NBC and the Olympics: Why Cord-cutting Will Be Slow and Hard

Steve Wildstrom / August 1st, 2012

NBC Olympics logoNBC’s exclusive U.S. coverage of the the 2012 London Olympic Games has not, to say the very least, been a hit in the tech world. Twitter has been buzzing since last Friday about NBC’s delayed showing of major events, endless commercials, insufferable commentary, cheerleading for U.S. athletes, mawkishness, sentimentality, and a hundred other sins. All of it is true, and all of it has marked coverage of every Olympics I can remember.

There are two important things new. One is the ubiquity of social media, which have grown tremendously since the 2008 Beijing games. Twitter, Facebook, and the rest give us a global water cooler where we can we can grumble and complain to anyone who will listen. The other  is the ubiquitous availability of streaming media on our phones, tablets, PCs, game consoles, and just about anything else with or connected to a screen.

The  combination has created a strange sense of entitlement among many of the tech savvy. who seems to feel it has a right to watch the Olympics live wherever  and whenever they want. The problem is that for all the quasi-governmental, nationalistic trappings of the games, the International Olympic Committee is a private organization to which NBC Universal, another private organization, has paid a grade deal of money for the rights to televise the games in the U.S. For reasons well explained by The Atlantic‘s Megan Garber, NBC’s economic interests lie with the status quo, and are likely to for some time to come. This bodes ill for those who are counting on the internet to disrupt the way television content is delivered.

First, no one has a right to anything other than over-the-air content broadcast by local stations. Some local stations offer streaming, but it’s only of their own content, mainly news, because that is all they own the rights to. Networks offer selected shows, either on their own sites or through service such as Hulu.com, but what they offer and when they make it available is entirely up to them. That is why calls for a Federal Communications Commission investigation of NBC’s delayed and mangled streaming of the Olympic opening ceremony were nothing more than venting.

The situation is not going to change as long as those who control the content don’t see cord-cutters, who who would rely exclusively on over-the-top delivery on the internet, as a major economic threat to their very lucrative relationship with cable and satellite operators on the one hand and content owners, such as studios and sports leagues, on the other. That is why they are taking only baby steps to stream their content, and why Olympic streamcasts and services such as HBO Go are available only to people who are already cable subscribers. (Of course, NBC’s relationship to cable is more than close; NBC Universal is owned by Comcast.)

Furthermore, the distribution of content is tied up in a maze of contractual agreements. ESPN, for example, has contracts with Major League Baseball, the National Football League, the National Basketball Assn., the NCAA, and the College Football Assn., among others, and each specifies just how the content may be distributed. These contracts will evolve, but slowly.

One thing that is absolutely clear is no matter what alternative means for delivering content are developed, you are going to pay for the good stuff. Like newspapers, television content distributors have not found an internet advertising model that works anywhere near as well as traditional broadcast or cable. In the future, you may be able to subscribe via the internet, but you are still going to pay.

I pay a lot of money for my Verizon FiOS video service and don;t really watch very much television. I sympathize with those who only want to watch Game of Thrones but are unwilling to pay for a cable subscriptions plus an HBO premium just to get the one show they really want to see. I don’t know that HBO will ever sell subscriptions to individual shows–it doesn’t suit their business model well. But I’m sure the time will come when you will be able to subscribe to HBO without going through a cable company.It’s just going to take a while, and that is more likely to be measured in years than months.

Maybe by 2016, we’ll be able to subscribe to live feeds of the Rio de Janeiro Olympics (Rio is just one hour ahead of Eastern time, so there’s not much of an excuse for delays.) I certainly hope so. But for the time being, we all need some patience.

 

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • Arthur Greenwald

    This is an excellent analysis and, in Aaron Sorkin’s phrase from The Newsroom, dares to “speak truth to stupid” about widespread indignation about limits placed on streaming video content. One correction: NBC owns the Olympics rights thru 2020 so sharing time zones with the USA will be the sole difference.

