Why NBC Doesn't Care That You Want to Watch the Olympics Live on TV

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I feel your pain, but NBC's business model isn't worth blowing up to placate the cable-cutting 2 percent.

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(Reuters)

If pissing off the Olympic audience were an event in London, NBC would be winning gold, silver, and bronze, every single night.

Refusing to air even the most dramatic competitions live, the network has resorted to streaming the Olympics online and showing the main events in prime time -- after the results have already been reported by the AP, ESPN, and even NBC.

The response from Twitter has been vitriolic. Most of what has passed through my feed is unpublishable, either due to apoplectic spelling errors or untoward language, but this tweet is sober and representative:


NBC doesn't benefit from a hysterical brigade of business and tech reporters shotputting slurs and criticism at the company. So what's going on here? What's more important than public opinion?

Oh, that's right. Money.

WHAT'S NBC DOING?

The easiest way to understand why NBC wants to force you to watch the Olympics in prime time is to stop thinking about what audiences want and start thinking about advertisers want. NBC paid about $1.2 billion for the rights to broadcast these games. To make back most of that money, NBC needs to sell extremely expensive commercials. The most valuable commercials aren't sold online to be viewed on browser tabs on 12-inch display screens. They're sold on prime time TV. So NBC has a clear interest in funneling our Olympic attention into the prime-time TV slot.

The strategy is working, in its own way. Even with the awkward five-hour delay -- too small to swap day for night a la Beijing, but late enough that England is asleep by the time New England finishes dinner --  these Olympics are smashing all-time viewing records.

Television is still a war of attention, and the most valuable attention isn't in your browser tab. It's on your HDTV.

Audiences shouldn't be so upset, and NBC shouldn't feel so smug. The network is caught between two fundamental forces. On one side is the absurdly high and rising cost of the Olympics. NBC paid $3.5 billion for the rights to the five Olympics between 2000 and 2008, $2 billion for the Vancouver and London games, and a whopping $4.38 billion for the four Olympics between 2014 and 2020. But as the costs go up, the revenue game is getting complicated. The television audience continues to splinter across devices and screens where advertisements pay dimes or pennies on the dollar compared to television.

Since the games are streamed live all day on NBC.com, an optimist might say: More viewing options, smashing! A pessimist might amend that enthusiasm by pointing out that video is only available to households with a cable subscription (NBC is owned by a cable provider, after all), so the message seems to be: We want audiences to have choice ... so long as they choose the option that makes us the most money. In short, NBC and Comcast came up with a 50% solution that gives 100% of viewers something to complain about. You either watch on a small screen with buffering or you watch on a big screen many hours after the winners have already been announced.

AN OLYMPIC-SIZED CRISIS FOR TV

NBC's Olympics crisis isn't unique. It is remarkably similar in scope to the debate we had last month over HBO Go. It is the fundamental crisis of television. The rising cost of content and the proliferation of video-enabled devices creates one distinct pressure for cable companies to raise prices and protect the cable bundle and a second distinct pressure for cable companies to accept lower profits by innovating wildly and giving audiences access to every show they want, on-demand, on any device, at an a la carte price.

The most outspoken voices clamoring for wild innovation are often the younger, more affluent, more urban, and more tech-savvy (often media) people griping on Twitter, who don't want to pay for cable, but also want to watch the Olympics and "Game of Thrones" whenever they feel like it. This is all fine and well -- if journalists weren't talented at raising awareness, they wouldn't be very good at their job -- but the impetus to blow up the old TV/cable business model isn't as strong as we'd like it to be. Between 80 and 90 percent of households have a cable subscription, and the level has been pretty steady for the last ten years. The estimated number of households who qualify as "cable-cutters" is as low as 2 percent. (An even smaller share of HBO's audience -- about 1 percent -- is through its app HBO Go. Even for shows like "Girls," it's 4 percent.)

Not every dilemma is an "innovator's dilemma"

"The problem for NBC as for other media," Jeff Javris wrote, "is that it is trying to preserve old business models in a new reality." Maybe! It is entirely conceivable that, by refusing to find more creative ways to distribute video, NBC and HBO and other providers are falling prey to a classic innovator's dilemma, by tinkering and iterating their fraying business model rather than throwing it out and starting fresh. But not every dilemma is an innovator's dilemma! The end of TV and the death of the cable bundle might be around the corner. Or it might be the case that it's going to be a lot harder to topple the cable provider/bundle system that anybody would have imagined 5 or 10 years ago -- and that NBC's old-school plan to maximize prime time commercial revenue is objectively the best strategy.

"The ad revenue from the opening ceremony and all the other big events they broadcast on prime-time delay will be more than worth the fleeting anger of the American public," said Kevin Boyland, an analyst with IBISWorld. "As broadcast networks, cable networks, and pay-tv providers move into the realm of online streaming, I think they will increasingly tie access to their online content to having a pay-tv subscription. This way, online content streaming becomes a value-added aspect of a pay-tv subscription rather than an external competitor that can siphon away subscribers and revenue."

It is annoying that the Olympics are delayed. It is annoying that Comcast and NBC have determined that non-cable subscribers will have to do with updates on their phones. It is annoying how expensive it is to watch live sports! But content is king, and creating and buying video content is really expensive. If you choose to not pay for it, you can be mad each time you feel screwed. But you shouldn't be surprised.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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