NBC faces big financial loss

The figure is a staggering $250 million. That’s the amount of money that NBC said it “knows” it will lose by airing the Winter Olympics from Vancouver, British Columbia, beginning Feb. 12.

Keith Sherin, General Electric’s chief financial officer, confirmed it. GE is still NBC’s owner, although a deal is pending to sell the network to Comcast. The company said the reason for the loss is a poor advertising market and higher costs for rights, which led NBC to project its first loss in at least three decades on Olympics coverage.

The exclusive rights to broadcast the Vancouver games alone cost NBC an estimated $820 million, yet the network’s advertising sales in Vancouver are predicted to be $650 million to $700 million. A 30-second advertising spot airing during the Vancouver games is selling for $500,000 to $600,000. You do the math.

Another factor in the loss is the higher production costs associated with the unique problems of mounting multilocation coverage in a foreign country during extreme cold weather. Technical crews have been working in freezing temperatures on mountains to ensure that reliable video from cameras is transmitted back to the master control center, which is no easy feat.

Revenue has changed little from 2006, according to the network, when NBC paid $613 million — about $200 million less — for rights to air the Winter Games from Torino, Italy. The network generated about $650 million in total ad sales from those games.

However, there’s no denying the audience the network attracts. NBC’s broadcast of the 2008 Beijing Summer Olympics was watched by 214 million people in the United States.