Saturday, February 18, 2006

Olympics Broadcasting Economics

I love watching Olympic events, though for this Olympics, I certainly appear to be in the minority. Apparently, prime time viewership is down 36% from Salt Lake City, 17% from Nagano, and 44% from Lillehammer. So much for the thrill of victory, and the agony of defeat when broadcast some eight hours following the event. Apparently, counter-programming by other networks has been successful, even including Fox's "Idol," what I view as a pageant of discordance.

If NBC fails to deliver the promised audiences to its sponsors, it owes "make-good" or free ads to these companies. Given NBC's investment of greater than $700 million in production rights, fees and incremental production costs, the network apparently still expects to see some $50 million in profits. To an outsider, this level of profitability, given the relatively poor audience seems unlikely. This level of profits is in line with what the network earned from the Athens and the Sydney Olympics but less than the $75 million it apparently earned from Salt Lake City.

However, put in context with other broadcasting rights, i.e. Howard Stern's contract, perhaps the Olympics is a relative bargain. After all, getting the rights to broadcast what to a North American seems like an obscure sport like cricket, is getting very expensive. Not knocking the sport, I have had the privilege of meeting Dickie Bird, the cricket umpire and fabulous raconteur, though I have yet to be persuaded to actually observe the game.

As this link points out, four years of broadcasting rights to Indian cricket has just been sold for $612 million versus the previous contract for $77 million. How do you possibly recoup the investment? From what I have read, the current TV penetration in India is some 110 million homes with cable reaching about 60 million homes. Far from an insignificant market.

The developing world may be catching up on what we started here...paying almost anything for content. Time to grab a Kingfisher beer and find the Mumbai sports channel!


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