By Brett Savaglio:
For the past two weeks, I have been engaged in what we might call a ‘digital experiment’. I decided to see if it was possible to watch the entire Olympics entirely online, bypassing the broadcast entirely - and, incidentally, bypassing all the advertising as well! Now that my experiment is over I can tell you that I was able to watch the Olympics, legally streaming online, without having to watch a single ad -- right on NBC's website.
While video on the web for the Olympics has been done before, and even some experiments with live streaming, this is the first time that every event, from Ping-Pong to Gymnastics, was live streamed to the web, and if you had an ad-blocker installed onto your web browser like I did, you didn’t have to watch a single ad. Advertisers should really be paying attention to this. They should really be worried about is the shifting digital landscape and how that affects the games. In a world of ad-blockers and digital streaming norms, does NBC have to seriously think about the way it distributes and broadcasts the Olympics?
This past weekend the Olympics in Rio wrapped up bringing a close to one of the world’s always most anticipated events. The games are not only an international celebration of sport and the global community, but also it is one of the world’s biggest media events. The games are broadcast basically world-wide and bring in a lot of ad revenue for media outlets lucky enough (or rich enough) to cover the games.
In the United States the company lucky enough to own the rights to the Olympics is NBC. NBC paid $1.23 billion for the broadcasting rights to the Rio games — part of a larger $4.38 billion deal for the games through 2020 in 2012 (they have since purchased further rights through 2032). With such big prices, comes large ad revenues. During the 2012 games in London NBC recorded a slim profit, and already the company is indicating, after over $1 billion in ad sales prior to the games, that this year will be just as lucrative. Somewhat paradoxically, ratings this year were down overall as opposed to the previous summer games in London.
On the one hand, ad sales are ad sales, and with the majority of them sold before the games, the viewership doesn’t matter, however it will inform advertisers for the next time around in Beijing and Tokyo. The model that they currently subscribe to is not sustainable. Sure, as long as there is TV in the way that comes through a wire to your set top box in your living room the Olympics will be shown on TV in the traditional way, with ads and people in sets and stories of athletes. However, this year makes the first time that all of the events, in realtime, were streamed by NBC during their coverage. That means, that if you had a cable subscription, you could watch any event, live as it happens, on the NBC Olympics app or website — no TV required. Simply choose the event (live or already completed) and a live stream with commentary would be selected. In order to facilitate such an operation many of the commentators for the games were stationed not out of Rio, but out of NBC’s massive sports studio complex in Stamford, CT. This is not the first time that NBC has had a digital presence to it’s broadcast. NBC has had video from the games online since Vancouver, and even streamed some events during the London and Sochi games. This though was a new, fully comprehensive operation.
Once I learned the games were being streamed the night of the Opening Ceremony, it became my main mode of watching the Olympics — why deal with all the programming and interviews and whatnot, I’m just interested in the games. Now what I encountered while I was watching I think can give us an insight into how future Olympics will be broadcast. During the first day, I switched from event to event, watching what I found interesting to me — cycling in the morning, judo in the afternoon, it was up to me. I would get the events in full as they happened. During the streams though, the feed would cut, rather abruptly, at any moment for a commercial break. At this point I was served one of the same 5 ads on rotation for the games. Once the commercial was done the stream would resume. This was somewhat frustrating as they would come without notice and often cut of the commentary, but they ultimately did not get in the way of the event (NBC at least tried not to go to commercial at pivotal moments).
On the third day of the games though I wondered what an ad blocker would do to the stream. I installed a blocker onto my Chrome browser and the next time an event was interrupted for commercial, I was not served one of the five now very familiar ads, but rather a logo screen telling me coverage would resume shortly. Much to my surprise that shortly was only about 5 seconds, at which point I was thrown back to the main event. I wasn’t served an ad. NBC may be okay with lower ratings if the digital presence was larger, but if I could circumvent the advertisers completely then they would be in trouble. This is an issue that many on the internet have feared since the rise of ad blockers and it seems their fears have come true.
Now that’s kind of a long story, but I think it is important for a few reasons. The first is the obvious disruption to the way the games are broadcast and consumed. The games are bought by NBC in order to show viewers expensive ads, it’s really that simple. If they are not able to serve the ads then they are in trouble. This is an outcome, though, of NBC trying to put traditional coverage into a digital first world. They treated each stream as if it were a channel on television, and that channel would have ads on it.
Let’s say that in the Beijing games in 2018, the next Olympics, NBC has exactly the same set up. We should expect that in two years more people, not less will be watching on streams rather than traditional TV, and we should expect that more people have ad blockers. That would mean that fewer and fewer people would see the ads that companies like Nike and Coke paid lofty prices to have them see. This in turn would cause for ad prices to fall for the next games, and jeopardize the way NBC makes money on the Olympics. This is what happens when you jam an old model of production and distribution into a new technology.
What would a digital first Olympics look like? It’s tough to tell the future, but one possibility would be to disjoin the Olympics from your cable subscription. Rather than only allowing cable subscribers to stream live, NBC could charge a flat fee for online Olympic coverage, and not have to rely on ad revenue from it. As more and more people drop cable every year, this is a scenario that is not that far fetched. Another possibility is for a company that is not a traditional broadcaster to buy the rights. Now this wouldn’t be able to happen until after 2032 (NBC’s current last contracted Olympics), but with companies like Google and Facebook buying companies for about the same price of an Olympics it’s not that far outside the box to thing that one of them could buy the rights and stream the games over their service.
Either way, it is clear we find ourselves at a turning point for the games and undoubtably the way that we consume them will change and adapt with new technology. As more and more people watch traditional TV content on the web, a changing definition of TV must come about, and a process of distribution will develop to reflect TV as it is on the web, not how it was at the end of the 20th century.