    • steve_wildstrom

      I’m assuming that the increasing ubiquity of streaming will cause some change in NBC’s behavior by 2016.

    • JDSoCal

      The Newsroom, universally panned by everyone, except the 200 or so people who watch MSNBC, is a big lefty bore. Stupid is defending Obama’s epic failure.

  • Walt French

    If I get this right, you’re saying that the IOC, a not-for-profit, non-governmental institution, selects bidders for distribution rights without regard to monopoly practices in the downstream distribution. And that the DoJ cares not very much about how NBC exploits its monopoly in the Games to generate profits in cable systems owned by its parent, so-called “tying.”

    Really, why does the IOC even pretend it’s not interested in profits? Its governing board might as well just be the various media companies’ reps.

    • steve_wildstrom

      The sort of exclusity granted by the IOC has been around since the beginning of broadcasting. There’s nothing illegal about it.

      • Walt French

        Remember that Microsoft got in trouble not for creating a monopoly with Windows, but tying other services to it to stifle competition where it otherwise would’ve existed. I don’t see any trouble with the IOC moves — though I think that, like the FCC spectrum auctions, they serve their public poorly — but rather with Comcast/NBC’s policies of limiting distribution for content available OTA.

        • steve_wildstrom

          The Microsoft case is not relevant. Microsoft’s problem is that having established a monopoly, not in itself illegal, it abused its monopoly position to damage competitors and consumers, illegal under the Sherman Antitrust Act. NBC has no monopoly; indeed, the merger of NBC Universal and Comcast was recently blessed by the government. There is no legal issue with the type of exclusivity agreement NBC has with the IOC and no regulation of distribution other than that cable systems must carry the networks’ local affiliate channels in their basic tier of service.

  • Rich

    He who has the gold makes the rules.

  • dr.no

    Monopolies don’t listen to consumer.
    Consumer are escaping to Internet don’t want the same model as TV.

    British Open used to shown Live on abc but this year it was shifter entirely to ESPN.
    On weekends you see more infomercials than you do sports or movies in
    over-the-air channels.

    Welcome to the future.

  • Tim Sanchez

    There have been many advances with streaming technology since Beijing, and I’m glad for the option. I haven’t been home enough to enjoy the Olympics on my TV, but I am using the Dish Remote Access App to catch live coverage and stored shows on my DVR I watched last night’s recorded primetime coverage that included Phelps adding to his Olympic medal count on my commute to Dish this morning. I can’t wait to see how streaming technology will be for Rio in 2016!

  • Good article. One other subplot that has emerged from the complaints on twitter is that now we don’t have to necessarily settle for NBC’s version. Many switching over to BBC.

    • steve_wildstrom

      The BBC version is only available in the US trough a proxy service that is more trouble than most people want to bother with.

      • Captiosus

        “trough a proxy service that is more trouble than most people want to bother with”

        On a Windows system, a simple program install, and then two clicks after installing the program is all it requires to access ALL of BBC 1’s live streams and archives. More trouble than most people want to bother with? They click more on Facebook for less.

  • JDSoCal

    NBC coverage is terrible. Today they showed women’s indoor cycling during a very big swimming final I won’t spoil, as if it isn’t already spoiled (fortunately, I watched it sort of “live” online) so they could tape delay it like 8 hours for primetime. Getting it to stream live from NBCOlympics.com, after getting the imprimatur of my cable provider, and then delivered from my PC to my flatscreen TV via HDMI cable was not trivial for me, and likely impossible for a lot of people.

    But I disagree that there is anything wrong with American NBC announcers rooting for US athletes. This is the Olympics, USA vs the world, and every other country’s announcers root for their athletes. It’s the whole point of watching the Olympics for 90% of people, and for the announcers to pretend they don’t care about USA athletes, either because they want them to win, or want good ratings, would be a silly lie, and would make the Olympics even less worth watching. Only lefty transationalists could be offended by this. As for myself and the 90% of Americans who are American exceptionalists, go USA!

