When NBC pledged $401 million last week for the U.S. rights to the 1992 Summer Olympics in Barcelona—a bid that will yield the largest sum ever paid for a single TV event—both the size and the source of the figure stunned the TV sports world. For one thing, it was $92 million more than the previous-record $309 million that ABC had paid for the 1988 Winter Games in Calgary, and most insiders had reckoned that $375 million or so would be about the most Barcelona could expect. Beyond that, NBC was considered at best a dark horse behind the other two networks in the bidding.
The smart money was on CBS for several compelling reasons. First, last May CBS had obtained the rights to the Albertville Games for $243 million ($68 million more than runner-up NBC had offered) and thus held a $15 million to $20 million advantage in the Barcelona bidding because it would already have production equipment and personnel in Europe in '92, ready to move to the venues in Spain at little cost. More to the point, CBS had the wherewithal to outbid its rivals because it had recently amassed cash reserves of some $3 billion from the sale of most of its non-TV properties. Also, during the last two years CBS has been mired in third place in the Neilsen ratings. The showcasing of two Olympics in one year would be a crucial element in plans to turn around the network's fortunes.
Industry pundits also favored ABC over NBC, in part because ABC is the Olympic network, having telecast 10 of the 14 Games held from 1964 to '88, and many experts felt it would be unwilling to surrender the Olympic franchise completely in '92. Not only that, but ABC, the once reigning champion of TV sports, is widely expected to deal itself out of baseball's new television contract, which will be announced later this month. This would leave the network with week-to-week sports programming consisting of the NFL's less-than-splendid Monday Night Football, some college football, lots of golf and a college basketball package that doesn't include the NCAA Final Four. That's hardly a championship lineup, but a Summer Olympics would give it a big boost in class. ABC also was thought to have an advantage because it owns ESPN, America's No. 1 sports-cable company, and the Barcelona deal was going to be the first Olympics TV contract to allow a network to share the broadcast with a cable partner.
When the day of the bidding arrived, almost no one in the television business, including a lot of folks at NBC Sports, believed NBC would enter more than a token bid. The network is a solid No. 1 in the Neilsen ratings and doesn't need the kind of lift CBS does. It was also widely assumed that NBC had either lost money or, at best, had made a negligible profit on its 179½-hour coverage of the Seoul Games. Since the network is now owned by General Electric, which is known for its bottom-line management, no one figured NBC Sports would be allowed to bid seriously for an event that was already a proven loser.
December 12, 1988
So why was everyone wrong? Mainly because NBC did make a profit on the 1988 Summer Olympics—more than $30 million, according to sources inside and outside the network. And though that was a pittance compared with the $40 million to $60 million profit that NBC was hoping for, it wasn't a negligible amount. NBC Sports president Arthur Watson refused to divulge the size of his network's take, but he did say, "We made some money in Seoul, and what [GE's CEO] Jack Welch and [NBC president] Bob Wright care most about is profit. Believe me, it didn't take a sales talk to convince them that NBC should be very aggressive in our bid."
The showdown took place in two phases. At 10 a.m., the top executives of all three network sports divisions filed into the New York offices of O'Melveny & Myers, the counsel for the Barcelona organizing committee, and delivered their first round of bids in sealed envelopes to International Olympic Committee (IOC) vice-president Richard Pound. The IOC also submitted an envelope of its own containing the minimum amount it would accept for the rights: $360 million.
Pound, who serves as the head of the IOC's television negotiations committee, discussed the bids with other committee members and then summoned representatives of each network for another 20 minutes or so of questioning. The plan had been to reduce the competition to two networks for the second round, but because the bids were so close and difficult to understand, Pound allowed all three networks to go again.
"In the old days, the networks used to bid X dollars, and that was it," said Pound later. "But this was terribly complex. There were all sorts of revenue-sharing gimmicks and different bases for guarantees. The networks are trying to avoid having to swallow the unswallowable nut; they're much more interested in risk-sharing than revenue-sharing. We can't get involved in that. We simply told them we had to know the worst-case scenario—meaning how much money would they guarantee us with no strings attached."
The first bids of all three networks contained guarantees that were said to be between $350 and $360 million, with ABC's being the highest. "The strategy in the first bid was to put in all sorts of bells and whistles that the others might not have," said Watson. "But the psychology was to make sure you made it through to the second round. That's where the whole thing happened."
The networks were given one hour to produce a second bid. Once the envelopes were opened, it was only a matter of minutes before the winner was announced. NBC had beefed up its sum by a staggering $40 million. The others had gone up only a cautious few million.
What was NBC's thinking in doing this? "The Olympics are good for our company, good for our affiliates," Watson said. "Everybody keeps saying we didn't get the ratings we had predicted in Seoul, but even with lower ratings, the Olympics dominated American TV in the weeks they were on. We may not make a lot of money in Barcelona, but $401 million is not a money-losing bid, believe me. The big variable this time is the cable TV package. I'm convinced we will get well over $75 million for our cable commitment, which we won't have nailed down for another week or so." The most likely scenario: NBC will sell the rights to about 75 hours of lesser Olympic events to SportsChannel America, an East Coast-based division of Cablevision Systems Corp., which between now and the Barcelona Games is planning to grow into a national entity.
Whatever the profits or losses ahead, NBC made history with its Olympian dollar commitment. But this was only the first act of a high-risk, big-bucks drama that NBC Sports is playing a starring role in. Baseball's new TV package is expected to produce $1.2 billion over three years, and the high rollers from NBC will be footing a good chunk of the bill. As Watson put it after his network's splurge last week, "The fact we just spent $401 million on the Olympics has no bearing at all on our baseball bidding. They are two entirely separate issues. The Olympics a dramatic, one-time spectacle. Baseball is a matter of serious, consistent programming for this network. Baseball has been an indelible part of the fabric of NBC for 40 years, and it will continue to be for many years more, I promise you."