Don’t Blame NBC If You Like Capitalism

More than anything else, the first few days of the Olympics have been constrained to non-stop complaints about NBC, mostly on Twitter. The basic premise is that NBC is tape delaying most of the major events and airing them in primetime on tape delay. This is not new. In fact, as far as I know this has been how the Olympics have worked as long as TV has existed. The only exception (obviously) is when the games take place in the U.S. or at least time zone that the U.S. falls in. The difference is the people watching them.

The internet rules our lives now. People are online almost constantly. Whether it’s browsing the web, Facebook or Twitter, most people under the age of 35 probably don’t go an hour without using the internet. Twitter has come a long way since 2008, when it was just barely catching on with the mainstream. This is the first Summer Olympics where Twitter is an integral part of people’s lives, and it’s ruining people’s viewing experience.

Twitter, Facebook, ESPN and even NBC’s own websites, have been posting results of events that are not available for viewing in the United States until several hours later, and this has enraged people to no end. And that leaves us right back where we were during the HBO uprising a few months ago. Once again, a vocal minority is complaining about the way the “old fashioned” media company is conducting business. Their argument is that since we have the capability to stream this stuff online, or show it on TV as it’s happening, we should, no matter what the consequence. This is not curing cancer. NBC is not holding something back that is going to impact society. It’s amateur sporting events.

We live in country with a free market driven by supply and demand1. In the TV world, networks make their money off advertising rates, which are driven by TV ratings, which equate basically to “how many and what kind” of people will watch a particular show. NBC get’s paid up front a certain amount of money and they hope that the ratings meet expectations so that they can charge more next time. The most public example of this happens during the Super Bowl, when advertising rates are bandied about, and now reach seven figures for a 30 second commercial.

Most TV is consumed during “prime time”, which is some combination of the hours between 7 and 11 P.M. depending on who you talk to. Because these are the most watched times, they are also the times that bring in the most advertising dollars.

Why have I spent so much time explaining something everyone already knows? Because apparently everyone doesn’t. Searching Twitter for “NBC” tells you that.

People love to say that NBC (and HBO) is following the “old business model”, but what they really mean is “people’s habits have changed”. The internet has created ways for things to be streamed online at any given time, live and in living color, and people expect that to happen even if it doesn’t make financial sense for the network. Twitter has created new habits where people have to be plugged in while they are watching something so they can both comment on, and read commentary about, the thing they are watching.

But these same people get angry when they have to watch something later that has been “spoiled” because they can’t shut off the web and Facebook for a few hours. So they blame NBC and invoke the “old business model” argument. The problem is, this isn’t the “old business model”, it’s the “current business model”. Want proof? here are some things sports business reporter Darren Rovell has tweeted over the last few days:

NBC paid over $1B for the rights to the Olympics. They have already been paid by advertisers (I assume) because that is how TV works. But if they don’t deliver on ratings, the next time around advertisers won’t pay as much, and they lose. They are a business, out to maximize profits, and don’t owe people anything. The next time your company is having a bad quarter, do you offer to take a pay cut? When it’s time for raises, do you say “give my raise to Bob, he works harder than me?” Of course not, so why should NBC say, “we are going to take less money because we feel bad for people watching it.”

The argument is that they should show the live and then again on tape delay, but that doesn’t really work for the TV business model. Would they have two sets of advertisements with different rates? Would they use the same advertisements but charge more? Would the ratings actually be higher overall? The answer to the last question is likely no. Even still, they would have to gamble on that up front, and from a business standpoint it makes no sense.

I realize that they are the only game in town and that is unfortunate, but the IOC is to blame for that. They negotiate the contract with the TV networks. If they cared more about viewers they could split it up across networks or write into the contract that NBC can’t tape delay certain events, but they don’t care about viewers. Like everyone else they care about the money.

If this bothers you, then there is a simple answer: don’t watch. Tell your friends not to watch. That is the only way to change things. When the ratings are better than 4 years ago, that means the “old business model” is working just fine. There are more channels than 4 years ago, there are more iPads and other devices to take away from TV and yet the ratings went up.

The funny thing is that this will likely be the last time this is an issue. The 2016 summer games are in Brazil which is just 1 hour ahead of New York, and they may schedule the events so that they are in prime time for the US. And 8 years from now, it’s too difficult to predict where technology will be, but I suspect the landscape will be much different.

The bottom line is that NBC isn’t “doing it wrong”. Just like HBO, they are doing it the way that makes them the most money. And people are mad because it’s not on the terms they want. And because it’s 2012, that means they take to Twitter. Unfortunately NBC is too busy counting their money to care.

  1. You can debate the fine points of this if you want, but from a general sense, it’s true []