The Big Three Aren't Sold On Seoul

In marathon bargaining sessions, the major U.S. networks refused to meet the $500 million price for TV rights to the 1988 Summer Games
September 22, 1985

The golden goose that is American sports television refused to lay a $500 million egg last week, and the organizers of the 1988 Seoul Olympics were stunned. For years, U.S. television in general (and the ABC network in particular) has subsidized the Olympics by paying ever more astonishing sums for the right to broadcast the quadrennial spectacle. Because of the Olympics' tremendous prestige and ratings potential, ABC paid $91.5 million for the Sarajevo Games in '84, $225 million for the Los Angeles Games in '84 and $309 million for the Calgary Winter Games in '88. Last week in Lausanne, Switzerland the Seoul Olympic Organizing Committee (SLOOC) expected to reap its own fortune. What it came away with, though, was a feeling of embarrassment and indignation. Not one bid from ABC, NBC or CBS even approached $500 million, which, despite their announced demand of $600 million, was the Koreans' irrevocable bottom-line figure.

The negotiations, which took place in a gilded meeting room just off the lobby of the Lausanne Palace Hotel above Lake Geneva, will conclude—possibly next week—when all three networks submit "reevaluated" bids to the IOC and SLOOC. Said Kim Tai Kyung, a South Korean businessman who served as éminence grise for the talks, "Our expectations have to come down and [the networks'] will have to change, too. We have to become more realistic."

But how much higher the networks will go on the next round of bidding is questionable. The days of astronomical bidding wars and open checkbooks are apparently over. After 19 hours of talks Thursday and Friday, and enough lobby intrigue to fill a Sydney Greenstreet movie, financial sanity prevailed. Said Neal Pilson, CBS's executive vice-president for sports and radio, "This is the only time I can remember when all three networks, acting independently with no collusion, have come to the same conclusion: that rather than suffer economic hardship covering an event, as important as that event may be, they all have said, 'We'll pass.' "

Officially, the talks were suspended so the networks could rework their bids. The real reason was to let the Koreans save face. They were stunned and demoralized by the initial offers. According to sources on both sides of the table, ABC, which has won 10 of the last 13 Olympic bidding contests, submitted a shocking lowball offer of some $250 million, plus an extra $7 million for cable coverage of certain events on ESPN. CBS, out of the Olympics since 1960, offered approximately $300 million with no extras. NBC, which took a $34 million bath after paying $87 million for the U.S.-boycotted 1980 Moscow Games, bid $320 million.

A Korean source said that SLOOC was "crushed." Rights to the last three Summer Olympics had gone for 2½ to nearly six times as much as their winter counterparts. South Korea insists it needs at least $500 million from U.S. television and about $150 million in rights fees from the rest of the world to cover bills already falling due on a Games budget of some $3 billion. Until last week American TV had been an easy touch. ABC's payment for the Los Angeles Games came to $1.67 per TV household. The European Broadcasting Union's cost per household was 17 cents. American TV money in 1984 accounted for 45% of the entire operating budget of the L.A. Games.

The Koreans felt insulted, and their faces revealed it. Before Sarajevo, Barry Frank, senior vice-president of Trans World International and the Koreans' TV negotiating agent, had brashly predicted a $700 million payday for Seoul. Some Koreans even boasted that their Games might be worth $1 billion to U.S. television. Said one Korean newsman last week, "I think [Koreans] will have to hang their heads."

In a sense, one could see the big chill coming. On Sept. 6 in Seoul, Lee Yong Ho, South Korea's minister of sport and the titular head of SLOOC, warned two IOC press aides, "We will take a very hard line with the TV networks—$600 million and not less."

But Lee grossly overestimated the health of the U.S. television industry. He was dealing with two networks—ABC and CBS—that are laying off hundreds of employees because of reduced profits. Capital Cities Communications, ABC's new parent company, is renowned for its conservatism and worships at the altar of the bottom line. The TV sports sales market has turned sour, and ABC already is hurting on Calgary. According to industry experts, "The Network of the Olympics" may lose $30 to $70 million on those overpriced Games.

The networks aren't exactly thrilled with Seoul's TV schedule. Korean time is 14 hours ahead of Eastern Standard Time; when it's 4 p.m. in Seoul, it's 2 a.m. in New York. As ABC learned from the Sarajevo Games, events taped for prime-time broadcast bomb out if viewers have had half a day to learn the results. The bulk of programming from Seoul will either be canned or shown live at an hour when a large part of the viewing audience consists of insomniacs.

To keep that time gap at 14 hours, Frank has persuaded the South Korean government to switch to daylight saving time next year for the first time in 20 years. It will run from April through October, at least until 1988. Still, all four days of the men's and women's swimming finals, scheduled to begin at 8 p.m. Seoul time, will be seen live in the Eastern U.S. at 6 a.m. and in the West at 3 a.m. Solely for the benefit of ABC and NBC, which have contractual commitments to baseball's playoffs and World Series, respectively, the Koreans also moved the Games forward by seven days. They will be held from Sept. 17 to Oct. 2.

In Lausanne, CBS and ABC executives seemed particularly insouciant. Roone Arledge, ABC's notoriously reclusive president of news and sports, spent two days ordering from room service while plotting tactics with a table stake severely limited by Cap Cities. "It's not life or death; we're not gonna bite our fingernails to see what happens," he said during one rare appearance before the press. Acting as Arledge's eyes and ears in the hotel lobby was a Frenchman named George Croses, ABC's vice-president of European affairs. Filling a similar role for NBC Sports president Arthur Watson was Alex Gilady, an Israeli who is that network's vice-president of European planning and development. They monitored doors, elevators and house phones around the clock to watch for telltale signs of covert deals.

