Kantar Media Takes Historical Look At Winter Olympics Ad Spending
2014 Sochi Olympics Could Produce More Than 5,500 TV ad minutes
New York, NY, January 22, 2014
– The countdown is on to the 2014 Olympic Winter Games, which will take place in Sochi, Russia and is being televised by NBC Universal from February 6-23. For U.S. sports fans, the quadrennial event fills a gap between the Super Bowl and the NCAA Men’s Basketball Tournament and puts a spotlight on a variety of winter sports that receive little media coverage in non-Olympic years.
Spectators and TV viewers will watch the participants vie for medals in 96 events on ice and snow. Skilled athletic achievements, unexpected outcomes and poignant storylines will add to the drama. For the advertising industry, there is additional interest in the efforts of marketers trying to leverage the Olympics for the benefit of their brands. Like the athletes, the sponsors also hope to cross the finish line without slipping or crashing and to earn marketing gold.
Kantar Media has mined its extensive database to compile a variety of statistics and insights on Winter Olympic advertising.
TV Ad Revenue vs. Rights Fees
U.S. TV ad spending in the Winter Olympics peaked in 2006 at $851 million when NBC Universal used its cable channels to add 70 hours of programming coverage and create extra inventory. Ad time sales for the 2010 Games were conducted during the devastating 2009 recession, resulting in less demand and a five percent drop in TV ad revenue to $809 million.
NBC Universal has announced it will show a record-setting 539 hours of TV coverage from the 2014 Winter Olympics, a 21 percent increase compared to 2010. The total volume of commercial time should increase by a comparable amount and provide some financial upside, as will new digital advertising opportunities from a significant expansion of streaming video coverage.
Escalating Olympics rights fees and higher production costs associated with more coverage require a growing financial investment from a media company. TV advertising revenue has not been keeping pace, even with more time available for sale. Digital ad spending is growing but external estimates still place it at less than ten percent of total ad revenue for the Olympics. The economics keep getting tougher.
Online Video Expansion
Over the past few Olympics, NBC Universal has significantly increased its streaming video coverage and improved the underlying infrastructure for user authentication and content delivery to consumer’s digital screens, leading to enormous audience growth. Coverage will increase yet again for the Sochi Olympics with all competition in every event streamed live. It’s the same model NBC Universal successfully used for the 2012 Summer Olympics. Highlight clips and playback of events will also be available.
Because the Winter Olympics has far fewer events than the Summer Games, trend comparisons on the amount of online video content should be done within the Winter or Summer competitions.
Even with the huge increase of streaming video content and audience growth, the Olympics remain primarily a TV event. More than 90 percent of total video consumption and more than 90 percent of all ad revenue is TV-based.
More Hours of TV Coverage Equals More Ad Inventory
As TV coverage of the Winter Olympics has expanded, so has the supply of commercial inventory and the volume of ads aired in the U.S. The growth has mainly been driven by expanded coverage on NBC Universal cable properties. In 2010, about 55 percent of the total programming hours and commercial time was on these external channels. For the 2014 Sochi Games, the cable ratio is expected to be about 65 percent.
Winter Olympics Programming Hours and Ad Time
NBC Universal has said it will air 539 hours of TV coverage from Sochi distributed across multiple channels. If the ratio of paid commercial time per hour is comparable to prior years, the 2014 Olympics could contain upwards of 5,500 TV ad minutes.
The blended average price for a 30 second unit in the 2010 Winter Olympics, across all network and cable channels, was $94,300. The amount paid by individual marketers can vary considerably depending on how much ad time is purchased, the mix of premium and non-premium inventory, packaging of TV spots with online inventory, and other negotiable factors.
One outcome of more programming hours is audience dilution, as viewers distribute their Olympic tuning across the spectrum of available channels and hours and also watch events online. This programming strategy can increase the aggregate number of Olympics viewers even as the average audience per channel and per spot declines. Ad revenue growth has thus become more dependent on volume than average price.
A Concentration of Ad Spending
The impact of the recession on TV ad sales for the 2010 Winter Olympics was reflected in the fewer number of participating marketers and a reduced share of total spending from the top ten U.S. advertisers in the Games. Big sponsors trimmed their commitments and a number of smaller companies opted to sit on the sidelines.
In 2010, the Top Five marketers accounted for 27 percent of total ad spend and the Top Ten represented 41 percent of the dollar volume.
The Top Ten advertisers in the 2010 Olympics spent a total of $334.6 million on TV advertising alone. In each Olympics several of the highest-spending advertisers also have top-level sponsorship deals with the global IOC and/or the domestic United States Olympic Committee (USOC). These arrangements entitle companies to additional marketing opportunities, category exclusivity and use of Olympics symbols and marks.
Top Ad Categories
The leading U.S. ad categories in the Winter Olympics are a reflection of the Top Advertiser list, since many of these elite companies have exclusivity deals that limit access by their main rivals. The Top 5 categories in 2008 invested $359.8 million and accounted for 45% of the total TV ad revenue.
About Kantar Media
Kantar Media provides critical information that helps our clients make better decisions about communications. We enable the world’s leading brands, publishers, agencies and industry bodies to navigate and succeed in a rapidly evolving media industry. Our services and data include analysis of paid media opportunities; counsel on brand reputation, corporate management and consumer engagement through owned media; and evaluating consumers’ reactions in earned media. As the global house of expertise in media and marketing information, Kantar Media provides clients with a broad range of insights, from audience research, competitive intelligence, vital consumer behavior and digital insights, marketing and advertising effectiveness to social media monitoring. Our experts currently work with 22,000 companies tracking over 4 million brands in 50 countries. www.kantarmedia.us