Blame it on Rio: Some U.S. companies see sales hit from Olympics
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2016 Rio Olympics - Opening Ceremony - Maracana - Rio de Janeiro, Brazil - 05/08/2016. Maracana stadium. REUTERS/Alkis Konstantinidis
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By Anna Driver and Malathi Nayak
NEW YORK (Reuters) - The Olympics are already proving to be a boon for Comcast Corp’s (NASDAQ: CMCSA) NBC and a drag for its U.S. media competitors, as well as for restaurants that rely on customers venturing out in the evening for a bite to eat.
Viacom Inc (NASDAQ: VIAB), Netflix Inc (NASDAQ: NFLX) and Discovery Channel all say they are bracing for a hit to ad sales or subscriptions during the Games, while Cheesecake Factory Inc (NASDAQ: CAKE) and others cautioned the event could keep people out of restaurants.
While previous Olympics produced winners and losers among U.S. businesses and industries, the effect could be more pronounced this year. That is because many high-profile competitions will be airing in primetime, in about half of the United States, and because NBC will air an unprecedented 6,755 hours of Olympic programing that can be viewed on broadcast television, online and on mobile devices.
The last time the Games coincided with primetime was 1996, when they were held in Atlanta. That was before streaming, apps and a host of other technologies.
NBC said on Thursday it had already sold more than $1.2 billion in advertising, including most of its premium ad space for the Rio Games, hitting an all-time record. About $1 billion was sold during the London Games four years ago.
"If I'm in a business in this month that is relying on foot traffic or eyeballs and I don't have Olympic programing, it's going to be a bad month," said Bernard Gershon, president of media and technology consulting firm Gershon Media.
For the Games, Comcast has enhanced its X1 video technology, a set-top box with a voice-controlled remote, and included new features such as the ability to search events by country or athlete and bookmark content.
"They really have stepped up the way you can consume the content and see it on multiple screens," said Gershon.
The Rio Games, which kick off with Friday's opening ceremony, are expected to draw more U.S. viewers than the record 217 million who tuned in to the London Olympics in 2012.
In today's fragmented market, it is increasingly rare for any programing to draw that sort of audience. Comcast paid about $12 billion for the U.S. rights to broadcast Olympics Games through 2032.
Viacom, the parent of networks MTV and Comedy Central, expects that because of the Olympics, ad sales in the current quarter will be "a little bit worse," than the decline seen in the previous quarter, Chief Financial Officer Wade Davis told investors on Thursday.
Similar concerns were aired at others that have to battle for advertising dollars in August.
Discovery Communications Inc's (NASDAQ: DISCA), Chief Financial Officer Andrew Warren this week warned investors that the company's third-quarter earnings would be "challenged" because the Olympics "suck advertising dollars" out of the market.
Discovery is not throwing in the towel, though. It is airing 23 hours of new programing during the Olympics, up from nine hours four years ago. A few others, including CBS, are taking a similar tack.
Online streaming company Netflix added fewer subscribers than expected in the second quarter and said the Rio Games are expected to have a "small, but meaningful impact" on the number of new subscribers in the current quarter, according to CFO David Wells.
It is not just Comcast's media rivals that are bracing for disruption. Apart from Cheesecake Factory, executives at Texas Roadhouse Inc (NASDAQ: TXRH) and Chuy's Holdings (NASDAQ: CHUY) said the Olympics may entice people to stay home and skip going out to dinner.
Still, some analysts say the Olympics may be used as a smokescreen for a company's underlying weak performance.
"Olympics is a convenient excuse,” said Brian Wieser, analyst at Pivotal Research Group. “Historically, on the ad industry, the impact was pretty limited. The money associated with advertising, not related to the Olympics, still showed up.”
(Editing by Eric Effron and Tom Brown)
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