July 29, 2021

Can Comcast Create Enough Value from the Olympics to Justify the Cost of Content?

Olympic Value History

The Olympics have long been one of the strongest pieces of content available. For the two weeks they broadcast, the Olympics dominate TV ratings.

This content, however, does not come cheap. In 2014, Comcast paid $7.75 billion for full U.S. distribution through 2032. At $1.3 billion per year, the company needs to derive a great deal of value to justify the expense.

Is the investment paying off?

For decades, the rights to distribute Olympic games were sold every few years to the highest bidder for a flat fee plus a share of ad revenue. The network that won the bidding war would then broadcast the games exclusively over their namesake network (ABC, CBS, NBC).

More recently, however, distribution has splintered across the growing number of networks now owned by major players. For example, when Comcast laid down $7.75 billion for 2014-2032 Olympic rights, it expanded its distribution strategy from an NBC-only broadcast scheme to one that leveraged all of the channels under its umbrella (USA, Bravo, NBCSports, etc.). While this decision split viewing and lowered broadcast ratings, from 2016 forward, total viewing across all assets greatly exceeded NBC-only viewing.

Mounting Challenges to ROI
Despite this short-term increase in audience, there are a number of speedbumps that threaten to derail the future of Olympic broadcasts.

  • Sports viewership is declining. The Olympics typically brings in a lot of casual sports viewers to watch the opening ceremonies and to see stars compete in skating and gymnastics, but it is still primarily a sporting event. Comparable sporting events like the Superbowl, Daytona 500, NCAA tournament, and the Kentucky Derby, have seen viewership drop from 2019. The Superbowl maintained the best at a 7% decline, but the Daytona 500 saw a 47% drop in viewership.
  • Awareness is low. According to a recent release by The Morning Consult, the percentage of people expecting to watch the Olympics declined since earlier in the year from 61% in early 2021 to 51% last week. Boomers are typically the bread-and-butter viewer for the Olympics, but they expressed no more interest than other groups.
  • Lack of big names. In the past Olympics there have been a number of athletes that had significant name recognition, but in 2021 Simone Biles is the only athlete who can lay such claim.
  • No audience at the events. The American fans were often very strong supporters of the Olympic games. The energy of the events was noticeable and the promotion and discussion from the spectators back to the states is noticeably missing. For people that want to be seen in the media and social media, Tokyo would certainly be the place to be seen over the next two weeks.
  • Continued fragmentation of viewing. As reported frequently by this group and others, Consumers have split viewing over a number of different sources making it very difficult to promote content. Standard Pay-TV HH’s have declined significantly over the last five years leaving a significantly smaller audience for traditional viewing content.

Comcast was aware of these issues when it laid down the big money, and has attempted to address them by making a number of strategic moves.

  • Making most of the content available on Peacock. This should drive significant usage of Peacock and possibly drive subscriptions to their premium service “Peacock Premium”. Like the in-theater movie usage done by other streaming services, this premium content should drive significant usage on this platform.
  • Launching portals on Flex and Roku. Given how pervasive connected TVs have become, Comcast used both its own broadband-only (BBO) platform (the X1-based Flex) and the leading streaming device vendor (Roku) to help promote and curate content for those living without a pay-TV subscription.

The Olympic portal on both its X1 set-top platforms (pay-TV and BBO) drove significant viewership of the Olympics in 2016, as the content was front and center when consumers turned on their TV. For the Tokyo Olympics, there are more than 20-million X1 boxes, more than three million Flex boxes, and over 50-million Roku devices deployed, this curated streaming content will help drive overall viewership of the more than 7,000 hours of content Comcast will make available.

Is the Cost of Programming Justified?
Expectations for the July Tokyo Olympics were high. As of June, NBCUniversal announced that it had signed over 120 advertisers for the games, more than any other Olympics broadcast. An NBCUniversal spokesperson said at that point the company was on track to exceed the $1.2 billion in ads sold for the 2016 Rio Olympics.

Unfortunately, early results from Tokyo 2021 have fallen short of expectations. For example, though Friday’s primetime opening ceremony still dominated TV viewing, with five times the TV viewership of the next-highest programming, total viewership fell dramatically. Combined broadcast and streaming views were only 16.7 million, down from 26.5 million for the 2016 Rio opening (-37%) and 40.7 million for the 2012 London opening (-54%).

In 2016, the total content hours viewed was higher than 2012 even though the TV viewership was lower. With the additional fragmentation of viewing across multiple platforms, Comcast might be able to drive total hours back to the same levels as 2016 to maintain advertising revenue, but the viewership and promotion of Peacock might be the saving grace for the company this year. On Monday, Conviva reported that the opening ceremony on July 23 was up by 279% compared to the ceremony during 2018’s PyeongChang games and NBC reported that users of the Sports and NBCOlympics.com apps were up 75%.

For comparison, in the new NFL deal announced earlier this year, NBC will pay $1.71 billion per year for Sunday Night Football rights. Even in a down year, SNF dwarfed everything else on the primetime roster in 2020, averaging 17.4 million linear TV and streaming viewers over the course of 18 games.

Conclusion
Even with the reduction in ratings, the Olympics remain one of the best opportunities to gain a broad audience, which in turn drives sizable ad revenue. By the time the Tokyo games wrap up, I expect that Comcast/NBCU will have justified the cost of this content, at least for this go-round. And while this scenario will likely repeat in the next few cycles, where it goes from there is less clear.

Stick with TDG and stay ahead of the curve.


Paul Hockenbury has over 24 years of experience in insight team leadership with Comcast where he directed product specific research for Video, Internet, Home Security, Mobile, and Home Phone. He brings an expansive knowledge and experience in the entertainment and telecommunications spaces to the TDG Team.

 

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