Weekly Update

NBC and the Olympics: Old ways still earn gold

The London Olympics may set back the cause of disrupting the traditional TV business by years. For all the whinging on Twitter and Facebook about NBC’s coverage of the games in the U.S., in particular its decision not to show most of the marquee events live in favor of tape-delayed packages during prime time, the strategy has so far proved to be a huge ratings and financial success for the network. Not only has NBC proved there is still plenty of gold left in the traditional prime-time broadcast model, it has shown that the steps the networks have taken to protect that model are indeed working, giving other networks watching NBC’s success little incentive to tinker with it.

Consider just a few of the lessons NBC and its peers are likely to draw from the results:

You can still buy ratings with big-money sporting events: NBC spent a whopping $1.18 billion for U.S. the broadcast rights to the London Games. But through the first five nights it was trouncing the competition during prime time, averaging 35.6 million viewers a night. Ad spots during the broadcasts are selling for more money since the games started than they were before. After warning Wall Street that it could well lose money on the deal, NBC now says it could break even on the games themselves, not counting the benefits of the promotional platform the game provide for other NBC programming and properties, or boost it provides to the ratings of non-Olympics programming like “Today” and the “NBC Nightly News” by broadcasting from London.

Although the networks have complained in recent years about the high costs of rights for major sporting events, to say nothing of the impact those high costs have on the carriage fees the networks demand from pay-TV distributors, nothing in NBC’s experience with the London Games suggests its time to change that formula. Big-money sporting events still work to drive higher advertising revenue and higher carriage fees. What’s not to like if you’re a network? Since only the major networks can afford those high rights fees, they will continue to enjoy the market share advantages that spending buys.

Authentication works:  While NBC has not shown many events live on the network it has made all events available for live streaming, but only to authenticated pay-TV subscribers. Though the authentication model has drawn complaints, as has the quality of some of the streams, and there are plenty of workarounds available for cord-cutters, none of that has had an appreciable effect on NBC’s streaming efforts. NBC served up 64 million streams through the first six days to all platforms — web, mobile, tablet — including 29 million live-event streams — a 343 percent increase over the Beijing Olympics four years ago.

What’s more, the authenticated streaming seems to be having a halo effect on NBC’s broadcast. The most streamed event so far was the women’s team gymnastics finals, which generated 1.5 million streams. It was also the most widely watched event during prime time, garnering 38.7 million viewers. Those results are only likely to strengthen the networks’ determination to keep streaming tethered to pay-TV subscriptions going forward.

Day-part programming still matters: The most viewer-friendly approach to the games would have been to broadcast the events as they happened and let people do their own time-shifting by TiVo-ing the broadcasts and making their own choices as to what to watch later. NBC obviously hasn’t done that, opting instead to provide a heavily programmed “package” of events during prime time while leaving their regular day-time schedule more or less as is.

It worked. Remarkably, 43 percent of prime-time viewers 18-54 said they knew the results of the events they watched before the broadcast but watched them anyway. In fact, 67 percent of those who knew the results before watching said knowing the outcome before hand made them more likely to watch, not less. For all the tools available to consumers today to become their own programmers, the day-parting and programming decisions of the networks still have enormous impact on what viewers choose to watch and how many of them watch it. That means the networks still retain  tremendous leverage with advertisers and distributors — the two main financial pillars of the TV ecosystem.

Sadly, there are a number of unfortunate lessons a network could draw from NBC’s handling of the games as well, for instance that you don’t even need to do a particularly good job at broadcasting events like the Olympics to achieve success. From a professional and journalistic perspective, much of NBC’s coverage has been comically awful, from inane interviews and commentary to ham-handed editing to grossly superficial reporting. But that’s not likely to be enough to threaten what still works about the model.

Question of the week

What other lessons should the industry draw from NBC’s handling of the Olympics?