How NBC Could Have Made Serious Online Revenues (and Why It Chose Not To)

| About: General Electric (GE)

eMarketer says NBC (NYSE:GE) only made $5.75M from online video advertising for the Olympics coverage.

Some thoughts:

1. Don’t trust anything eMarketer says, including this. This is the same organization that said - 8 months into the year - that 2008 online video advertising was not $1.35B, but rather, $550M. Clowns I tell you, absolute clowns.

2. Things are complicated. On the one hand, in some ways, NBC was right to shun the web for TV because that’s its bread and butter.  The web - while potentially huge - remains a clown industry for TV companies… even CBS’s (NYSE:CBS) much vaunted $23M take from March Madness is nothing to offset TV’s massive cannibalization. Jeff Zucker can’t exactly use online video advertising revenues to strengthen his hand at parent GE, hence that is why he could give web viewers the one finger salute. 

Truth is, even marketers don’t necessarily mind it, because they themselves are struggling to grapple with emerging media and audiences fleeing towards it.  The Olympics, coming along once every four years, provides a much needed mirage that freezes time and sends them back to a more nostalgic, less hostile period where their own futures aren’t at risk.

This being said, NBC missed a huge opportunity to catapult itself into a real player that gets the web. Four years is a looooong time between Olympics and media buyers looking to get more placement and exposure online won’t treat NBC as a media company that gets it. Will it lose money and business as a result? Yes. But again, for CEO Zucker, the present is all that he cares about.

3. The bloggers and journalists do sometimes need to wake up to business realities. Yes, I’m one of them. But if you didn’t understand why (hmm: only $5.75M) NBC shunned web for TV, you should not be allowed anywhere near a pen of computer. Just saying: show some balance in your reporting and pontificating, otherwise it’s moot and becomes noise.

So how could NBC have generated more revenues and made the Olympics a winner on the web?

I would have sold licenses to other media companies at $5M (with embedded ads) and $10M (with no ads). If the with ads/without ads option is too complicated (it’s not), another way to look at the $5M/$10M options is for companies to get a company-wide license (so Time Warner (NYSE:TWX) can use the content on both SI.com and AOL.com). 

Mind you, this gets dicey: if News Corp. (NASDAQ:NWS) pays for the web rights for MySpace, can it also use it on FOXSports.com, which is a joint venture with Microsoft’s (NASDAQ:MSFT) MSN.com?  As you can see, it’s not perfect but it’s something a couple of business development and sales dealmakers could hammer out over a few drinks.  People (bloggers, journalists) seem to miss the point: NBC never planned to make the web viable… because if the Olympics online proved to be successful, the future TV revenues from the quadrennial event would become smaller and less lucrative.

But let’s pontificate: NBC could have made a killing by selling licenses.  With any other content, the idea it to resell ads on top, in overlays and pre-rolls, but with the Olympics, a case could have been made to only get the content and the right to sell ads around (though NBC would block that, even, and say no monetization allowed, proving online success was never in the cards).

But, demand would have been there:

If you are, for example, YouTube, Veoh, MySpace, ESPN.com, Yahoo.com, MSN.com, etc., and want the programming, I don’t see why you would not pony up $5M and let the ads run with the official sponsors and NBC advertisers.

In this case, NBC would simply have to monitor a handful of licensing clients to make sure they are not running their own advertising over the content (in my bizarro world, the others could run ads in companion areas such as display banners and text links, but absolutely no pre-, mid- or post-roll or overlays).

Either way, at the $5M or $10M spend, NBC and Olympic sponsors get more reach and NBC makes more revenue.  Imagine Yahoo.com, AOL.com and MSN.com all paying at least $5M for the coverage. So would ESPN.com and ABC.com.  We’re not saying for NBC to share rights with ABC and CBS, that’s lunacy, it’s blasphemous… but a more open media company (ie. not NBC) would have considered this online route.  Frankly, it might have not even been repeated in 2010 or 2012…

But the point is: it would have been a good test to make online revenues grow faster… and therein lies the answer why this won’t ever happen: TV companies don’t want the web to grow any faster than it already is.  Part of the incentive to get the rights is to sit on the web opportunities.

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