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NBC sure to win gold
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February 7, 2002: 9:32 a.m. ET
Winter Olympics wins viewers, profits, unlike any other sporting event.
By Staff Writer Chris Isidore
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NEW YORK (CNNmoney) - Profit in major sports broadcasts these days is as tough to find as winning amateur athletes at the Olympics, but NBC is poised to score a strong bottom line victory with the Winter Games that start in Salt Lake City Friday.
The company estimates it will earn a profit of between $60 million and $75 million from the 17-day event, despite spending $110 million in production costs and a rights fee of $545 million.
By comparison most major U.S. sporting broadcast contracts have gotten so expensive that they mean losses for the networks. NBC recently lost the contract for the National Basketball Association that it had held for 12 years, with its executives saying they couldn't justify the losses that went with trying to put major sporting events on free broadcast television.
Advertising time on the Olympics is 98 percent sold out, and the network is close to its $720 million revenue goal set for the games, an especially impressive achievement in the current soft advertising market that has seen ad rates drop even for the Super Bowl played earlier this month.
The $720 million is about 40 percent higher than booked by the network at the last Winter Olympics in 1998 in Nagano, Japan, and higher even than the 1996 Summer Olympics in Atlanta, which had about one-third more prime-time viewing hours.
Helped by increased patriotic mood in the country since the September terrorism attacks, NBC is expecting about 180 million to 190 million distinct viewers during the 17 days of the games, or about two thirds of all Americans.
"It really is akin to having seven Super Bowls during that time," said NBC President Randy Falco.
The reason that the Olympics are unlike any other sporting event is that they draw a much broader range of viewers. It is not just sports fans tuning in to watch. Figure skating has high ratings among women viewers who often don't watch sports.
NBC has also made a push to market these games to younger viewers, who normally are interested in the so-called extreme sports, by emphasizing some newer Olympic sports other than the traditional skating or alpine skiing events.
"The Olympics really are much more than a sporting event It really is an entertainment event and in that sense, it brings to the set a much more diverse audience," said Falco.
"Given that (the 2000 Summer Olympics in) Sydney were a little bit of a dud firecracker, I think everything looks locked and loaded to have successful games this time," said John Inch, analyst with Bear Stearns.
The Olympics are important to the network's bottom line for more than just ad sales for the 17-days of the games. The games take place during the all-important February Sweeps period, when ratings are used to set ad rates in the coming six months.
The boost that the games will give to other NBC programming, such as local news broadcasts, the Today Show and Tonight Show will continue to pay dividends to the network long after the games end.
One advantage to NBC is that it will put about just over 200 hours of its 375 hours of programming on its cable stations MSNBC and CNBC, increasing the amount of television spots it can sell.
"Go back three Olympics, you were broadcasting four or five hours a day, instead of 15 hours a day, but you still had same expense to cover the Olympics," said Jeffrey Logsdon, media analyst with Gerard, Klauer, Mattison & Co.
Still the Olympics won't be enough to move the stock of NBC parent company General Electric Co. (GE: up $0.09 to $37.05, Research, Estimates), said Bear Stearns' Inch, even if it is a noticeable contributor to this quarter's bottom line.
"A division under 10 percent of earnings doesn't drive the stock," said Inch. "It's an important platform for growth. But even if the Olympics were a bust, it wouldn't matter. They had to write off the XFL, and it didn't move the needle." 
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