For just one moment, pity NBC Inc. The network has rolled up remarkably strong ratings for its broadcast coverage of the summer Olympic Games in Barcelona. And defying the oddsmakers on Madison Avenue, it managed to sell virtually all the ad time on its wall-to-wall schedule. Yet as the Games ended, NBC was being counted as a spectacular loser: The network's controversial pay-per-view telecast bombed so badly with viewers that it overshadowed even the polished performance of NBC Sports anchor Bob Costas.
NBC had billed the "TripleCast" as a way to stretch the boundaries of sports programming. In addition to regular network coverage, viewers would pay $125 to receive commercial-free, round-the-clock coverage on three cable channels. NBC and its partner, Cablevision Systems Corp., would use the revenue from an estimated 2.5 million subscribers to defray the $401 million NBC paid to buy U.S. rights to the games.
COLD COMFORT. Instead, NBC and Cablevision lured only 250,000 homes for the TripleCast. And both partners are losing millions: NBC, a subsidiary of General Electric Co., wouldn't cite a figure. But Nicholas Heymann, an analyst at County NatWest USA who follows GE, says NBC could lose $60 million to $70 million on the pay-per-view venture. Cablevision says it may lose $50 million. "It's a disaster all around," says Jessica J. Reif, an analyst at Oppenheimer & Co.
Well, not quite. One NBC insider says the network would have lost $100 million if it relied purely on ad revenue to cover the $401 million rights fee. And NBC spokesman Joseph Rutledge says its heavy promotion of the TripleCast actually boosted the network's broadcast ratings. That's welcome news to such major Olympic sponsors as Coca-Cola Co. and Visa USA. The biggest danger facing sponsors in these Games was getting lost in a blizzard of corporate logos (table). That's cold comfort to NBC, though. Its advertising success pales next to the failure of the pay-per-view venture.
How could supposedly savvy media executives be so far off the mark? In hindsight, the answer is simple: NBC and Cablevision were trying to peddle a concept that was hobbled from the outset by both technology and the conflicting agendas of broadcast and cable television. It is a case study in how to fail while pioneering a new strategy.
For starters, not enough TV households had the technology to receive the pay channels. Then, NBC and Cablevision executives didn't anticipate that both network affiliates and cable operators would regard TripleCast more as a threat than an opportunity. Most important, the two partners priced the pay-per-view package too high for all but the most addicted of armchair jocks.
`ALLIGATOR PIT.' Rutledge says the TripleCast was undermined by industry skepticism and negative media coverage. But the network-cable conflict should have been clear from the start. To assure NBC affiliates that the TripleCast wouldn't undercut their ratings, NBC President Robert C. Wright initially told them it would carry only second-tier sports such as Greco-Roman wrestling. But as sales faltered, NBC threw in key events, such as basketball and gymnastics, that were also on the network. Affiliates were livid--and some refused to promote the TripleCast.
Even so, some cable executives say that the service flopped because it didn't offer enough sought-after events. "NBC was attempting to walk a tightrope," says John C. Severino, president of Prime Ticket, a regional sports network based in Los Angeles. "They slipped and fell into an alligator pit."
To make matters worse, cable operators balked at clearing the capacity to carry all three channels. Some cable operators ended up clearing just one or two. What's more, only two-thirds of the 60 million cable households can receive pay-cable channels. And of these, only half can order the channels on demand. So, just 20 million TV households were able to make the impulse decision that NBC said would drive most buys.
That number was shrunk even further by the stiff price tag. Only when signups lagged badly did the partners agree to offer a daily rate of $29.95. They slashed the price to $19.95 after Cablevision Chairman Charles F. Dolan took an informal poll of cable operators at a reception aboard a Royal Viking Line cruise ship in Barcelona during the games and found they were desperate to reduce the fee. That irked NBC affiliates even more: "I wouldn't have taken any pleasure in seeing it succeed," says James B. Waterbury, president of NBC's affiliate-relations board and general manager of KWWL-TV in Waterloo, Iowa.
For NBC, the fiasco mars an otherwise brightening financial picture. Heymann estimates NBC will earn $245 million in 1992. But he says the core network will lose about $20 million, largely because of the TripleCast. That's another headache for Wright, who last season watched NBC lose its ratings crown to CBS Inc. Dolan, for his part, stresses that this experience will help future pay-per-view ventures. He says he even asked Wright if he'd like to try a TripleCast for the 1996 Olympics in Atlanta. Wright's reply? He'll get back to him.