Official sponsorship revenue flowing to International Olympic Committee, which industry experts calculate at around $6 billion but is separately from Comcast’s wheelhouse, will also have to be settled, making for a hefty all-around hit.
In a global pandemic with visibility low and every dollar precious, companies may be more likely than otherwise to prefer cash in hand – rather than shifting ads to a later date, probably in the summer of next year.
“NBCUniversal is actively working with our advertising partners to navigate this postponement, and we’re exploring all options to best serve their brands and our consumers this year, and into 2021,” said an NBCUniversal spokesperson.
Prime Minister Shinzo Abe and the IOC agreed Tuesday morning to move the games as pressure mounted in the midst of the rapidly spreading coronavirus.
NBCUniversal declined to comment on any financial hit beyond the statement.
The $1.25 billion in national advertising across platforms – an Olympic record – “is at risk,” said James McDonald of London-based media and advertising consultancy WARC. “With the fallout that we are seeing globally from the spread of this disease, the business pressure is generally immensely far higher than we’ve seen in previous times.”
Advertisers are saying, “‘All of that money we had tied in, that is something that we can recoup at a time when we need to shore up the ship.’ So the $1.25 billion is all up for grabs. They’ll be trying to see what they can recoup, what will be shifted.” They’ll likely defer spending if they can “since every dollar counts.” It’s not clear what portion of that spend Comcast already has the bank.
At risk, separately, are IOC official sponsorships worth an estimated $6 billion this year, double the previous summer games in Rio de Janiero. Denstu, the IOC’s official agency, changed the rules for these games, for the first time allowing non-exclusive sponsorships in a given sector – like two airlines, Japan Airlines and ANA, and two banks, Mizuho and SMBC. The price to join three tiers of domestic sponsors also rose.
“These funds are [also] in jeopardy,” said McDonald, calling the situation “completely unprecedented.”
Executives at Discovery, Inc., whose Eurosport subsidiary has the rights to air the Olympic games in Europe, said in late February that the financial impact of a cancellation would be minimal because expenses would fall along with revenue. In separate statements Tuesday, Discovery and Comcast said they both fully supported the IOC and the Tokyo 2020 Organizing Committee’s plan to stage the Olympic Games in 2021 to ensure the safety of spectators, athletes, staff and the international community.
At a media conference in early March, Comcast CEO Brian Roberts said, “We try to anticipate for big events what might happen so that we’re protected there, and we also have insurance for any expenses we make. So there should be no losses should there not be an Olympics. There wouldn’t be a profit this year.” He said the company has insurance and “contractual protections.”
The IOC did not say when exactly the games would return but the idea is it will be in about a year. They had been slated to start on July 24 this summer. Lead time is needed for the massive event that involves 11,000 athletes. NBCUniversal was going to broadcast 7,000 hours of programming across all its platforms.
Comcast will also loose the ability to use the games as a powerful booster for its other shows and, importantly, for new streaming service Peacock, which is set to launch April 15 for Comcast subs and July 15 for the rest of the country.
Comcast shares were mostly flat Tuesday, sitting out a massive market rally that saw the Dow Jones Industrial Average surge more than 11% and sent most media stock far into the green.
Just before the Olympics were officially delayed, Comcast had filed a prospectus for a bond offering with the SEC that included some gloomy comments about the coronavirus’ potential “material adverse impact on our results of operations over the near to medium term.”
It cautioned investors of closed theme parks and delayed film releases. It discussed disruption of “the creation and availability of our film and television programming in the United States and globally…including from the cancellation or postponement of sports events, including possibly the Olympics, and the suspension of entertainment content production.”
And as they affect Sky, these impacts materially exacerbate what was an already deteriorating economic environment and advertising market in the UK and Europe in 2019,” the filing said. As for Comcast Cable, “while our network performs well to meet the challenge of business and schooling from home, will not be unaffected either as economic stress impacts our residential and business services customer base.”
Comcast expects the impact on the business to vary but said it will generally depend on the extent of governmental measures affecting day to day life and the length of time that such measures remain in place .”At this point, it is impossible to predict such extent and duration and the degree to which supply and demand for our products and services, including advertising, will be affected. This uncertainty makes it challenging for management to estimate the future performance of our businesses, particularly over the near to medium term.”
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