By Pablo S. Torre
It's not just Michael Phelps who's getting very rich in Beijing. As TV advertising sales at large continue to sink, NBC has struck gold thanks to the unprecedented $894 million it paid 11 years ago for the U.S. broadcast rights to the Olympics. With one week now in the bag, the network easily shattered records in advertising revenue (more than $1 billion) and ratings (according to Nielsen, more than half of all Americans tuned in since the opening ceremonies--which itself garnered 35.7 million viewers). And last Thursday, NBC announced that another $10 million worth of commercials had been bought since Monday, with more expected on the way. "The ratings seem to validate that the Olympics has retained its universal appeal," says Gary Zenkel, president of NBC Olympics. "The Michael Phelps journey to a record eight gold medals was certainly one of the best in history and captivated our audience."
For just 30 seconds of airtime during the live, prime-time events -- think swimming, track and field, gymnastics -- NBC charges a going rate of $750,000. But companies like McDonald's, Adidas and Samsung aren't simply calculating eyeballs. With exclusive sponsorship deals that can span decades -- Coca-Cola, for example, has had a deal with the Olympics for 80 years, good through 2020 -- they're also counting all the products viewers don't see amid NBC's 3,600 total hours of coverage. In bidding for commercial space, incumbent sponsors actually get the first shot to lock out competitors, which explains why Americans haven't seen Pepsi at the Games since 1928. (One realm that doesn't apply to? Politics: both Barack Obama and John McCain each shelled out at least $5 million this week for campaign attack ads.)
The Olympics' local market isn't lost on advertisers, either. Sponsors have invested $3.2 billion globally thus far, while some American companies like UPS are focusing all their cash ($60 million) on China itself. All the attention makes individual sponsorships a particularly valuable loophole: even though Nike lost out to Adidas, for example, athletes like Yao Ming and LeBron James can still wear their preferred brand on the court, if not the podium. In the days after former Chinese gymnast Li Ning wore his own clothing line as he ascended to light the Olympic torch, for example, the company's stock reportedly rose 4%.
Ultimately, though, one harsh reality remains: the window of opportunity closes fast. "With the Olympics, the American public has the memory of a goldfish," says Ed Butowsky, a financial adviser to athletes. "Pretty soon, we'll be onto the World Series."