News that the CBC has secured the broadcast rights for the 2014 and 2016 Olympic Games has set off speculation in the industry about how the embattled public broadcaster can afford to mount the Games at a price that Canadian private broadcasters said would not work for them.
CBC declined to discuss details of the contract reached overnight Tuesday, saying the International Olympic Committee does not permit broadcasters to publicly discuss terms of their dealing. Estimates from industry sources consulted by The Globe and Mail regarding the value of the deal range from $65-million to $80-million for both the Games in Sochi, Russia, and Rio de Janeiro. There are also intimations that the deal may be back-loaded.
The IOC reportedly rejected a $70-million bid from a combined CBC-TSN consortium earlier this year, which led TSN to withdraw from bidding.
Kirstine Stewart, CBC executive vice-president for English services, has promised the corporation will break even or make a small profit as the Games return to CBC for the first time since 2008.
But advertising revenues for Sochi are expected to be modest due to the nine-hour time difference between the Russian city and the east coast of North America. Rio is in the Eastern time zone but will still require considerable production costs.
Replacement value is one of the key points that make the Olympics viable for CBC when it might not work for a private broadcaster.
For a private network such as CTV, the difference in audience and, therefore, ad revenues between an Olympic opening ceremony and the season finale of an American program such as CSI is not that great. The Olympics don't move the needle that greatly for ratings.
For CBC, however, the gap in audience between its domestically generated programming and an Olympic opening ceremony is much greater.
That means CBC can generate more revenue with an Olympics telecast than it might with its usual broadcasting.
Likewise, CBC would have to pay the costs of filling those hours that would be occupied by the Olympics.
Another key factor for CBC is the ability to place Olympic programming on its other networks such as CBC Bold and CBC News Network. With the cable and satellite industry moving toward more choice for consumers, the Olympic package creates a strong incentive for viewers to pay the fee for channels once they are no longer compulsory.
Finally, the Olympics are an investment in CBC's digital services. The Olympics allow CBC to drive viewership to the official Olympic site and to its streaming services, which are not getting as much attention when competition has the Games. In an age when digital and social media are growing more powerful, they help to amortize the IOC price tag.
The Harper government pleaded ignorance Thursday on how much CBC paid, saying the broadcaster has not disclosed the amount.
"We don't know how much CBC paid," a senior government official said, speaking on condition of anonymity. "This was between the CBC and the IOC and my understanding is that these financial details are not disclosed by the IOC. So far, CBC has elected not to disclose them."
Prime Minister Stephen Harper told reporters in Gimli, Man., Thursday that he had no idea on what CBC spent.
"I would be surprised if anyone in my office knows," Harper said. "The CBC board of directors operates at an arm's-length basis from the government, and I presume that the corporation made these decisions, you know, within their authority to bid for the games. Beyond that, I'm not going to get into an industry dispute."