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Analysis: Internet media banned from the Olympics

Industry Standard

(IDG) -- A few weeks after Soviet tanks rolled into Budapest to put down a revolution in 1956, the Hungarian Olympic water polo team got its chance at revenge. In a gold medal match at the Melbourne, Australia Summer Games, the Hungarians whipped the Soviets in a blood-filled brawl, 4-0. It was broadcast back to the Hungarians, who, for a day at least, could hold their heads high as they walked the streets of the capital city with Soviet troops looking on.

The so-called blood-in-the-pool match was the kind of drama that's become the hallmark of televised sporting events. And yet, that same year, the head of the Olympics told the world that TV would be the ruin of the Games.

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The Olympics return to Australia this year and Olympics organizers again are casting a suspicious eye on a new broadcast medium: the Internet. The Games' organizers -- primarily the tradition-bound International Olympic Committee -- and its broadcast partners have basically shut the Net out of the Games. There will be no radio play-by-play. No taped video highlights of the competition, except for a very limited number of broadband users. And certainly no live video. Worse yet, dot-com journalists won't receive a single media credential to cover the Games. It's the third straight Olympics that major sites, even and SportsLine have been barred from.

Money and tradition, more than anything else, explain why you'll have to turn to the boob tube for your Olympic thrills. The Olympics may still be called the "People's Games," but over the years the IOC, one of the oldest and most powerful bureaucracies in all of sports, has turned the amateur sporting event into a multibillion-dollar business. The IOC has built up the Olympics by cutting deals with corporate sponsors and media titans, who, in exchange for writing the biggest checks, get full and nearly exclusive access to the Games and the Olympic trademarks.

The Olympic organizers strenuously defend the deals that keep the Net far from the action. The IOC sells the broadcast rights for billions of dollars to finance the Games and support the various sports governing bodies that select the athletes and judges. As the exclusive U.S. TV broadcaster, NBC can recoup the costs -- and make a sizable profit -- selling ad time to major sponsors like Coca-Cola (KO) . "We've given out a general comfort statement to the [TV] broadcasters saying you're the ones who brought us to the dance, so we'll do everything we can to protect those rights," says Richard Pound, an IOC VP who chairs the organization's Internet plans.

Dot-coms can't afford to compete for those rights, but Netizens don't always play by the rules, particularly when the rules benefit corporate titans. Thanks to new enhancements in technology, piracy issues loom larger for the Sydney Olympics then ever before. Suddenly, mobile phones and digital cameras mean that every fan entering the 110,000-seat Olympic Stadium is a potential pirate broadcaster. Just as MP3 and Napster are turning the music industry on its head, Olympic pirates may provide the opening wedge that eventually pries open the events to Internet coverage.

Timing is everything

Early on, veteran sports-media execs predicted that the Sydney Games, because of the enormous time difference of 15 hours between Australia and New York, would be the first Internet Olympics. The Net would allow for more timely coverage. Viewers in the States, for instance, could wake up in the morning and watch events that were only a few hours old. But NBC and the IOC had a different idea. NBC decided that because the Games will be held half a world away, it will tape each event and broadcast it hours later. That means some events will be held back from the U.S. by as much as a day as NBC waits for the biggest possible prime-time viewing audience. And the network is withholding in-depth coverage from its Web site until after the event is aired on TV.

"With the Sydney Olympics, it all comes down to one thing: the time difference. That's why making rules on when and where you can access the information is the silliest thing I've ever heard," says Tom Jessiman, CEO of London-based, an affiliate of SportsLine.

With all the IOC bans in place many dot-com media honchos have written off the Games altogether, choosing instead to focus on the start of the NFL season and baseball's pennant races. But the bans have hit the sports sites where it hurts most. Official Olympic sponsors such as Coke and McDonald's (MCD) are spending tens of millions of dollars on TV advertising, but almost nothing online. Says Robert Coen, the chief advertising forecaster for the Interpublic Group of Companies (IPG) , the second biggest advertising holding company in the world: "Compared to all the money spent on ads for the Olympics on TV, no Olympic-related money is going to the Internet. I don't see the Olympics being much of a factor on Internet advertising."

Until the online Olympics audience becomes much bigger, advertisers will continue to spend their ad budgets on TV. Yet this audience won't grow in any meaningful way until some of the Olympic restrictions are lifted and sites are able to afford broadcast rights.

The threat of TV

Like all major sports events, the growth of the Olympic Games has everything to do with the IOC's success in courting the media. The press helped garner advertiser interest early on from the likes of Kodak and Coca-Cola. Before long, advertisers would surpass wealthy patrons as the main source of support for the games, and the IOC, a nonprofit organization, no longer had to worry about finding funds to stage the Games every four years.

