Comcast's Olympics Bid: Gold Medal Or Red Ink?

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In winning the rights to four more Olympic Games last week, NBC owner Comcast, acted as if it could not afford to lose one of the struggling network’s signature events to rivals ESPN and Fox.After making a $4.38 billion bid that was nearly a billion dollars richer than its rivals’ offers, can Comcast really turn a profit as Comcast CEO Brian Roberts promised?

“We don’t believe the rights were obtained at a bargain price,” said Barclays Capital analyst James Ratcliffe, who calculates a 3.5% growth rate in the cost of the rights. Under its previous Olympics deal, NBC lost $220 million on the 2010 Winter Games and is expected to drop another $250 million on the 2012 London Olympics.

Compared to GE, NBC’s previous owner, Comcast is in a better position to leverage content. Comcast brings cable network Versus to the party, as well as the Xfinity platform for streaming more live events and VOD capabilities, Ratcliffe notes. Nevertheless, he expects Comcast to lose $1.382 billion on the new deal.

The analyst calls the loss minor, accounting for 15 cents a share to Comcast over the life of the pact. (Had Comcast bid $3.4 billion as Fox did, the impact would have been about 5 cents a share, Ratcliffe estimates.)

Benjamin Swinburne, a Morgan Stanley analyst, gives Comcast more credit for being prudent. Compared to the previous deal, in which NBC overpaid, the cost for the new deal is essentially flat at a time when sports rights are escalating overall, Swinburne said.

Swinburne figures losses will diminish with only modest growth in ad rates, assuming viewership doesn’t fall. “A path to profits is possible if the Olympics help NBC accelerate retransmission fee growth or help NBCU cable nets such as Versus drive higher affiliate fee growth,” he said.

Swinburne added the deal shows that Comcast is willing to invest in NBCU’s assets.

Roberts; Steve Burke, who runs NBCU for Comcast; and Mark Lazarus, who succeeded the legendary Dick Ebersol at NBC, avoid the black eye they would have gotten had they lost the Games. And the biggest winners might have been the army of NBC Olympics staffers now likely to have steady employment through 2020.