or tour."
Other companies who typically fly important customers to the Olympic Games are also cutting back, says Peter Carlisle, CEO of Carlisle Sports Management. "A lot of companies don't want to invest in the games the way they normally would. There's less hospitality, fewer people they're bringing over there."
NBC's biggest challenge now is to bring more viewers to the screen. Olympics advertisers like General Motors, Coke, McDonald's, Visa, and AT&T are paying an average of $730,000 per prime time spot on NBC. By comparison, a spot during the Super Bowl goes for $2.3 million, and commercials during the recent finale of Fox's American Idol
sold for $1 million each.
So far, the network has sold just 85% of its inventory—slightly behind schedule, say ad buyers. For the Sydney games, NBC didn't sell out until a week before Australian 400-meter track world champion Cathy Freeman lit the torch. For the 1996 Atlanta games, NBC didn't sell its final $1 million worth of spots until the very day of the opening ceremony.
With Athens seven hours ahead of the East Coast, prime time will be loaded with tape-delayed coverage. The Summer Games in Sydney were a ratings disaster, well below audience guarantees. Research by Magna Global USA found that NBC stuffed 20% more commercials into each hour of programming to make up for the ratings shortfall.
Still, many buyers and advertisers predict a hit. Says Laura Bajkowski, vice president of advertising for sponsor Choice Hotels: "I see 200 million people glued to the set as they are every Olympics." Some will be in Bermuda.
Additional reporting by Allison Romano