Olympic Implications for NBC Comcast Deal

NBC has been the exclusive U.S. network for the Olympics since 2000. (ATR)The merger of U.S. cable giant Comcast and NBC Universal could play a pivotal role in the upcoming battle for broadcast rights to the 2014 and 2016 Olympics, and how those Games reach the U.S. audience.

Former network executive Neal Pilson believes the merger, which would create one of the largest media companies in the U.S., "would give added strength" to keeping the Olympics "as a marquee event that I think would help grow the combined brand of NBC/Comcast."

Pilson, an ex-CBS sports chief who is now president of the sports consulting firm Pilson Communications, consulted with the IOC during rights negotiations for the 2010 and 2012 Olympics. That role has now been given to CAA Sports Media Venture.

"I would hazard the opinion -- I haven't talked to anybody over there -- that the Olympics would be a high priority for a merged Comcast/NBC, if for no other reason than the Olympics are a great platform to demonstrate the distribution capability of a new company like that," Pilson tells Around the Rings.

"They would be Exhibit A as far as 'Look what we can do.”

Negotiations for the U.S. rights for the 2014 and 2016 Olympics will open soon after the Vancouver Olympics.

Pilson says Comcast has the same deep pockets that current NBC parent company GE used to buy years of Olympic rights.

"They're both more than capable of paying $2 billion or more for rights," he says.

"The question is whether the Olympics fits the marketing strategies of the companies. Obviously, it has fit GE for many years. While Comcast doesn't sell the type of manufacturing and consumer products that GE does, still Comcast would be looking to demonstrate that its brand and its program service has unique capability to broadcast a big event like the Olympics,” says Pilson.

"I would think the Olympics would be a kind of signature event that Comcast would want to carry to demonstrate it made a good deal with NBC."

Nuts and Bolts

As GE has made it clear it wants to get out of the television business, Comcast is looking to build up its programming and distribution.

Comcast, the top U.S. cable operator, would have a 51 per cent stake in the joint venture. NBC Universal, the entertainment arm of General Electric, has been valued at $30 billion. French company Vivendi has a 20 percent stake, and will sell that back to GE for $6 billion for the deal to go through.

According to reports, NBCU will have revenue of more than $15 billion this year and operating income of about $2.4 billion. Another bonus: the company has no debt.

The remaining 49 per cent stake will be sold by GE to Comcast over the next seven years.

Versus, which aired coverage of the World Championships in Athletics from Berlin, is a Comcast network. The cable system also owns The Golf Channel, home of one of the new Olympic sports.

Seven NBC Universal networks showed 3,600 total hours of coverage from the Beijing Olympics: : NBC, USA, MSNBC, CNBC, Oxygen, Telemundo and Universal HD, plus NBCOlympics.com. That is 1,000 hours more than the combined coverage for every televised Summer Olympics in U.S. history (Rome 1960 - Athens 2004, 2,562 hours).

NBCOlympics.com featured approximately 2,200 total hours of live streaming Olympic broadband video coverage, the first live online Olympic coverage in the United States.

Pluses and Minuses

Harvey Schiller, former president of Turner Sports, believes it could be advantageous for the Olympics to be part of a distribution system such as Comcast.

"The question always remains: Can a cable operator demand more money on a subscriber fee than they would with or without it?" he tells ATR.

"For special things like the Olympics, there has been some resistance in the past."

Schiller said when he was at Turner, the company asked for extra money from cable systems to air the Goodwill Games, a Turner property. He recalls that the systems agreed.

Schiller said Comcast also offers additional outlets for programming, although he said NBC already has several channels, "so you're not adding much more." Comcast, though, has regional outlets which NBC doesn't have, which "can take specific programming that might be more in tune with a particular sport or team from that region," he says.

Schiller adds that the merger will also provide more promotional opportunities 24 hours a day on the system operator.

ANeil Pilson says the Olympics should be a high priority for the merged NBC/Comcast. (ATR)disadvantage is that NBC will no longer have "a powerhouse like GE behind it. They were a sponsor and a purchaser of rights."

NBC helped pay for the Olympic rights with sponsorship dollars provided by GE, a global entity. Comcast is only a domestic company.

Pilson says the loss of revenue from the absence of a corporate parent that is also a sponsor could be made up by other sponsors, or even by GE continuing to buy ads.

Noting that GE had a large presence in Beijing, Pilson adds, "Hopefully, GE would continue as an advertiser."

Leadership Factors

NBC Universal CEO Jeff Zucker would be the head of the proposed joint venture, according to Reuters, which also said Comcast would contribute around $4 billion to $6 billion in cash, plus its cable networks to pay for its stake.

Zucker got his start with NBC as an Olympic researcher for the 1988 Seoul Games, so presumably he has a soft spot for the Olympics.

Because the leadership from the Comcast side has a television background they should see the value of the Olympic brand.

U.S. Olympic Network Ramifications

The joint venture is also expected to affect plans for the U.S. Olympic Network, which have been put on hold pending a working agreement with the IOC. The U.S. Olympic Committee was planning to partner with Comcast, but by joining forces with NBC, Comcast takes on the Universal Sports channel, which often shows Olympic sports programming.

Pilson thinks Comcast would focus on Universal Sports, which is already up and running and its "expression of interest in the USOC channel would go away."

"If Comcast is going to spend a lot of money to buy NBC," he says, "my guess is one of the assets they're buying is NBC Universal and all of the programming commitments and relationships that NBC has with the Olympic sports and the Olympic family. It would seem to me that that's where Comcast would look to develop Olympic programming -- on the channels that it just acquired.

"The USOC hasn't had a channel ever. It would make it a good deal more difficult for them to launch a channel at this point,” Pilson says.

He says the USOC, which would also have to mend fences with the IOC, will lose its leverage in a merger. According to reports, the USOC had asked for as much as 50 percent of the channel if it had partnered with NBC Universal, while the network was offering 20 percent.

Challengers for Olympic Rights

Pilson thinks the fight for the 2014/2016 rights will come down to NBC and ESPN.

Comcast mounted an unsuccessful takeover bid for Disney, which owns ESPN and ABC, in 2004.

Pilson believes the merger of NBC and Comcast would create a very strong competitor to ESPN as far as the multiple revenue-generating platforms that would evolve.

"You have the strength of NBC in terms of their broadcast and cable and internet capability," he says, "and you add to that the Versus channel in terms of national sports distribution and the vast resources of Comcast in terms of revenue generation."

Negotiations for the U.S. rights for the 2014 and 2016 Olympics will open soon after the Vancouver Olympics. (ATR)ESPN has expressed a strong interest in bidding for the Games and also controls a large number of distribution platforms.

Fox owner Rupert Murdoch had said he might be interested if Chicago won the 2016 Games, but there has been no indication that the company would bid with Rio de Janeiro as host city. Murdoch has said Fox would bid only if Chicago won the 2016 Games.

CBS has not been a major factor in negotiations since Pilson bought the rights to the 1992, 1994 and 1998 Olympics.

"I think CBS is comfortable with its current sports programming at this point," he says.

"It doesn't appear that they will be aggressive bidders for Olympic rights, but they have said nothing publicly. That's not to say they might be doing it all quietly."

Schiller says he would not eliminate some other possible players, including CBS, which could partner with Turner. "It's always down to who's going to write the biggest check," he says.

Written by Karen Rosen.