NBC’s $12 Billion Olympics Bet Stumbles, Thanks to Millennials

How Important Are the Olympics to NBC's Bottom Line?
  • Rio broadcast ratings down 25 percent among 18 to 49 year olds
  • Sports fans get older while advertisers seek younger viewers

Back in June, Steve Burke described what he called his Olympics “nightmare.”

“We wake up someday and the ratings are down 20 percent,” the chief executive officer of NBCUniversal said at a conference. “If that happens, my prediction would be that millennials had been in a Facebook bubble or a Snapchat bubble and the Olympics have come, and they didn’t know it.”

He has escaped that with the Rio games this year -- but not by much. Prime-time broadcast viewership has been down about 17 percent compared to the London games four years ago. And in the 18-to-49-year-old age group coveted by advertisers, it’s been even worse. That audience has been 25 percent smaller, according to Bloomberg Intelligence.

The Summer Olympics ratings slip, the first since 2000, raises fresh doubts about what used to be a sure thing: live sports would be a huge and growing draw no matter what. That’s why NBC parent Comcast Corp. paid $12 billion for exclusive U.S. broadcast rights to the Olympics through 2032. Others, including Walt Disney Co.’s ESPN, 21st Century Fox Inc., Time Warner Inc. and CBS Corp., have made long-term bets on football, baseball and basketball.

To be sure, many sporting events are as big as ever. The Super Bowl in February pulled in 112 million viewers, making it the third most-watched event in TV history. On the other hand, Villanova’s victory over North Carolina in the men’s college basketball championship drew 37 percent fewer viewers than last year’s title game, though that may have had something to do with the fact that, for the first time, the match-up was on a cable channel, not a broadcast network.

More Options

One issue is that many fans are getting older. The average age over the past decade of National Football League and Major League Baseball viewers has increased by four and seven years, respectively, to 47 and 53, according to Ben Thompson, founder of the blog Stratechery.

“Sports is less ingrained in the younger demographic,” said Brandon Ross, an analyst at BTIG Research. “It has been replaced by other things like video games and e-sports and Snapchat feeds.”

And Americans have more entertainment choices. During the 2012 Olympics, Snapchat was in its infancy and Netflix had about half as many U.S. subscribers.

NBC Sports Chairman Mark Lazarus said the network has a plan to profit from its Olympics investment, by giving people more options. This year, for example, the network put more than 6,000 hours of coverage online and allowed BuzzFeed to run its Olympics Snapchat channel.

‘My Time’

Through Tuesday, NBC said, 78 million unique users streamed on the NBC Sports app and NBCOlympics.com, up 24 percent from same period in London.

The network is reaching more 18-to-49-year-olds on broadcast television during the Olympics than its three broadcast rivals combined, Lazarus said. While about 98 percent of Olympics watchers are still on traditional television, “We also understand that to millennials and younger viewers, prime time is really ‘my time.’ They want to watch on their terms, and that’s why moving forward we’ll continue to adapt to viewer behavior with our coverage on multiple platforms.”

It’s a delicate balance: Online offerings may have cut into NBC’s Olympics audience on TV, John Martin, CEO of Time Warner’s Turner division, said in an interview.

“Potentially it’s diluted the concentration of viewership on the linear network,” Martin said. “I wonder if there was less content available -- and people felt more compelled to tune in to the traditional network -- whether that would bolster ratings.”

Lazarus agreed that may have been the case, but said if NBC hadn’t let people stream, “the press would be writing that we’re harboring content and not just showing it live and not sharing it. It’s our job to find the right balance.”

NBC charged up to 50 percent higher rates for internet ads than for TV because the web audience trends younger and marketers are eager to reach millennials, Lazarus said, and there was little trouble selling spots on both platforms. NBC said its profit from the London games was about $120 million, and that it sold more than $1.2 billion in commercials this year and expects to even bigger earnings than four years ago.

The Olympics continue to have that draw. The audience “is not as good as it was four years ago, but in such a fragmented media world, it’s such a huge number,” said Andy Donchin, chief domestic investment officer at ad-buyer Amplify US. “We’re buying TV to get mass reach.”

But it wasn’t mass enough. Because ratings fell short, the network had to give buyers free commercial time to make good on guarantees that a certain number of viewers would switch on television sets. The promise was for ratings equaling an average of about 21 million U.S. households and the reality, as of late last week, was roughly 18.2 million, according to a person familiar with the matter.

NBC is “going to have to figure out the economics,” said Ian Schafer, founder of the Deep Focus ad agency. It has two years to do it, before the winter games in Pyeongchang, South Korea.

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