TV has been the biggest boon for the games, though it took some time to catch on. In 1948, the Games' organizers reached a landmark agreement with the British Broadcasting Corp. The BBC agreed to pay the equivalent of $3,000 to televise the 1948 Olympics, establishing the concept of rights fees. (To avoid inflicting financial hardship on the BBC, the British Olympic committee never cashed the check.) The 1956 Winter Games in Cortina D'Ampezzo, Italy, carried the first live TV feed. But IOC traditionalists, expressing the same type of resistance to change that has re-emerged today, were unimpressed. Former IOC President Avery Brundage commented at the time: "We in IOC have done well without TV for 60 years and will do so certainly for the next 60 years, too."

Brundage couldn't have been more wrong. Beginning with the 1960 Games in Rome, TV has fundamentally changed the way the Olympics are viewed. And TV-rights fees are now the single biggest source of revenue for the IOC. But it wasn't until the '80s that the organizers figured out how to turn a profit on the Games. The 1984 Olympics in Los Angeles kicked off the era of hyper-commercialization -- and big profits. In subsequent years, a worldwide sponsorship program was developed, and the IOC's coffers began to overflow with corporate dollars. Suddenly, the "Olympic Movement," a term coined in 1894 to describe the need for promoting the unifying nature of a global sports, became synonymous with the big business of staging the most commercialized event in the world. The Sydney Games are predicted to generate $5 billion for the host city and the surrounding economy of the New South Wales region of Australia alone.

Containing the Net

Sports sites desperately want a piece of the action. And why not? NBC is expected to make a tidy profit from the Sydney Games; it's forecasting $900 million in advertising revenue after paying out $705 million for the TV rights. Overseas broadcasters are paying $615 million for rights. Brands such as Coke, Visa and IBM have kicked in another $1.25 billion in sponsorship commitments.

Net firms have not been shy about spending money, but even they can't buy into this exclusive club. Beyond that, Olympic sponsor IBM, which is shelling out $200 million in money and services for Sydney, landed the gig for producing, a job that ordinarily in the sports world goes to an online media outfit.

The Internet's greatest advantage -- its capability to cheaply beam content to any computer anywhere in the world -- is the same reason it's being so highly regulated by the IOC. The IOC understands that through the Net more people can access the Games. But if it's at the risk of jeopardizing its billion-dollar TV-rights deals, forget it. "We're torn between those two streams of thought," says the IOC's Pound.

A major obstacle to watching the Olympics on the Web is the inability to confine the broadcast to a region -- which is the very basis of the TV contracts. A Web broadcast creates the prospect of viewer choice, a scary proposition for TV programmers. If you give the viewer the choice to watch the games on something other than TV, then TV ratings would fall, advertisers would insist upon paying less and the price for sponsorships and TV deals could plummet, so the thinking goes. Scarier still for network executives is the scenario in which there are multiple official sites competing for the same advertisers. For instance, Sydney is the first Olympics in which NBC is in competition with the host city to find advertisers for their respective Web sites. And organizers of the Salt Lake City Winter Olympics in 2002 are promising a better site, with more advertisers. Unless a decision is made, the IOC is facing the prospect of having the 199 national Olympic bodies, which now subsist on IOC contributions, launching fledgling Web businesses to help pay for their athletes' training. Pound says he won't stand for it. "I would be nervous if you had organizing committees selling [advertising] on their own," he says. "They might sell it to competitors of their own sponsors or something like that." But dot-coms see opportunity in the turmoil. "It's like everything else in life," says Jessiman of "You have to ask yourself: Do you fear the Internet or embrace it?"

The IOC has scheduled an historic summit in its hometown of Lausanne, Switzerland, in December to address the Net. The top executives in sports, media and the Internet will have their say. "Where we are with the Internet is we're at a crossroads," says David Aikman, group marketing manager for the IOC assigned to the Internet task force. "The reason we called this conference is we're all trying to figure this thing out."

There's a lot to be sorted out. For instance, NBC and the IOC differ over whether Olympic Webcasts are included in the Peacock Network's $3.5 billion TV contract, a deal that expires following the 2008 Games. If NBC has the Net rights sewn up, which it believes it does, then the dot-coms may not have much to talk about in Lausanne. And NBC is committed to protecting that investment.

