NBC's Conan O'Brien-Jay Leno fiasco has been a monumental disaster for the network, both for its public image and bottom line, as it prepares to pay an embittered O'Brien and his staff an estimated $45 million to abandon "The Tonight Show."
Next up: the Winter Olympics.
A solid Olympics performance in February could go a long way toward rehabilitating the network. The past few weeks of bad publicity haven't helped, though, and NBC's struggling prime-time ratings hinder its abilities to promote the Vancouver games, which begin Feb. 12.
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NBC also knows going in that it will lose millions of dollars on the Olympics but insists that no corners will be cut that viewers will be able to see.
"The squabbling over late night has really overshadowed anticipation for the games," said Shari Anne Brill, an analyst for the Madison Avenue firm Carat USA.
John Rash, an analyst for the Chicago ad firm Campbell & Mithune, said NBC's prime-time troubles hurt its ability to get people excited about the games and emboldened rival networks to program more aggressively against the Games.
But John Swallen, senior vice president of research for TNS Media Intelligencer, cautioned against connecting NBC's other problems with interest in the Olympics.
"Ultimately, it's the competition and the personalities of the athletes involved in the competition that makes the difference between a ratings bonanza and a ratings disaster," Swallen said. "And you can't predict that until the games unfold."
In a strange parallel, NBC is suffering now because of decisions made years ago. Rather than let O'Brien escape to a competitor in 2004, NBC executives promised him "The Tonight Show" five years later and then tried to keep both O'Brien and Leno — an effort that blew up in their faces.
Similarly, the General Electric Co.-owned NBC agreed in 2003 to pay $820 million for the television rights to the Vancouver games, compared to the $613 million paid for the 2006 games in Turin, Italy. Reportedly, no other network came within $700 million of NBC's successful bid to air both the Vancouver games and the London Summer Olympics in 2012. NBC bid a total of $2 billion for both games.
GE executives announced late last year that NBC is expected to lose about $200 million on the Vancouver games, the first time it has lost money on an Olympics since it began televising the games in 1992. Any expectation that NBC would take in enough revenue to make up for the significant increase in rights fees was dashed by the recession.
The U.S. Olympic Committee lost three sponsor companies, including General Motors, and picked up only one new one. The International Olympic Committee lost four companies, and picked up only one new one, according to the TNS Media Intelligencer.
Sponsors can often be counted on for big advertising campaigns. GM, for example, spent $112 million in Turin. Although the company will advertise during the Vancouver games, it won't approach that level, company spokesman Ryndee Carney said.
NBC Universal is televising some 835 hours of competition next month on the broadcast network and cable affiliates including USA, MSNBC and CNBC. The company is promising its advertisers that ratings for the Vancouver games will exceed those of four years ago, and there are several reasons to believe this might be true.
Olympic games in North America usually do better than games overseas both due to pride created by proximity and the ability to show more events live in prime time. All figure skating events, most speed skating and more than half of the freestyle skiing events will be televised live in the Eastern time zone, said Dick Ebersol, NBC Sports chairman.
Ratings for many sporting events have jumped in recent years because of high definition television, which makes them much more attractive for viewing. About one-third of American homes now have HDTV.
"This is going to be completely breathtaking, especially in HD," said NBC's Bob Costas, noting it would be the first Winter Olympics shown entirely in HDTV.
The Olympics are frequently used by networks as a promotional platform for upcoming shows, and while this is more important with summer Games that directly precede a new TV season, NBC has work to do this February. It must remind viewers that Jay Leno is returning to "Tonight" and demonstrate it is back with new programming at 10 p.m., including Jerry Seinfeld's new reality series, "The Marriage Ref."
NBC says it will take no financial shortcuts in its Olympics coverage that would cheat viewers. It is saving money with other efficiencies: The network will have 600 fewer employees in Vancouver than it did in Turin, spokesman Chris McCloskey said.
"In light of the events of the past few weeks, I don't think they need any negative press about anything," Carat USA's Brill said. "The show must go on and the show must go on as well as it always has been."
The Vancouver games may also have a big impact on whether NBC televises the Olympics in the future, with bidding expected this year for rights to the 2014 and 2016 games. NBC is expected to have considerable competition, and will be bidding in regulatory limbo — before action can be taken on the sale of a majority stake in NBC Universal to Comcast.