NBC’s banking on Internet to make its Olympic bid profitable

Associated Press

NBC lost more than $200 million the last time it showed the Winter Olympics, and it’s bracing for similar losses in London next year.

So, plenty of people scoffed when the network bid $4.4 billion — nearly a billion more than runner-up Fox — for the U.S. rights to carry the four games through 2020.

Yet the price may prove right.

The growth of Internet video and opportunities under NBC’s new owner, Comcast Corp., should help cut losses significantly and perhaps make the Olympics profitable after the London Games. There’s also an intangible promotional benefit to NBC.

Consider this: Even at a loss, the Olympics generate huge audiences. About 185 million people saw some of the Olympics in Vancouver last year. The struggling broadcaster can promote new shows to those viewers as it tries to dig out of fourth place.

NBC didn’t pay all that much for the Olympics, considering that TV rights fees for other major sports such as Pac-12 college basketball have been doubling or tripling. For the 2014 and 2016 games, it’s paying about the same as it has been. For the final two games in the deal, NBC is paying just 19 percent more.

Morgan Stanley analyst Benjamin Swinburne called NBC’s deal an “Olympic win at the right price.”

He said NBC should be able to cut its Olympic losses in half after London, as long as viewership doesn’t change and advertising rates keep improving.

Beyond that, NBC can create more ad opportunities by tapping sports channels added to the NBCUniversal family when Comcast took control in January. One is the Golf Channel — convenient for Comcast as golf joins the Olympics in 2016. Another is Versus, which Comcast is positioning as a competitor to ESPN, another Olympic bidder.

NBCUniversal will have about 20 channels and more than 40 websites to cover the games. By contrast, it used five channels and one website in 2010, when it was controlled by General Electric Co.

The Olympics coverage can also help Comcast get higher fees from other cable TV companies such as Time Warner Cable Inc. to carry those channels in their lineups.

“It does not take too much to move it across the finish line in terms of getting more in the black,” said Matthew Harrigan, an analyst with Wunderlich Securities.

NBC should also benefit from sponsorship packages developed by the U.S. Olympic Committee two years ago when the advertising market looked grim.

One unknown is how fast Comcast can increase revenue from online viewing.