The Olympic failure

Most observing eyes have been saying for awhile that 2007 would be the crisis year for local broadcasters, and I don’t entirely disagree. The conventional thinking is that post-Olympics and post-election years always see a downturn in business, because the previous years were so “good.” But I’ve been suggesting that 2006 would not see the Olympics and election windfalls of the past, and that those who budgeted for these traditional gains will have a hard time hitting the mark.

Well, General Electric (NBC) told analysts yesterday that it lost $70 million in the 1st quarter on the Olympics. In January — according to MediaDailyNewsCEO Jeff Immelt said the Torino Olympics would “about break even” in the first quarter.

Despite the loss, GE executives said yesterday that the Olympics would be “slightly profitable” for the year on the backs of affiliate contributions.
“On the backs of affiliate contributions” means the network made up its losses, while local broadcast companies took it on the chin, especially those in the south.

The failure of this Olympics is being attributed to the success of American Idol on Fox, but this assumes old thinking — that the only thing that hurts a blockbuster is another blockbuster. I think it’s bigger than that, and that history will judge the Torino Olympics as a turning point in the collapse of mass marketing, because controlling scarcity — which is what NBC has always done with the Olympics — doesn’t work in a era of disintermediation and fragmentation. Hyperbole is revealed for what it is, and formerly compelling story lines don’t “drive” people to watch anymore. Gimme the scores, man. Gimme the scores. Moreover, the decision to time-shift events is now with the viewers, not network programmers. Strategies that run counter to this only further alienate shrinking audiences.

Time is the new currency, and there’s nothing broadcasters can do about that.

Next up is the mid-term elections, where broadcasters have always been the big winners as candidates try to “drive” people to their camps. However, the stars are lining up to produce another disappointment here, because mid-term election voters are interested voters, and increasingly, we’re finding them on the internet. Political advertising will outperform projections online and underperform projections on-the-air, and then where will we be?

Broadcast companies will find themselves in an untenable situation with shareholders next year, but it won’t be because of things that happen in 2007. This is the year that’s breaking the model. Broadcasters will tell investors to wait until 2008, because that’ll be a SUMMER Olympics and PRESIDENTIAL election year. The question is will investors believe them?

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