No Olympics is a big blow to NBC
Games were key for NBCUniversal, which has sold $1.25 billion in ads for the event.
The delay of the 2020 Olympics in Tokyo until 2021 because of the spread of COVID-19 scuttles one of the biggest live-TV events of the year and delivers a major blow to NBC.
The International Olympic Committee and the Japanese government, citing the need “to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community,” announced the postponement in a joint statement Tuesday.
The decision will cause a significant financial hit — and much disruption — for the Olympics TV rights holder, NBCUniversal, which this month said it had sold 90% of its commercials for the Games, scheduled to run from July 22 to Aug. 9. The $1.25 billion the company collected was a record, surpassing the total for the 2016 Games in Rio de Janeiro.
“This creates a world of hurt for NBC,” said Rick Burton, a sports management professor at Syracuse University and a former executive with the U.S. Olympic Committee. “What was already a complicated year for the company just got a lot worse.”
The Games are so important to NBCUniversal that six years ago it committed $12 billion to extend its partnership with the IOC through 2032. Every two years, NBCUniversal
has used its 17 days of Olympics coverage to forge relationships with key advertisers and millions of viewers. Its Olympics coverage also crushes its TV competitors in the ratings.
The New York-based media company, which already had advance teams in Japan, has been making contingency plans in recent days as it became clear that holding the Games in July would be untenable because of the virus outbreak, which has forced the cancellation of virtually all sporting events, concerts and film and TV productions.
“Given the unprecedented obligation we all face to contain COVID-19 globally, we fully understand the decision made by the IOC, Japanese government, and the health organizations they are working with to postpone the Tokyo Olympics and Paralympics
until 2021,” NBC said in a statement. “We have no doubt that the IOC and Tokyo Organizing Committee will put on an exceptional Games next year, and that the Olympic flame will once again unite the world and provide a light at the end of this tunnel.”
NBCUniversal generated $1.6 billion in revenue from the Rio Games, including $1.2 billion in ad revenue, according to S&P Global Market Intelligence’s Kagan unit. NBCUniversal’s commercial sales were on pace to be 6% higher this year.
NBC Sports typically sends 2,000 people to an Olympic site to handle its live coverage. Many of them are freelance employees who specialize in working on live events and essentially will be out of work this year because of the postponement.
The network has only a small number of personnel in Tokyo as the Games were still four months away, according to a person familiar with the situation who was not authorized to comment.
This year, NBCUniversal was counting on the Olympics to bring in a huge ad haul and also launch its streaming service, Peacock. The nationwide rollout of the ad-supported service was scheduled for July 15, a week before the opening ceremony in Tokyo.
The company looked to capitalize on the intense interest surrounding the marquee event to promote Peacock.
NBCUniversal also was banking on advertisers spending heavily to promote their products on Peacock because other streaming services such as Netflix and Disney+ do not accept commercials.
“NBC is losing that promotional window for Peacock and also for its new fall season programming,” said Jon Swallen, chief research officer for Kantar Media, which tracks ad spending. “It’s a blow in the short term because that July-through-August period is typically soft for advertising. Every four years when the Summer Olympics come around, it’s a huge windfall for NBCU.”
This month, Brian Roberts, chairman and chief executive of NBCUniversal’s parent, Comcast Corp., said during an investor conference that the company was “full steam ahead” in planning for the Olympics, but it had insurance to cover its expenses in case the Games were canceled.
“There should be no losses should there not be an Olympics,” Roberts said at the Morgan Stanley media conference in San Francisco. But he noted there “just wouldn’t be a profit this year.”
But for NBC’s sales team and advertisers, the postponement adds to the economic uncertainties because of the U.S. shutdown of nonessential businesses. It will likely mean renegotiating contracts, and prompt advertisers to recalibrate their spending plans. The IOC did not specify when in 2021 it hoped to stage the Games, so it will be difficult for both sides to make concrete plans.
New York-based Discovery Communications, which has the rights to broadcast the Games in Europe, also must shift gears.
“We will continue to develop our products and offerings to best serve our customers and marketing partners in 2021,” Discovery said in a statement.