"It's really difficult to predict what the future is going to bring," says Gary Zenkel, senior VP of marketing and business development for NBC's Olympics coverage. "Right now the Olympics garners a premium in both rights fees and ad buys because it is able to attract and sustain an enormous TV audience. Until that audience and those advertising dollars are diverted to other [media] platforms, we will not in any way compromise the value of the exclusivity of TV."

Battle over Web rights

The fact that NBC Sports programming execs will have the final say over which Olympic events Americans see -- and where they see them -- through 2008 runs counter to the viewer's-choice philosophy of Internet sports coverage. "It's a disservice to the viewer," says Rick Gentile, an executive producer of We Media, a New York-based media company targeted toward the disabled. We Media in April purchased the rights to broadcast this year's Paralympic Games over the Net and on TV. Unlike the Olympics, the Paralympic Games has received spotty TV coverage over the years, so the Games' organizers turned to an Internet company to get several days worth of continuous live, online coverage -- the first live coverage of any kind for the 12-day event in which handicapped athletes from around the world compete.

Of the IOC's Olympics policies, Gentile, a former CBS (CBS) Sports producer, says: "Compound [the Net blackout] with the fact that there's no live TV, and it's the same as if the network that had the rights to the Super Bowl said, 'The Super Bowl won't be available on live TV or the Internet this year.' Then you sit there and say, 'Wait a minute. Aren't I entitled to this?'"

Actually, no. The business of sports broadcasting is determined by ratings and advertising dollars. Without advertisers, even the prospect of covering niche sports like the gold-medal handball match live on the Net is too costly. NBC knows full well the financials of offering Olympic events to fans on a pay-per-view basis. Its now famous "Triplecast" pay-per-view coverage for the 1992 Summer Olympics was a big money loser for the network. Still, it appears that the emergence of broadband may force NBC to revive the triplecast model, particularly if viewers and advertisers clamor for it.

Zenkel says NBC is investigating whether it would make sense to utilize broadband in future Olympics to give the rabid fan more coverage. But he doesn't see the ad dollars supporting that type of programming until at least after the 2004 Games.

But there is urgency to the Lausanne summit. The IOC has sold the TV rights to broadcasters on every major continent. The contracts don't contain clear stipulations about who owns rights to broadband or the Internet, both of which promise to be major sports broadcasting outlets before the deals expire in 2008. Though dot-coms and networks are beginning to fight over Net broadcast rights, the IOC doesn't want to make a hasty decision.

But it doesn't appear that Net firms will be able to buy their way into the Olympics anytime soon. Pound says the IOC is likely to give its TV partners first crack, thus protecting the value of its TV deals. Whatever is decided, "We would like to act in some way as to enhance, or at least not damage, the existing TV rights," he says.

Already steaming over IOC restrictions, particularly the ban on dot-com media credentials and the decision to let longtime sponsor IBM produce the official Web site, sports sites are losing patience with the IOC brass. "If they're confused, they should cut a series of short-term deals [with Net companies]. That way they'll get a lot smarter," says Jessiman.

But the early scoop on 2002 doesn't sound as if much progress is being made. Mitt Romney, CEO of the Salt Lake Organizing Committee for the Olympic Games, says the Net will be a big boost for ticket and merchandise sales, but the broadcast restraints are here to stay for a while. "I don't imagine there will be any difference in the video distribution rights between Sydney and Salt Lake because the contracts with the broadcasters have been in existence for some time," Romney says.

TV's limitations

Lost in the squabble over rights and corporate dollars is the fan. The dreary reality is that for all the talk of the Olympics being the People's Games, half the world still has no access to it. That's the case for Fiji, a tiny island-nation in the South Pacific with a handful of Olympic athletes. Because the country taps into New Zealand's TV feeds, the only time the Fiji team will be seen on TV (barring an unlikely medal finish in one of the few events it's participating in) is for a few seconds at the opening ceremony. The region has been getting increasingly wired, though, leading some residents to hope a solution may come from the Net.

Buoyed by the success of setting up a Web site to bring new and unheard-of training techniques to the athletes of the region, the Oceania Olympic Committee -- the athletics body that overseas the Olympic qualifying efforts of 14 South Pacific nations, including Fiji, New Zealand and Australia -- would like to see the Net bring blow-by-blow coverage of the events.

"If you could use the Internet somehow to see how a Fiji sailor is doing, rather than having to read a text version of it somewhere a day later, that would be great," says Dennis Miller, the sports director for the Oceania Olympic Committee.

Miller's view makes sense, and perhaps the IOC could find some wiggle room to allow for such experiments in Net broadcasting. But probably not. After all, Olympic coverage is all about money, and the Net, despite its reach, won't pay the bills.

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Official site of the 2000 Sydney Olympic Games

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