NBC expects record Olympics profit despite ratings drop

LOS ANGELES (Reuters) - Comcast Corp’s NBCUniversal expects to generate record profits from coverage of the Rio Olympics despite so far losing a U.S. ratings battle compared to the Games four years ago.

An average of 30.3 million people have watched NBC’s television networks and digital platforms during prime time on each of the first five days of competition, according to Nielsen data provided by the network.

That’s an 8.6 percent drop from the audience watching NBC during the 2012 London Olympics, raising questions about why the audience is shrinking when there is more programming than ever on computers and mobile phones.

But NBC Sports Group Chairman Mark Lazarus on Thursday said the audience size is in line with the network’s expectations about changing viewer habits. Before the games started, the company had said it could top the $120 million profit from the 2012 Olympics. That is still the case, Lazarus said.

“This will be our most economically successful Games,” Lazarus confirmed to reporters on a conference call.

The media company had sold $1.2 billion worth of ad time on its TV networks and digital outlets before the Games in Rio opened last Friday. It has added $30 million more since then. “Our advertisers are happy,” Lazarus said.

If NBC does not meet the ratings guarantees it provided to advertisers, the network will offer them free commercial time later during the Games, Lazarus said, and it has enough inventory to do so.

Even though audiences are smaller than four years ago, the Olympics still draws one of the largest TV audiences that advertisers can find, said Barry Lowenthal, president of media buying firm The Media Kitchen. On the NBC broadcast network alone – which does not include cable or online viewing - NBC has recorded between 20.6 million and 33.4 million viewers.

“Those are really big numbers by today’s standards,” Lowenthal said.

Still, the experience with Rio suggests viewership is changing and likely to move further away from TV, Lowenthal said. NBC’s figures show U.S. TV audiences are shrinking while streaming is exploding. And consumers discuss more than results on social media.

“Look at what happens with Michael Phelps’ face,” Lowenthal said, referring to video of the star U.S. swimmer, stone-faced, preparing for a race. “That was almost a bigger story than him winning the medal.

“We are all realizing the Olympics are a very multi-screen, complex experience,” Lowenthal added. “It’s not as simple as just watching a baseball game. The impact of that is it’s going to be more and more fragmentation.”

NBC and news outlets send alerts on mobile phones with results from major events, one factor that might be discouraging viewership, said Marc Ganis, president of SportsCorp, a sports business consulting firm.

On the NBC Sports app, viewers are forced to watch ads when they switch between sports, which some people have found annoying, Ganis said. Some complained about ad breaks during the opening ceremony, though the first 4.5 hours had 19 percent less ad time than the 2012 Games, according to Kantar Media data.

Comcast, which has paid about $12 billion for the U.S. rights to broadcast Olympics Games through 2032, will look for other ways to make money on future Olympics, Ganis predicted. One possibility could be an Olympics streaming subscription without ads.

“How many people would pay five or 10 or 20 dollars to be able to get a better experience with no ads? I’d suspect you would have many people who would sign up for it,” Ganis said. “I would expect NBC is surveying that now.”

Reporting by Lisa Richwine in Los Angeles; Additional reporting by Liana B. Baker in Rio de Janeiro; Editing by Tom Brown, Peter Henderson and Bill Rigby