No Matter How NBC Spins It, Olympics Web Strategy Comes Up A Loser

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Despite its special Silverlight-powered Website and more than 2,000 hours of online video, it looks like NBC flubbed its opportunity to make its Olympics Web revenues more than a rounding error. NBCOlympics.com may have streamed 72 million videos and racked up 1.2 billion pageviews, but Yahoo Sports still edged it out with an average of 4.7 million visitors a day versus 4.3 million (source: Nieisen Online). And Yahoo didn’t even have video. NBC is spinning its numbers as a success to the New York Times today, in response an estimate eMarketer put out on Friday that NBC’s Olympics video ad revenues came to only $5.75 million. That compares to $23 million that CBS made from video ads when it streamed the NCAA basketball tournament live on its Website in March.

Surely, NBC should have been able to make more money from Olympics Web video than CBS did from March Madness. But NBC decided to limit what people could see online, especially live streams, in favor of its TV coverage because it feared cannibalizing its TV audience. Those fears proved to be unfounded because given the choice, most people would rather watch the Olympics on TV than online. But NBC missed a big opportunity here to expand its audience by streaming events it gave short shrift on TV (i.e., anything that wasn’t women’s beach volleyball or sports where the U.S. didn’t have a good chance of earning a medal).

The eMarketer estimate does not include banner-ad revenue generated by those 1.2 billion pageviews. Those could have been more than the video-ad revenue, depending on the CPMs—for instance a $10 CPM would have generated $12 million. It’s still a rounding error compared to the $1 billion in revenues that NBC made from the Olympics, most of that from TV ads. Right?

Wrong. NBC paid $900 million for exclusive video rights to the Olympics, meaning that its profits will be about $100 million. It doesn’t take much to move that profit needle. After Website and bandwidth costs, online revenues are pretty much gravy. Think of it this way: Every $25 million above costs would have resulted in 25 percent more profits.

But NBC still thinks of the Web as nothing more than an experiment.

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