CTV Olympic Coverage Caught in 'Perfect Storm'

Advertising dollars a big question mark for Vancouver Games
Toronto Star, Jan 07, 2009
Chris Zelkovich Sports Reporter

Sticker shock has some television advertisers balking at record-high prices for the 2010 Vancouver Olympics.

The CTV-Rogers consortium broadcasting the Games is saying that the biggest gamble in Canadian broadcasting history – a $90 million (U.S.) rights fee – will pay off with record advertising profits. But advertisers say the consortium is dreaming if it thinks it can command big dollars in these gloomy economic times.

"It's a perfect storm and CTV is getting caught in it," says one ad buyer, who requested anonymity.

Coincidentally, consortium president Keith Pelley uses the same term but in a completely different context.

"We are set up for the perfect storm," he said. ``The Games are in our own country, our athletes are winning on the world stage and are poised for success and we have the multiple platforms to tell their stories.

"We are fortunate to be involved with the biggest sporting event in our country and our initial reaction from the corporate community has been positive." But that's not what many in the ad world are saying. They claim the consortium is asking for record prices at a time when most advertising budgets are being slashed because of the faltering economy.

"It's not happening at a great time for the folks at CTV and Rogers," said Eli Paper, media director for Toronto-based Television Advertising Services Inc.

"That could change in the next year, but it doesn't take a rocket scientist to figure out that spending big dollars isn't on any advertiser's mind right now."
The problem for the consortium is that the big sponsors – national advertisers such as RBC, McDonald's, Visa, General Motors – need to commit a year before the February 2010 Games.

Can a company like General Motors, which is counting on a multi-billion-dollar government bailout to stay alive, afford to pay the high Olympic price tag when it's not even sure it will be in business a year from now?
``A lot of those decisions are made now, which could hurt CTV and Rogers badly," said Paper.

Pelley says the media consortium is days away from completing major ad deals and that he doesn't expect any problems in meeting revenue goals. But one industry source said that at least one national sponsor has already asked the consortium to drastically lower its asking price.

What has some advertisers shaking their heads are prices they've never seen before. One source says the consortium is trying to peddle $480 million (Canadian) in ad inventory, more than four times what CBC was selling during the last Winter Games in Turin, Italy.

The general rule, sources say, is to double ad prices when Games are held in your own country. But the consortium is looking for four to five times what CBC charged for Turin in 2006, they say.

There are two reasons for the high prices. One is that the consortium needs to recoup the $150 million (U.S.) it paid for the 2010 and 2012 Olympics. Not only was that a Canadian record, but it was also more than $50 million higher than the losing bid by rival CBC.

The general consensus in the business was that the CTV-Rogers group had overestimated CBC's sealed bid and overpaid badly for the Games. The Vancouver rights, for example, are more than three times the $28 million CBC paid for Turin.

But CTV argues it paid such a high price because it offered an unprecedented package. Buying the rights for coverage on 11 television outlets, English and French websites, 50 radio stations and much more doesn't come cheap, it says.

Pelley says the economy is a concern, but that the Vancouver Games – only the third ever held in this country – are as close to recession-proof as anything.

He cites the Vancouver organizing committee's record $720 million in sponsorship revenue as an example of the Games' ability to get the business world excited.

And he points to the last Winter Games held here – in Calgary in 1988 – as an example of the Olympic brand's power.

Black Monday, which heralded the biggest economic meltdown since the Depression, happened in October 1987. Four months later, with the economy still in the tank, CTV beat its Calgary revenue goals by 30 per cent.

The consortium is banking on history repeating itself.