NBC Avoids Sports Price Surge With 16% Olympics Rate Increase

NBC’s decades-long partnership with the Olympics is paying off.

The network will pay an average of 16 percent more for rights to broadcast the Olympic Games in the U.S. through 2032, far below the price hikes that sports such as soccer and American football have commanded.

The broadcaster, owned by Comcast Corp., will shell out $7.65 billion under the deal, extending an earlier agreement that would have expired in 2020. The deal with the International Olympic Committee covers broadcast, pay-television, mobile and Web viewing, the organizer of the games said yesterday in a statement. An added $100 million signing bonus paid by NBC will promote the Olympics movement.

The licensing deal, awarded without a bidding process, suggests the IOC chose to stick with a reliable partner rather than try to seek a bigger haul. In 2011, Walt Disney Co. agreed to a 73 percent increase in fees for “Monday Night Football,” and soccer’s World Cup was able to quadruple its U.S. licensing fees in a deal with Fox.

“The Olympic Games are in good hands with a partner whom we trust,” IOC President Thomas Bach said yesterday in a conference call. “We can say this because of the longtime experience we have with NBC, who have a more-than-excellent track record when it comes to broadcasting the games.”

NBC has aired all Olympics coverage in the U.S. since 2000 and is extending its current deal, which ends in 2020, after turning a profit on the Sochi games in February and breaking even on the 2012 games in London.

“You have to think the IOC has a comfort level with NBC working with them over the past eight Olympiads,” said Brad Adgate, director of research at Horizon Media, in an e-mail. “I was surprised as well that they didn’t open the negotiations to Disney, Fox and other networks.”

Profitable Games

The Comcast unit reported last month that it got $1.1 billion in revenue from the Sochi games, surpassing the $875 million it invested to cover the event in Russia, according to people with knowledge of the matter.

In the new deal, NBC is paying an average of $1.28 billion for each Olympic games, up from an average of $1.1 billion in its earlier agreement. NBC paid $4.38 billion for the rights to the Olympics from 2014 to 2020, including $1.19 billion for each of the latter two games in that span.

The deal keeps the Olympics, which last about 20 days every two years, alternating between winter and summer sports, among the most expensive U.S. sports-programming licenses. Disney pays $1.9 billion a year to host 17 National Football League games on ESPN’s “Monday Night Football.” CBS Corp. and Time Warner Inc. have a 14-year deal to air the monthlong National Collegiate Athletic Association’s men’s basketball tournament for about $771 million a year.

Cable-Bill Increase

Fox is paying $450 million and $500 million for the 2018 and 2022 World Cups -- up from the $100 million ESPN paid for the 2010 and 2014 licenses, Sports Business Daily reported in 2011. The National Basketball Association, whose TV deal expires after the 2015-16 season, will also get a much larger increase than the Olympics did, Adgate said.

Sports are valued because viewers like to watch them live, meaning they can’t skip commercials. Securing programming rights to must-have sports also lets TV networks charge higher fees to cable companies, who then pass on much of their increased expenses to consumers by raising their bills. Americans paid an average of $53.30 for video service last year, up from $44.30 five years earlier, according to Bloomberg Industries. That represents an increase of about 3.8 percent a year, almost double the average rate of inflation.

Bach said the IOC’s familiarity and satisfaction with NBC’s coverage led it to extend without opening the bidding to other networks, as it did in 2011. He said negotiations began last year.

“That way we could be sure, and we are sure, that the Olympic Games will be presented in a way that the Olympic spirit requires,” he said.

Jimmy Fallon

Broadcasting the Olympics also helped ratings for NBC programs such as “The Tonight Show,” whose hosting duties were handed to Jimmy Fallon this year from Jay Leno. NBC said last month that it expects to return to the No. 1 spot in the ratings when the television season finishes, ending a decade-long drought.

In London two years ago, NBC found that sharing on Twitter and Facebook generated interest in broadcasts that aired hours later in prime time. At the Sochi games, the network increased the hours being live-streamed by 42 percent, and struck a deal with Twitter Inc. that let smartphone users record events like ski jumping to watch when they got home.

“The London and Sochi Olympics on NBC have taken place under Comcast ownership and each posted record performances, giving us the confidence to make this significant commitment today,” Comcast Chief Executive Officer Brian Roberts said on the conference call.

‘Compelling Television’

NBC has given Comcast, the largest U.S. cable company, an alternate source of revenue even as it expands in pay-TV with the acquisition of Time Warner Cable Inc. The broadcaster represented about 37 percent of sales for Philadelphia-based Comcast last year.

Comcast slid less than 1 percent to $51.74 yesterday in New York. The shares are little changed this year.

“Although no one can be quite sure what the world looks like in 2032, one thing I think our company is very sure of is that the Olympics, with this leadership, history and future, will be the most compelling television in the world,” Roberts said.

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