How Olympic TV May Kill Chicago's 2016 Bid

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Darron Cummings / AP

Michael Phelps, on his way to a world-record time of 50.22 seconds in the men's 100-m butterfly at the U.S. national championships in Indianapolis on July 9, 2009

On Oct. 2, members of the International Olympic Committee (IOC) will meet in Copenhagen to decide the host city for the 2016 Summer Games. Officials from Chicago, which is competing against Rio de Janeiro, Madrid and Tokyo for the Olympic prize, are working feverishly to perfect their pitch down the homestretch. The Chicago delegation just returned from Africa, where it made a presentation to the Olympic executives of that continent. President Obama himself sent a video message, asking the Africans for their vote.

Chicago's bid has received positive feedback, and many consider the Windy City to be the favorite to win the Games. So why, less than three months before the vote, is the Olympic governing body of the U.S. ticking off the very officials who will decide Chicago's fate, in a move that could cost an American city the Games?

The U.S. Olympic Committee (USOC) announced on July 8 that it had signed an agreement with Comcast to form the U.S. Olympic Network, which will provide year-round coverage of Olympic sports. According to the USOC, the network will launch sometime after the 2010 Vancouver Games. One problem: the U.S. Olympic Network could compete with NBC, which is paying $2.2 billion to broadcast the 2010 and 2012 Olympics. The network accounts for roughly half of the IOC's global broadcast-rights fees, and NBC will surely be among the bidders for the 2014 and 2016 Olympics. Plus, NBC wanted the USOC to partner with its own cable network, Universal Sports, for Olympic programming. NBC is irked, and the IOC doesn't like to see its sugar daddy sulking.

So the IOC publicly chided U.S. Olympic officials. "We were aware that the USOC had been considering a new 'Olympic broadcast network,' but we have never been presented with a plan, and we had assumed that we would have an opportunity to discuss unresolved questions together before the project moved forward," the IOC said in a statement. "It is for this reason that the IOC is disappointed that the USOC acted unilaterally and, in our view, in haste by announcing their plans before we had a chance to consider the ramifications." The IOC also said that the network "raises complex legal and contractual issues and could have a negative impact with other Olympic broadcasters and partners, including our U.S. TV partner, NBC."

Ouch. The wrist-slap comes at the worst possible time for Chicago. The IOC and the USOC were already squabbling about the USOC's share of sponsorship and broadcast revenue: the IOC wants to reduce the funds flowing to the U.S., while the Americans are resisting. Both sides, however, had agreed to put those negotiations aside until after the 2016 decision was finalized. Now all tensions are back on the table.

The IOC is a famously isolated, self-important organization whose members do not like to be slighted. Competition for hosting rights is fierce: a city needs a majority of the 107 members to vote in its favor to win. One ballot can tip the balance, and this new dustup could alter a member's decision. "This is an absolutely unnecessary self-inflicted wound," says Marc Ganis, a Chicago-based sports-business consultant who has closely followed the 2016 bid. "It just serves to remind the IOC of their preconceived notion that the Americans are arrogant and self-serving."

Indeed, the USOC's strategy is mystifying. A Chicago win would be a financial boon to the USOC. Given the buzz around having an Olympics in the States, greater levels of broadcast and sponsorship revenue would trickle down to the USOC and the governing bodies of the Olympic sports. The USOC needs this money, as it has lost valuable sponsors like The Home Depot, General Motors and Bank of America since the onset of the recession. So why not work with the IOC to resolve any issues with the network — or at least hold off on action until Oct. 2?

Norm Bellingham, chief operating officer for the USOC, insists that the IOC was informed of the network's plans for months. "We never heard any negative feedback from them," says Bellingham. "By the time we heard that they prefer that we hold off, we just did not feel like that was viable."

Timing aside, it's questionable whether a 24-hour Olympic-themed network is viable at all. The state of the economy presents any new, expensive venture with challenges. And though the ratings for the Beijing Games were strong — driven by interest in China and in the epic quest of swimmer Michael Phelps — it doesn't follow that there's even a speck of demand for Olympic programming in non-Olympic years. Given the already cluttered and competitive sports-television landscape, who wants to watch Taekwondo or table tennis on a Saturday afternoon in October? Or November? Or April? "The chances of an USOC channel moving the dial is very unlikely," says Ganis. "The audience is a niche of the niche."

Long term, the USOC would benefit much more from a Chicago win than a new network. And if all goes well, it could end up with both. The IOC still has a financial incentive to select Chicago: U.S. media outlets would offer the organization millions of dollars in fees to broadcast a domestic Olympics. But it's still bad politics to risk alienating IOC voters. The USOC has undergone a management shake-up since the Beijing Games: former CEO Jim Scheer was pushed out and replaced by Stephanie Streeter, a four-year board member, on an interim basis. Right now, the USOC may need a leadership infusion. "You just sit back and wonder, Who is making the decisions?" says Ganis. "Is anyone thinking of the greater good? Why risk so much for something so modest? That's the real head scratcher."