How #NBCFail Became 'the Most Watched TV Event in U.S. History'

Lesson #1: A lot of people still watch live-TV, even if you -- and the loudest tech journalists online -- don't.

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For NBC, the London Olympics might have been the worst of all possible worlds. The events were too late for a live morning broadcast (like Beijing) and too early for a live evening broadcast (like Atlanta). By deciding to stream all of the competition online and delay the most popular events for a glitzy 8PM broadcast, NBC infuriated media writers, inspiring the hashtag #NBCFail on Twitter.

Then something strange and wonderful happened. NBCUniversal and its networks --  NBC, NBC Sports Network, MSNBC, CNBC, Bravo, and Telemundo -- set the record for most-watched television event in US history. NBC itself notched a higher average prime-time audience than the Summer Games in either Beijing or Athens.

Citing Nielsen Co. ratings figures, [NBC] said Monday that more than 219 million viewers watched the Summer Games on NBC and numerous sister networks. This figure surpasses the 215 million who watched the 2008 Beijing Olympics.

There are at least three story lines to pull from this story, and they all speak to one of my favorite new subjects: The idea that the cable bundle might be threatened and that live-TV -- not-delayed-and-streamed-onto-your-secondary-screen live-TV -- might be dying a slow but sure death. The NBC story both challenges that assumption and points to one of the most important reasons why a dramatic change in pay-TV might be more imminent than media executives hope.

(1) A lot of people still watch TV live -- even if *you* don't.

NBC broke all the previous Olympics records for average primetime audience despite showing delayed programming in an environment of supposedly fractured attention. This is pretty strong anecdotal evidence that, even if my Twitter feed is full of cord-cutters, lots of Americans still pay for live TV and like it.

And here's the non-anecdotal evidence: One hundred million households pay for live television -- practically the same as four years ago. The cord-cutting revolution (well excavated in this report by Rebecca Greenfield) is alive and well, but it's much smaller than your typical tech blog will let on. The more important figure for cable is that the number of live-TV hours watched per-person per-day has fallen by only about three percent over the last four years. That's a turning point (see #3). But it's not a cliff. Cable companies, perceiving that their pay-TV audiences have plateaued, are hedging by offering broadband and phone services, while media companies are hedging by selling access to delayed video content to companies like Netflix.

(2) It would be weird for media companies to use this moment to blow up their business models.

Why didn't NBC care that they were getting killed by the Hashtag Mafia? Because NBC needed to make money more than it needed make friends on Twitter. NBCUniversal (owned by Comcast) paid about $1.2 billion for the rights to broadcast the London Olympics, and starting to make back that money necessitated selling ads in primetime, when companies would pay the highest rates. Not willing to give away content that would subvert the pay-TV model, they required a cable subscription in order to access live-streaming online. The upshot: If you wanted to watch anything, you had to pay for TV. If you wanted to watch the most important stuff, you had to wait for primetime.

Some analysts clamored that NBC was violating the Innovator's Dilemma by protecting its legacy business rather than riding the wave of the future and opening up live broadcasting to anybody willing to pay for it a la carte. Time might prove these analysts right, or wrong, I don't know, but either way, let's agree that Not every dilemma is an Innovator's Dilemma!, and managing a beleaguered business model is not the same as being steadfastly anti-innovation. In the end, NBC's strategy paid off with the best ratings in Olympic TV history and a historic accomplishment in live-streaming. Whether this teaches the company the right or wrong lessons about the pay-TV business, we'll have to wait and see.

(3) There's no denying that attention is fragmenting, and capturing it, monetizing it, and advertising it, is the great challenge for TV video content producers.

If we are at the dawn of a revolution in pay-TV, here's something that will help you understand why. NBC broke the Olympic audience record by broadcasting the games across six networks -- NBC, NBC Sports Network, MSNBC, CNBC, Bravo, and Telemundo -- and live-streams viewable on computers and mobile devices all day long. Whether NBC and other media companies are driving or responding to the dispersion of attention is besides the point: Attention is dispersing all over the place.

Live-TV-viewing isn't free-falling, but it's falling. DVR watching isn't exploding, but it's rising. Mobile and laptop video-watching isn't close to rivaling TV, but it's growing quickly. Netflix and Hulu (and YouTube Premium Channels, and Amazon Video) aren't anywhere close to replacing TV, but they're also taking from television something that is as real and as zero-sum as money: Attention. Over time, cable ratings will probably decline for many of the 900+ networks in my bundle, and channels might be killed, and pressure might rise on media companies to agree to bundles that are smaller and more targeted, even if they're not as a la carte as, say, iTunes for music. Even so, things competing for our video-watching attention are growing faster than our video-watching attention, itself.

And that's the trend to keep your distracted eye on.