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Rebranded NBC Sports Network Holds Key to Comcast’s Olympics

Comcast (CMCSA) Corp. Chief Executive Officer Brian Roberts says he’s confident his $4.38 billion bet on the Olympics will turn a profit. That’ll depend on how many viewers the rebranded NBC Sports Network can attract.

The company’s NBC Universal is putting more than 293 hours of the London Olympics on the pay-TV network, starting July 25. That’s an average of 14 hours a day, in addition to coverage on the free NBC network, Bravo, CNBC, MSNBC and Telemundo. Bob Costas will serve as lead anchor for the games and may appear on the channel for extended interviews and live updates.

Comcast is using the Olympics to promote the network, formerly Versus, as a national, 24-hour sports channel. The games offer the NBC Sports Network a platform to build viewers and advertising, now just a fraction of those at Walt Disney Co. (DIS)’s ESPN. The channel plans to use the visibility to secure more rights, possibly to Major League Baseball.

“This is a long-term project toward getting more distribution and higher rates, because we will have the programming people care about,” Mark Lazarus, NBC Sports Group’s chairman, said in a phone interview. “This is going to be a network that has events, news, documentaries, specials and original programming.”

While NBC doesn’t expect a profit from this year’s games, which are being carried under an older, expiring agreement, the company will do “a lot better than people think,” said Lazarus, who declined to give a specific number. NBC’s telecast of the 2010 Vancouver Games lost $223 million.

Olympics Forecast

David Joyce, an analyst at Miller Tabak & Co. in New York, predicts NBC will lose $100 million to $200 million on the games, which run through Aug. 12. NBC says it paid $1.18 billion for the rights, while Joyce estimates $100 million in production costs.

The company projects revenue of $950 million “so far,” about $100 million more than the 2008 Beijing Games, Seth Winter, a senior vice president of NBC Sports, said at a briefing today in New York. The figure doesn’t include local ad revenue, and NBC is holding back some airtime to profit from events that may surge in popularity, he said.

Philadelphia-based Comcast, which acquired control of NBC Universal for $13.8 billion in January 2011, rose 1.5 percent to $31.04 at the close in New York. The TV, film and theme-park unit contributed 37 percent of Comcast’s sales in the first quarter and 18 percent of income, according to company reports.

Profit Goal

Roberts’s goal of profitability “over the term” of the Olympics deal, covering games from 2014 to 2020, hinges on the NBC Sports Network increasing subscribers, the fees cable and satellite services pay to carry the channel, and advertising.

Olympics programming is a “must have,” said Lazarus. Fans will see as many as 20 medal rounds and 22 different sports on the NBC Sports Network this summer, including men’s and women’s basketball, women’s soccer and field hockey.

ESPN charges pay-TV systems about $5.15 a month per subscriber, more than any other national network, and is expected to collect $6.19 billion from cable systems this year, according to researcher SNL Kagan. The NBC Sports Network charges 31 cents and is expected to pull in $297 million.

Prime Time

In prime time this year, Disney’s sports network has averaged about 1.23 million viewers in the 18-to-49-year-old demographic, the target group for marketers, according to Nielsen data from Horizon Media Inc., a New York ad company.

The NBC Sports Network, helped by hockey playoffs, has averaged 142,000 viewers, according to Nielsen data. The channel is available in 80 million homes, compared with almost 100 million with ESPN, according to the companies.

To Lazarus, that gives the NBC Sports Network room to grow.

“There’s not going to be a single moment when you’ll be able to say, ‘NBC Sports Network has arrived,’ but it’s all about getting a scalable level of quality events and quality original programming,” Lazarus said. “We will continue to prove to the cable operators that we deserve higher rates.”

Today, ESPN has rights to Monday Night Football, Major League Baseball, the National Basketball Association, NCAA basketball and football, Nascar, all four of tennis’s major championships and three of golf’s four majors.

Bull Riding

Beyond the Olympics, the NBC Sports Network’s rights include the National Hockey League, Major League Soccer, NCAA hockey, IndyCar racing, the Tour de France and bull riding.

The network is interested in Major League Baseball “at the right price,” Lazarus said. The league will seek offers later this year.

NBC Sports Network also will develop morning, early evening and nightly sports information programs to challenge “SportsCenter” and other ESPN talk shows, such as “First Take” and “Pardon the Interruption.” The “tone and voice” of the shows will be distinct from ESPN, with less reliance on anchor showmanship, Lazarus said.

ESPN isn’t the only obstacle. The NBC Sports Network faces competition from the new CBS Sports Network and a potential entrant from News Corp. (NWSA)’s Fox, which is considering its own national channel, people with knowledge of the situation said.

Comcast, CBS and News Corp. all want “something similar” to ESPN, said Joyce.

In addition, many leagues already have their TV rights tied up in multiyear contracts, and the cost of sports is skyrocketing. Gaining rights without making fiscally irresponsible decisions is the biggest challenge, Lazarus said.

ESPN agreed to pay the NFL almost $2 billion a year for rights to Monday Night Football through 2021, a 73 percent increase from the previous contract, the New York Times reported. NBC has spent $15 billion on sports over the last 15 months, including the Olympics through 2020 and Sunday Night Football through 2022, Lazarus said.

Tape Delays

Tape delays of the Olympics in the U.S. also present a challenge, particularly in the Internet age, when results may be known instantly and services like Twitter Inc. could erode audiences, said John Tinker, an analyst at Maxim Group LLC in New York. For the London Games, the NBC broadcast network will air events including swimming, track and field, and gymnastics in prime time on delay.

“Live is hard to replicate,” said Tinker. “When America beat Russia in hockey in 1980, you wanted to see that live. That’s what you’re paying for. There will still be an audience, but live sports are what people want to watch.”

Some events from the 2014 and 2018 winter games in Sochi, Russia, and Pyeongchang, South Korea, will be delayed for U.S. viewers. The 2016 Summer Olympics will be in Rio de Janeiro, one time zone later than New York.

Lazarus says he isn’t worried. Media buzz will make Americans want to tune in even if they already know the result.

“The Olympics is the last bastion of communal viewing where families gather in front of the TV,” Lazarus said. “It’s less about the results and more about, ‘Boy, you’ve got to see this.’ Knowing the stories and seeing the patriotism doesn’t get diminished at all by someone knowing the results.”

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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