But will the pay-per-view Olympics be a breakthrough-or a bust? As NBC’s marketing campaign shifts into overdrive, many cable operators accuse the network of stumbling by failing to consider that there aren’t enough cable channels to feature the network’s Olympian menu. Moreover, it’s not clear whether recession-weary consumers will pony up an average of $125 for the extra coverage. “NBC has made one monumental error after another” marketing the Olympics, says Jeffrey Reiss, chairman of Reiss Media Enterprises, a pay-per-view service that’s distributing the 1992 games. An Olympics debacle would not only be a financial setback for the network-it could lose millions-but could also give a black eye to the pay-per-view business, which is trying to grow beyond movies and boxing.
The pay-per-view Olympics took shape after NBC paid an unprecedented $401 million for the television rights to the 1992 games in 1988–$100 million more than it spent on the l988 Seoul Olympics. “It wasn’t possible for the broadcast side to support those costs,” says Thomas Rogers, president of NBC’s cable division. So NBC formed a pay-per-view partnership with Cablevision, a Long Island-based cable operator; the network earmarked $100 million of its rights fee for the pay-per-view games, and will spend $100 million more to produce and market the extra programming. To make back the $200 million, Rogers says NBC needs 2.8 million customers. That would be twice the audience for the Evander Holyfield-George Foreman fight last year, the most lucrative pay-per-view event ever. Rogers says he’ll achieve that figure by expanding the number of homes that can receive pay-per-view programming from 20 million to 40 million. He’s enlisting the support of cable operators to install temporary “traps,” or descrambling boxes, in homes that lack pay-per-view. Some observers say consumer demand for exhaustive coverage of this year’s Olympics could spur operators to cooperate. “You’ve got NBA players competing [and] a new rivalry with a united Germany,” says Seth Abraham, president of Time Warner Sports.
Nevertheless, there are early signs of trouble. Martin Lafferty, NBC’s vice president of Pay-Per-View Olympics, says “85 of the top 100 operators” have signed up. But of the 10 biggest companies, which account for more than half of all subscribers, just four have completed contracts. Among the giants holding out: Time Warner, Comcast, Continental and Cox. Many operators complain they’re squeezed for channel space and can’t afford the hassle of preempting established networks for two weeks. “NBC saw this as ‘Wow, this is exciting’,” says Fred Dressler, vice president of programming for Time Warner Cable. “They underestimated … what they were doing to our basic business.”
For example, last summer NBC approached several cable networks, including Discovery and VH-1, offering financial compensation if they would take themselves off the air for the Olympics. “The overwhelming response from our affiliates was ‘No way. Why move a crown jewel to make room for this thing.?’ " says one cable executive. NBC cleared at least one channel in up to 20 million homes by striking deals with three pay-per-view movie networks; it freed another channel by combining two cable networks–CNBC, which NBC owns, and American Movie Classics. But some operators now say the only way they’ll carry the Olympics will be if NBC abandons its TripleCast and offers the games on a single channel. NBC’s Rogers vows that will never happen; he says the appeal of the TripleCast lies in the depth of its programming and freedom to choose among three simultaneous events.
Even if NBC clears 40 million homes, viewer response could be disappointing. Skeptics point to the hefty price, the availability of many Olympic events on free TV and the fact that much of the programming will be aired during working hours. Robert Beyer, of Adelphia Cable in Philadelphia, predicts only 3 percent of his customers will sign on-less than half the turnout NBC is counting on. That would be more bad news for the network, whose profits have shrunk an estimated 70 percent since 1989. To ensure a good response, NBC is gearing up a $40 million TV and print ad campaign this winter, including gimmicks like a Super Bowl-trip sweepstakes. Meanwhile, NBC’s supporters argue the cable industry should offer more help, saying that expanded channel capacity over the next decade will require more experimentation. “The industry has got to stretch,” says Larry Gerbrandt, of Paul Kagan Associates, a media-analysis firm. But if cable operators remain as underwhelmed as they’ve been so far, NBC’s bold gamble may prove to be just a few years ahead of its time.
