The Olympics: ESPN Upends TV Sports

The cable network is expected to dominate the post-Dick Ebersol era bidding on the Games this week

Illustration: David Plunkert

Minutes after Dick Ebersol parted ways with NBCU CEO Steve Burke on the afternoon of May 19, the 63-year-old NBC Sports chairman returned to his office on the 15th floor of 30 Rock and lowered himself gingerly onto the sofa. A writer from Sports Illustrated had been waiting to pick up the thread from a conversation the two men had begun earlier that morning; as the journalist was organizing his notes for a story about televised golf, Ebersol had gone upstairs to Burke’s office, where he refused to give ground on his salary demands.

This was only the latest go-around between Ebersol and his new boss, and yet no matter how many times the two jawed across the expanse of Burke’s desk, they couldn’t get to an acceptable number. On Wednesday, May 18, Ebersol told Burke he was quitting, although Burke asked him to hold off on making any final decisions for another 24 hours.

Having failed to come to terms on a salary package, there was nothing left to be done. Rising to his feet, Ebersol gamely shook hands with Burke and headed back to his office. Ebersol’s 22-year career at NBC was over, three weeks before he was to board a plan for Lausanne, Switzerland, where almost everyone expected him to make a successful bid for the Winter and Summer Olympics—as he had done so often before.

Ebersol will be conspicuous by his absence when NBC submits its bid to the International Olympic Committee on June 7. Simply put, his ouster has created a power vacuum in sports broadcasting—and it won’t take long to gauge how that void will disrupt the bidding that starts this week. (Fox will lead off on June 6. ESPN follows suit on the morning of June 7.)

Without Ebersol in the game, ESPN is widely seen as the network with the best shot at stealing Olympic gold. While network president George Bodenheimer has no designs on becoming the next Ebersol—the ESPN chief is all business where Ebersol is renowned for his personal narratives and weepy profiles of Olympians—a win in Lausanne would effectively sideline broadcast TV’s sports profile.

A ’roid-ripped, cash-generating machine, ESPN practically has a monopoly on big-time sports, boasting the rights to the NFL, NBA and Major League Baseball. With its triumphant coverage of the 2010 World Cup, the network demonstrated it can handle a massive global event.

So preeminent is the brand that ABC promotes its marquee sports broadcasts under the banner “ESPN on ABC.” If not an outright capitulation, it’s a tacit nod to ESPN’s standing. Should the Disney contingent win the bid—CEO Bob Iger will make the trip to Lausanne with Bodenheimer—ESPN will serve as the nerve center of the Olympics coverage, while ABC will play a more peripheral role.

ESPN boasts a notable advantage: its parent company is mulling over a side deal that would establish it as a member of the IOC’s elite sponsorship circle, the Olympic Partner Program. The entitlement would add $100 million to ESPN’s total bid, although the prospect of Mickey Mouse shilling for the Olympic brand would go a long way toward earning ESPN a reduced fee.

“It’s a one-horse race. ESPN has cash flow for days and they can offer the IOC the sort of brand equity no other network can touch,” says one Olympics observer. “The IOC is always talking about appealing to the younger generation, and what’s more appealing than Mickey Mouse?”

Last month, Iger told investors that the Olympic Games would present another golden opportunity for ESPN to bump up its sub fee. Despite already boasting cable’s most taxing carriage fee—cable networks pay ESPN $4.40 per subscriber per month, bringing in approximately $5.27 billion per year for the sports network—Iger said an Olympics package “would definitely generate incremental subscription revenue” for ESPN. He added that “the purchase of an Olympics should not only be looked at as a possible generator of advertising revenue.”

Ironically, Iger was shut out of his first bid by Ebersol. In July 1993, NBC made the first pass at the 1996 Atlanta Games, offering $456 million. Iger’s counteroffer bought ABC another round—still, when organizers opened NBC’s second bid, they were greeted with the original figure: $456 million.

Ebersol shrewdly deduced that ABC wouldn’t up the ante, as it was still woozy from losing $75 million on the slushy 1988 Calgary Games. Time was also very much on Ebersol’s side. On the day the bids were read, Capital Cities acquired ABC and the new owners stayed Iger’s hand.

Fox remains a dark horse in this year’s auction, having drastically underbid for the 2010/2012 package ($1.3 billion, or $700 million shy of NBC’s offer). Still, the network enjoys unsurpassed access to the 18-49 set, the prime Olympic audience, winning the demo for the seventh consecutive season.

A rumored CBS-Turner Sports gambit appears to have faltered. After assessing the upside of their cooperative NCAA Men’s Basketball Tournament venture, the two sides had discussed making a joint raid on the Olympics package, but insiders suggest that Turner would rather keep its powder dry for an eventual try at the NFL.

On June 2, CBS Corp. CEO Les Moonves confirmed that CBS would sit out the bidding, saying the Games “are not going to be cost-effective for us.” While he jokingly rued the missed opportunity to visit Switzerland, Moonves said he believes that CBS’ existing sports portfolio is just fine the way it is.

 

Despite what had happened upstairs, Ebersol would eventually resume the SI interview, allowing that he had anticipated Comcast’s refusal to come to terms. He spoke of books he’d been meaning to get around to reading and how he was looking forward to spending time at the summer home he shares on Chappaquiddick with his wife, the actress Susan Saint James. (Comcast chairman Brian Roberts also owns a summer home on Martha’s Vineyard, although his stronghold is situated on the far side of the island.)

While Ebersol plans his downtime, Comcast is busily insisting nothing has changed, noting that Ebersol’s departure is unrelated to its bid. (Roberts and Burke phoned IOC president Jacques Rogge to assure him that NBC was still committed to the Olympics.) But the ragged hole he’s left in his wake will wreak havoc on the selection process. For one thing, NBC’s entire presentation was written, directed, and choreographed by Ebersol. With him out of the picture, NBC has had to scramble to gin up a new pitch.

No matter what Comcast pulls out of its hat, the team could still face a frosty reception in Switzerland. Ebersol’s ties with the commission are the stuff of legend; his cozy relationship with former president Juan Antonio Samaranch allowed NBC to hash out a secret deal (code name: Project Sunset) for the first-ever multiyear rights package.

And then there’s the lingering question: Does Comcast really want this? Months before Ebersol checked out, Burke had expressed a measured ambivalence toward investing in any future cash-burning efforts. “We’re here to make money, and we’re going to be disciplined,” Burke told investors in February. “We’re going to concentrate on businesses that have good returns.” NBC lost $223 million on the 2010 Winter Games in Vancouver and analysts see the network losing another $250 million on London 2012.

Complicating matters for NBC are General Electric’s reduced role in ownership. “GE made it possible for NBC to own the Olympics the way it did for as long as it did,” says one insider. “GE makes everything: lightbulbs and jet engines, nuclear power plants, and toasters. They’re like the Dutch East India Company, and the Olympics are the means by which they establish their industrial colonialism.”

In other words, if GE were to lose a couple hundred million on the TV rights but in doing so establish trade relations with new and emerging global markets, the whole thing is a very sexy write-off. That’s the difference between a bad investment made by a multinational conglomerate and a U.S. cable company: one business can absorb (and hide) a big loss, and the other cannot.

However things shake out in Switzerland, the Olympics has lost its greatest champion. Perhaps for this reason alone, the three candidates will refuse to give in to the IOC’s demands for yet another price hike.

“When the networks went back and revised their presentations, you can bet they also revised their bids, downward,” said one Ebersol confidant. “Knowing Dick’s not going to be there willing to spend a half-billion more than everyone else, the sense is that everyone can sort of dial it down a bit.”