    And mawkish is a synonym for sentimental, no need to use both words, Steve. But yeah, at times, NBC’s mawkishness did go overboard.

  • Answer: Indoor Antenna. I have the Mohu Leaf and have been enjoying all the Olympic coverage in HD for Free. To lean more about Indoor Antennas and to get a 10% off coupon for the number one selling antenna out there go to KilltheCableBill. Go USA!

  • Regarding HBO GO. I recognize that HBO can choose not to directly sell to me, but wouldn’t any agreement between HBO and another party that precludes HBO from selling to me be a violation of the Sherman Antitrust Act which makes any agreement in restraint of trade illegal?

  • Matthew

    There is a tendency away from the “TV” experience so why spend big bucks and try to force it on Americans. The TV will eventually become as obscure as the radio. Battling technology is like standing against the ocean, eventually your feet must give way to the rising tide. Get ready for losses NBC because buying these rights is exactly what you will get. Also, NBC will not retain customers by being the only provider but they will rather piss people off making them want to distance themselves from NBC. They will also diminish the popularity of the Olympics thus reducing future revenues. Who thought that this deal was a good idea?

    • steve_wildstrom

      One thing I don’t see changing-and certainly hasn’t changed since my original piece was written about the London Olympics in 2012, is that the rights to distribute video content of sports events, whether you call it television or not, are going to remain centralized. If NBC, or some competitor, doesn’t buy the rights, how will they get to viewers, whether they are watching on big TVs, phones, tablet, or whatever? The International Olympic committee could distribute the content itself, but wisely recognizes that multicultural, multilingual distribution is way outside its competency.

      • Matthew

        To answer your question; in a similar way that Youtube videos are distributed to end users. On this note, if the Olympic Committee couldn’t figure out how to make their own site then why didn’t they partner with a site like Youtube for online content instead of a TV network? Internet distribution is way outside of the competency of NBC as is evident by the many niche markets that are completely dry. I read many complaints about people not getting the content that they want. One last point; if they started these games just 2 weeks earlier then they would have roughly 1.3 billion Chinese people who sit in front of their TV’s for the entire week of the Chinese New Year Festival. They missed that boat big time so I also do not agree that there is currently a high degree of multicultural competence either. The only thing that NBC seems to be good at is reaching the market that it already had to begin with.

        • steve_wildstrom

          NBC has Olympic distribution rights only for the U.S., so the Chinese market is totally irrelevant. (I assume Chinese rights held by CCTV, but doubt there is deep interest in Winter games, in which few Chinese participate.)

          The big problem with YouTube distribution is making money. Monetization of YouTube videos is a tiny fraction of broadcast revenues.

          • Matthew

            I agree that there is a challenge of getting revenue from YouTube videos but let us consider that current revenue shares are only a predictor of future shares if the same model is used. What I would propose is to modify the current YouTube model by restricting access. There are many potential combination of restrictions. For example: YouTube currently has a pay-per-view model for movies. There could be an extended pay-per-view that gives access to all videos covering a single event, a single class of events, multiple events, clips from a selected country or broad access. Access could also be time restricted. As you can see there are many combinations so picking the best strategy would be challenging. In any regard, I think it best to keep this content on YouTube instead of on the NBC site. Finally, it is a horrible idea to make people buy a tv subscription in order to get online access as is evident by the financial losses incurred.

            Getting back to the main point; NBC does not have a model that reaches many of the niches and thus they are losing revenue opportunities. It does not surprise me that NBC has taken financial losses on their Olympic coverage and I anticipate these losses to continue. There may be positive financial spillovers by forcing people to get a cable subscription but I doubt that the magnitude of these spillovers are high. Thus their actual (company wide) profit-loss may be very close to the event profit-loss, which means that they have a losing hand. In my opinion, it came from a losing strategy. NBC should have kept internet media in a place where it would be expected such as on YouTube.

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