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Olympics trains for Net challenge

As the torch heads closer to Salt Lake City for the 2002 Winter Olympic Games, organizers and broadcasters once again fear they will be burned by the Net.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
6 min read
As the torch heads closer to Salt Lake City for the 2002 Winter Olympic Games, organizers and broadcasters once again fear they will be burned by the Net.

Already, online troubles for the games are mounting on several fronts, with one Internet company scheduled to cover the event collapsing and another backing out of its contract to run the official Web site.

Organizers, meanwhile, continue to grapple with tricky questions about how to balance online and traditional media coverage without alienating companies that have paid billions of dollars for exclusive TV rights. The International Olympic Committee (IOC) offered press credentials to only a few Internet news outlets--a policy that angered some companies that were passed over.

"We're all media, we're all covering different events from different angles," said Joe Ferreira, vice president of programming at CBS SportsLine, a sports site that so far has been denied access to the games.

The debate within the IOC is a familiar one. Like any traditional media business, the Olympics is struggling to balance event programming in the Internet age. TV stations pay huge amounts of money to broadcast events exclusively, be they sitcoms or sports. The Internet threatens this system in a number of ways: impinging on regional TV licenses, breaking embargoes on events that TV would like to delay for broadcast at peak viewing times, and fragmenting audiences, to name a few.

At stake is a fortune in TV rights.

Since 1995, the IOC has inked with broadcasters from around the globe long-term TV deals that run through 2008 and are worth about $5.1 billion. The largest single payout came from General Electric's NBC, which paid $3.5 billion for U.S. rights to the games during that period.

"The fear is that the television broadcast networks have paid huge amounts of money around the world and they don't want to be trumped by the Internet," said Scott Doniger, an analyst at Forrester Research.

Tough qualifying heat
To date, Web companies seeking to provide online coverage of the games have faced a tough road.

During last year's Summer Games in Sydney, Australia, Web reporters were shunted from the Olympic playing field, leaving online news organizations dependent on stories produced by traditional media wire services.

Forrester Research analyst Eric Scheirer, who wrote a report titled "No Gold for These Online Olympics," criticized such policies as shortsighted.

"NBC worries that Internet viewing would cannibalize its TV audience and jeopardize its ad deals," Scheirer wrote. "But this protectionist stance is misguided. Internet distribution can effectively complement televised coverage--and attract its own audience and attendant revenues."

Olympic organizers say they are warming to Net initiatives.

"The time is ripe, possibly even late, for Internet credentials and including the Internet as a media," said Bob Condron, a spokesman for the U.S. Olympic Committee. "We need to get them as a part of our family now so we can figure out where we want to go."

Nevertheless, the IOC has yet to fully open the games to online companies.

In a conference held in Lausanne, Switzerland, last December, the IOC brought together the sports community and the leaders of the new and traditional media to discuss the future of Olympic coverage on the Internet.

The IOC said it will accredit a limited number of Internet organizations to cover the 2002 Olympic Games in Salt Lake City but will not permit "moving images or audio taken from within Olympic venues."

A select few companies were awarded credentials, including Yahoo Sports and some smaller Web sites that cover specific events. Larger players, such as ESPN.com and SportsLine, were not given credentials.

Other Net woes
Beyond anti-Web regulations, Internet coverage of the games has been complicated by the economic meltdown that has wiped out hundreds of dot-coms and forced others to recast their businesses. The troubles have struck companies large and small.

Earlier this month, San Mateo, Calif.-based Logictier backed out of a deal to host the SaltLake2002.com Web site, according to the Salt Lake Organizing Committee.

The committee said Logictier's decision to pull out of the deal stemmed from a change in its business focus; the company will continue to work on the site until a new partner is found.

The announcement followed another would-be Olympics Web player that collapsed in the dot-com wipeout. Last month, San Francisco-based Quokka Sports filed for Chapter 11 bankruptcy protection and effectively shut down, having run out of cash.

The failure has left NBC without an Internet partner to run its NBCOlympics.com Web site, at least for now. The two companies had collaborated on Olympics coverage in Sydney under a deal that was expected to extend through the Winter Games.

Financial risk?
Quokka's troubles highlight the vast competitive gulf between Web companies and established media, such as television, in covering high-profile events such as the Olympics.

NBC refused to comment on the financial performance of its Olympics coverage. Nevertheless, some estimates put the company's take from the Sydney Games in excess of $50 million, on $900 million in advertising sold over the 17-day event. Broadcast rights cost $705 million, and production costs came in around $125 million.

Surprisingly, the company earned a profit despite disappointing Nielsen ratings for the games, which the company decided to broadcast with a several-hour delay to reach prime-time audiences. The company garnered on average just 13.8 percent of U.S. TV viewership--down 36 percent from the 1996 Atlanta games and 20 percent below NBC's own projections.

NBC paid $545 million for the rights to the upcoming Winter Games broadcast. The company is expecting better results at Salt Lake City, which will not face the time handicap of Sydney.

By contrast, NBC has viewed the Web as a sideline aimed primarily at promoting its TV programming.

According to Nielsen/NetRatings, NBCOlympics.com drew 4.4 million unique U.S. visitors in September during the games. Although the numbers appeared to show a host of fans tuned into coverage on the Web, analysts were unimpressed, noting that NBC kept the Internet coverage of the Olympics relatively low key.

Significantly, NBCOlympics.com offered no live coverage of the games, providing only short video segments of events that had already been televised.

NBC is not prepared to drop its Internet coverage completely, however, and is in discussions with various Web companies to find a replacement for Quokka, according to NBC spokesman Mike McCarley.

"We are in talks with several different companies," he said, declining to offer specific details about the talks.

A Yahoo representative said the company is in discussions with the Salt Lake Organizing Committee and NBC to offer Web site hosting.

"We've been talking to (the Salt Lake Organizing Committee) in terms of their plans for the Web site," the representative said. "I don't want to go into those things until something is finalized."

Analysts also said that RealNetworks and Microsoft, which compete in providing software for viewing live video over the Net, may be interested in becoming players in upcoming games.

RealNetworks in particular has aggressively signed up sports programming for its subscription Internet streaming service, GoldPass, which offers Major League Baseball and National Basketball Association games as part of a $9.95 a month package.

The streaming media company declined to comment on its Olympics plans.

How the next Internet partner is chosen to cover the Olympics may create a blueprint for granting rights to online media companies. Whether an Internet company will eventually have its own set of rights will depend on how widespread the medium grows and how lucrative these deals could become for the IOC.

But for now, at least, the committee appears to be in a quandary about the Internet's role in coverage. The question is not whether the Web will play a role in disseminating information, but how.

"Somewhere down the line there will be an Internet rights holder, and that's taking shape," the U.S. Olympic Committee's Condron said. "How they want to do it will probably be in a relationship with a rights-holding network. The main thrust is to not diminish the broadcasting-rights holders who pay pretty goodly sums to bring the message to the world live."