Twelve hours into the talks, a bellman paged Arledge. "Mr. Arledge, phone call for Mr. Arledge. Is Mr. Arledge in the lobby?"

Quipped Gilady from his perch in an easy chair: "Mr. Arledge is not, was not, nor ever will be in this lobby."

Behind closed doors the network honchos took turns negotiating over a green baize table with three representatives of SLOOC and the IOC's three-member TV committee. The real power in the room was the head of the TV committee, Richard W. Pound, a Montreal lawyer who is a possible successor to IOC president Juan Antonio Samaranch. Pound wanted the Koreans to accept a bid, even if it didn't meet their $500 million minimum. At one point he took the SLOOC members aside for a lengthy private lecture. It was the Olympic equivalent of being taken to the woodshed. But the Koreans, who were receiving their orders via telephone from Rho Tae Woo, chairman of South Korea's ruling Democratic Party, refused to budge.

NBC came the closest to victory. So eager was Watson to land the prize that he haggled until 1:55 a.m. Friday. For the next four hours he held meetings with his staff in his suite and reappeared at the bargaining table at 8 a.m. sharp. While Watson planned further strategy, another of his aides, Jarobin Gilbert, was seen strolling the empty streets of Lausanne, conferring with Mr. Kim.

Sources said NBC's final bid included an offer to pass a sizable chunk of its profits, if any, back to SLOOC. Watson denied that he made any such profit-sharing proposal. Whatever his offer, it still fell well below $500 million and the Koreans said no. By midmorning Friday, Arledge reportedly had raised ABC's hard cash offer to $340 million. CBS never came up from its initial position.

As the talks dragged on, one participant said to a reporter, "For your ears only: There will be no puff of smoke."

An hour later, Samaranch held a somber press conference to confirm the big strikeout. Then he said, privately, "The problem with the local organizing committees is that they always want the last dollar. They don't care whether they have good relations with the networks. But we have to go on to the next Olympics and the next."

Frank has talked of auctioning off the Games to individual TV stations in 200 American cities, thereby forming a syndicated network that might collectively pay more than one major network alone. Pound, however, is prepared to quash this idea before it raises its ugly head. A barbed-wire hookup, he believes, would tarnish the image of the Games and antagonize the big three networks in future negotiations. Pound's more likely course is to talk tough to the Koreans once again. The IOC TV committee is legally empowered to take the television rights away from SLOOC and cut its own deal. And that deal could include all three networks, with the Games divided by sport and spread around the TV dial. That has never happened before, but the day may soon arrive when one network can't program enough hours and sell enough commercials to cover its production costs.

Frank is confident that a deal will be made. But the dynamics of Olympic TV are changing. Tune in—next week, next month or next spring—for the finish of the real Olympic marathon.

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PHOTOGRAHAM FINLAYSONFrustrated after an all-night stint at the table, the IOC's Pound (gesturing) tried to persuade the South Koreans to lower their demand. TWO DIAGRAMSPAUL PUGLIESESince 1960, when CBS aired 35 hours of Winter and Summer games for $444,000, the hours have increased by 700%, while rights fees multiplied by more than 71,000%. PHOTODAVID LEVENSON/COLORIFICFor Watson and NBC, it was very close but there was no deal—yet. PHOTODAVID LEVENSON/COLORIFICFrank (right) couldn't get CBS's Pilson and James Rosenfield to sweeten their bid. PHOTODAVID LEVENSON/COLORIFICFor the first time, Arledge didn't have enough of ABC's millions to throw around. PHOTODAVID LEVENSON/COLORIFICSLOOC's Lee had to go home empty-handed. CHART

Hours of Programming

1960

1964

1968

1972

1976

1880

1984

1988

WINTER GAMES

10 hours

20 hours

25 hours

10 hours

45 hours

55 hours

65 hours

100 hours

SUMMAR GAME

15 hours

5 hours

50 hours

60 hours

75 hours

0 hours

190 hours

225 hours

Where Will The Buck Stop?

Olympic years

Cost of U.S. rights in millions of dollars

1960

*SQUAW VALLEY

CBS

$2

#ROME

CBS

$5

1964

*INNSBRUCK

ABC

$2

#TOKYO

NBC

$5

1968

*GRENOBLE

ABC

$5

#MEXICO CITY

ABC

$7

1972

*SAPPORO

NBC

$10

#MUNICH

ABC

$12

1976

*INNSBRUCK

ABC

$15

#MONTREAL

ABC

$30

1980

*LAKE PLACID

ABC

$20

#MOSCOW

NBC

$80

1984

*SARAJEVO

ABC

$90

#LOS ANGELES

ABC

$230

1988

*CALGARY

ABC

$310

#SEOUL

?

$350+

*WINTER GAMES

#SUMMAR GAMES

Commemorative Coins

5.3%

Lottery

4.3%

Private Donations

5.3%

Corporate Sponsorship

5.3%

Gate Receipts

4.3%

All other TV Rights

5.0%

U.S. TV Rights

16.7%

South Korean Government

46.7%

Other

7.1%

Expected Revenue
Total: $3 billion
American TV dollars represent the No. 2 source of revenue in South Korea's budget.

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Bogey (+1)
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