Will US TV Rights Buy Chicago The 2016 Summer Olympic Games?

Philip M. Stone September 16, 2009 Follow on Twitter

All sporting eyes will be on Copenhagen Oct. 3 when the International Olympic Committee (IOC) decides which city – Chicago, Madrid, Rio de Janeiro, or Tokyo – gets to host the 2016 summer Olympic Games. But for all the presentations that will be made – Michele Obama will be heading the US delegation – will those presentations really matter, or behind the scenes is it US Televsion revenue that really will rule the day?

Based on previous precedent the US rights for the 2014 Sochi, Russia Winter Games and the 2016 Summer Games should have been agreed upon back in February or March so that financial decision would have been agreed before the IOC picked the summer host city. But this was a very difficult Q1 for US TV titans with the

US in deep recession, TV advertising revenues plummeting – autos down 30% --  even General Electric, the parent of NBC Universal with whom the IOC has had a very cozy profitable relationship  through the years saw its share price drop to as low as $5.87. The IOC, probably quite rightly, figured that was not the ideal time to encourage record bids.  

So the IOC delayed that US rights decision until when it thought the US networks would feel more financially secure, that they could see the recession lifting, and they would be willing to bid high for these prestigious sporting events, something that could take until early next year to complete. It was a very smart business decision -- and as ftm has said many times in the past, the IOC is above all a business, a very profitable business -- but it also puts the IOC in a position that could be contrary to the Olympic spirit. The US networks have probably, one way or another, let it be known they would likely bid higher if the summer games were held in the US because that means primetime live sports which is worth a premium to taped prime time sports à la Beijing.  And since the US accounts for 50% or more of the IOC’s television revenues the IOC usually listens when the US networks speak.

The IOC will insist their final decision will be made purely on the best city for the Games determined by the final presentations held in Copenhagen and not in behind-the-scenes discussions about whether Chicago would provide more US TV cash, but it’s unfortunate that the IOC has put itself in such a position where tongues can wag.

If Chicago were to lose then, on a time basis, Rio would be the favorite for it is only one hour ahead of New York but Madrid at six hours ahead of New York and Tokyo at 13 hours ahead would put a real spike into live prime time coverage.  

The indications are that NBC won’t have the US bidding to itself.  Disney’s ESPN and CBS are making noises that they will enter the fray, and no doubt the value of their bids will be determined by the money  they think they can make, and they’ll make more if they can televise live in prime time (branding also has a large value to ESPN.)

And we’re talking really big money here. Don’t forget that NBC paid $894 million for the Beijing Games and is paying $2.2 billion for the 2010 Vancouver Winter Games and the 2012 London Summer Games.

Chicago is said to have put together a good bid, and having the Obamas from Chicago in their corner – there are events planned at the White House – probably won’t hurt any, nor having The First Lady in Copenhagen. But what will hurt is a recent poll by the Chicago Tribune that indicates that the people of Chicago in increasing numbers don’t want the Games and that is an IOC sensitivity that the other competing cities will pick up on.

The way the IOC sees it, according to one of their documents, Madrid currently has the most public support at 58%, Rio is next at 42%, then Chicago at 39% with Tokyo’s public really not wanting the Games – support there is at 25%.

The Tribune’s poll, taken just a month before Copenhagen, could be devastating. It shows a major support slippage – in February it was about 2:1 in favor, but six months later and the figures are about even. Also damaging is that more than 80% of those polled don’t want public money spent on the Games which is a problem because the city has signed a document the IOC insists upon that any shortfall at the end of the day is made up by the city.

And no one really trusts cost estimates. London, for instance, is said to be spending around $18 billion for its Games – that’s about double the figure it gave to the IOC in its winning bid, and that’s with the London organizers saying they don’t have to build near as much infrastructure as Beijing did – tennis, for instance, will be played at some place called Wimbledon! Chicago says it, too, will keep new infrastructure to a minimum, but judging by London the people of Chicago could be paying off their games for years to come.

So, the IOC has a lot to weigh – a city whose residents seems more and more not to want the games as opposed to the TV networks that have probably let it be known that if the games ended up in Chicago then their bids would be correspondingly higher.

And the IOC makes no secret of wanting the highest TV revenues it can get.  For some 50 years it negotiated European TV rights with the European Broadcasting Union (EBU), but this time around it figures it can get far more via negotiations with individual countries, and Rupert Murdoch, wanting to boost his satellite channels, is upping the ante. He has already secured rights in Turkey and Italy a move that so upset Italian state broadcaster RAI that it talked about closing down its sports channel and that it and other public broadcasters would cut back on their coverage of secondary Olympic sports.

Spanish state broadcaster RTVE last week won national broadcasting rights for the 2014 winter and 2016 summer Games in a deal said to be worth around €70 million ($100 million) and German broadcasters ARD and ZDF have reportedly submitted a joint bid of around €90 million, but Murdoch’s Sky Deutschland is said to have bid around €100 million. The IOC itself is handling separate negotiations with Germany, France and the UK and has given the rights for other European countries to Lagadere’s Sportfive agency on financial terms not released.

The global Vancouver and London TV rights are thought to have been sold for around $4 billion and the IOC is working on getting far more for the 2014/2016 Games, especially if Chicago hosts those summer Games.

As we said, the Olympics are big business, particularly big TV business.