The Olympics' Upset Winners

When the Russian women's gymnastics team walked away from the Olympics finals with a silver medal on Tuesday, the six team members had tears of disappointment, not pride, in their eyes. The Russian team had gone to Sydney with one goal: Bring home the gold.

The same is true for NBC. When the TV network agreed to pay US$705 million for the TV rights to the Sydney 2000 Olympics, it knew that anything short of ratings gold would be utter defeat.

So far, it doesn't look good. In its first five days covering the Games, the network's ratings fell below those of prior Olympics. They are down nearly 36 percent from those of the Atlanta Games in 1996, 20 percent below those of Barcelona in 1992 and 12 percent below those of Seoul in 1988. The low numbers may force NBC to offer free spots to advertisers, who were promised higher ratings.

Pundits are blaming the underwhelming TV audience on a number of factors: the tape-delayed coverage, a generally disappointing showing by American athletes, the beginning of the football season and the end of the baseball season (which compete with the Games for viewers), and NBC's lackluster production. "Even CBS Corp.'s Survivor series seemed to have more immediacy than these Olympic Games," says Tom Shales, TV critic for the Washington Post Co.

Of course, delayed coverage, ratings competition and corny commentary are not new. That's why many observers are pointing to yet another culprit this year: the Internet.

NBC may be delaying its coverage of the games, but much of the Net isn't. Beyond the sports sites, Internet destinations from newspaper sites to America Online Inc. are publishing exhaustive news and analysis. "There is some marvelously innovative coverage going on in the Internet across the world," admits Kevin Monaghan, VP of business development for NBC Sports.

The ubiquitous online coverage of the Games is not just diluting the TV audience; it's also fragmenting the Web audience. All sorts of news and information sites are seeing double-digit traffic increases tied to the Olympics, giving the likes of ESPN.com, CNNSI.com and NBCOlympics.com a run for their money. Perhaps no one is feeling the challenge as keenly as Quokka Sports Inc., the San Francisco firm that invested millions to produce NBCOlympics.com. Even with heavy TV promotion, NBCOlympics is coming up short of projections.

"We have made a good solid start," says Quokka CEO Alan Ramadan. While exact figures are not yet available, it's unlikely NBCOlympics will meet its official target of 10 million visitors - let alone the 20 million to 30 million Ramadan used to boast he'd draw. Meanwhile, "unofficial" sites like ESPN's are drawing far bigger audiences.

All this audience dilution wasn't supposed to happen - at least that's not how the International Olympic Committee planned it. To protect its key source of income - TV contracts, which totaled $1.3 billion globally for the Sydney Games - the IOC went all-out to limit Internet coverage. It banned audio Webcasts and online video highlights, whether live or delayed. And it refused credentials to Net journalists.

Clearly, the protectionist policy has flopped. "[IOC President Juan Antonio] Samaranch's effort to put firewalls around news content was destined to fail," says Jack Myers, chief economist for the Myers Reports, a New York-based media newsletter.

NBC concedes that the flourishing Internet coverage is changing the power dynamics of the sports media world. "With all these different platforms and choices, certainly you are not going to reach the masses that you have reached in past Olympics," says Monaghan. The changes are inevitable, and NBC is learning valuable lessons by being a player in both TV and the Internet. "In some cases, we are inviting people to turn away from their TV sets," he adds. "We are cannibalizing our existing business to gain a foothold in this new medium."

How to make money in the new medium remains a open question. Few will have to face the challenge more directly than the IOC. With TV audiences dwindling and Internet audiences fragmented, how can it protect the lucrative rights contracts that make the games possible - and that have turned the IOC into one of the most powerful and entrenched bureaucracies in the world of sports?

The committee acknowledges - and now claims it is pleased with - the Net's growing influence on the Games. Officials concede they suspect it will grow at TV's expense.

Ironically, it is the accredited broadcasters that are pushing the IOC to extend rights to the Internet. Many of them arrived in Sydney with plans to put multimedia Olympics coverage on their Web sites. "I think a lot of broadcasters would like to see some kind of [multimedia] news access for their sites," says David Aikman, marketing manager for the IOC, who is based in Sydney to oversee the implementation of Net guidelines. "But that requires getting something like 150 rights-holders to get together and agree on a neutral package of [Internet] rights. That won't be easy."

In addition, with the Net's disregard for national borders and its fragmented audiences, big advertisers have been reluctant to pay for online promotion. So it will be tough coming up with rights packages at a price media companies are willing to pay. "I don't think the IOC is going to be able to charge the same kinds of fees in a fragmented market," says Mike Levine, VP of business development at Sportscapsule, an online video-highlight service.

Sports-media executives argue that the Net and TV are not necessarily antagonists: The two can complement each other to build larger audiences. NBCOlympics.com, for instance, has served more than 3 million pages to viewers seeking updated TV schedules, Ramadan notes. In turn, 70 percent of NBCOlympics' audience visits its site during broadcasts, when the site is heavily promoted.

Yet as online-video technology matures, TV and the Net are likely to compete more directly. "We would love to be able to take advantage of the potential of this medium and do some interesting things with video," says Steve Robinson, managing editor of CNNSI.com.

It will be up to the IOC to grapple with those issues. In November the organization will gather for a summit meeting in Switzerland to figure out what role the Net will play at future games.

"I think going forward," says Aikman. "It's going to be a real challenge." Sydney has shown the IOC it has to start factoring the Internet into its plans. Its media partners, after all, are paying too much to come out feeling like losers.

Bernhard Warner contributed to this story.

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