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The $309 Million Games

ABC still smarts over the price of the rights

The setting: an ABC-TV press conference, Nov. 17, 1987. The site: a Calgary warehouse that was rapidly being transformed into the ABC broadcast center for the Winter Olympics. The speaker: Roone Arledge, the founder of ABC Sports and the man most responsible for turning the Games. Summer and Winter, into a television institution.

Arledge, who left ABC Sports two years before to become president of the network's news division, kept clearing his throat and nervously rubbing the corner of his forehead. What, the press wanted to know, did he have to say about the price ABC paid for the rights to telecast the Calgary Olympics? Almost four years ago. Arledge had bid the astonishing sum of $309 million for those rights, more than three times the $91.5 million ABC had paid for the 1984 Winter Games in Sarajevo. "I don't know if I should use this word," Arledge replied, "but I'm going to, anyway. We were misled...."

Later Arledge explained what he meant by "misled." He said that as late as the morning of the day on which bidding for the Calgary Olympics began. ABC "had been assured" by Barry Frank—senior corporate vice-president of Trans World International, a TV marketing house, and an adviser during the rights negotiations to Olympiques Canada Olympics (OCO), the committee organizing the Calgary Games—that negotiations with the three major U.S. networks wouldn't end in an auction. "There was a breach of faith...," Arledge said. "The [bidding] process was ill-conceived, and I think the result showed it."

During the same press conference, Arledge and his successor as president of ABC Sports, Dennis Swanson, professed to be glad that their network had won the bidding for the Calgary Games—for the prestige—even though ABC management sources say the network will lose $20 million to $30 million on them. But as for the way the deal had been cut, well, there was still resentment in Arledge's comments.

According to Arledge, the person most responsible for the "breach of faith" was Frank, who reportedly earned a $2 million commission for his efforts. Arledge claims that Frank had promised ABC that when the bidding reached the level OCO hoped to attain, the real negotiations would begin and that ABC's traditional relationship with the Olympics—it had telecast 9 of the previous 12 Winter and Summer Games—would be taken into account.

Frank and International Olympic Committee member Dick Pound, who chaired the negotiations, dispute Arledge. There was nothing left to negotiate, they say, because weeks in advance of the bidding the three networks had signed identical 60-page contracts, agreeing to all details of the deal except the final dollar figure. "They knew that what was involved was, in essence, an auction." says Pound.

"There were no assurances, verbal or otherwise," says Frank. "What Roone Arledge is saying is redolent of sour grapes."

The bidding, held in the ornate Palace Hotel in Lausanne, Switzerland, began in an atmosphere of relatively good humor. Once the network executives were nestled in their suites on Tuesday afternoon, Jan. 24, 1984, Frank informed them of the most important ground rule: The bidding would be over when the IOC committee said it was. Whenever the committee wanted to go to a higher round of bidding, the networks would be informed of the minimum bid required to stay in the action. Each network would then have 30 minutes to deliver its bid in writing to the door of the hotel conference room where the committee was meeting.

Frank now says he limited the bidding to hard cash—there would be no dealing in the soft currency of favors—to assure fairness. NBC was particularly worried that Arledge might call in markers from the IOC. In fact, NBC's European representative stayed near the door of the conference room for 11 hours to make sure no one from ABC or CBS made a secret visit. Frank instituted a buddy system within the committee; no one from his side could leave the conference room—not even to go to the bathroom—unaccompanied.

Just before the bidding began at 2 p.m., each of the dozen committee negotiators bet $1 on what the final price would be. Frank was high man, with a figure of $287 million, and thus wound up the winner.

By the third round the minimum to stay in the bidding had reached $265 million, whereupon CBS submitted a blank piece of paper—in effect, dropping out. After the fourth round ABC and NBC were tied at $300 million. "The atmosphere in that conference room was unlike anything I've ever seen." Frank says. "People weren't talking about lunch money in there."

Bill Wardle, OCO's vice-president for marketing, recalls that he and his OCO colleagues wanted to have one more closed bid and go home—the $300 million bid had already surpassed their expectations. Frank, however, persuaded them to change the bidding to an auction. "I felt at this point, in fairness to the networks, the bidding shouldn't be open to guesswork." he said. "The more equitable solution was to allow them to eliminate themselves."

Arledge, who says ABC led the bidding in each of the first three rounds and thus was in the position of having to bid against itself, was furious at the implementation of the auction idea and even considered dropping out. But when NBC, having won a coin flip to determine which network would kick off the auction, bid $304 million, Arledge came back with the $309 million, "just to see what happened." What happened was that NBC tossed in its hand.

In the conference room there was cheering. Frank had served his client brilliantly. The difference between ABC's bid and OCO's hoped-for figure of $275 million by itself almost accounts for the $35 million profit that the Calgary organizers expect to make on the Games.

But Arledge was outraged. The next day, he skipped the traditional luncheon for the winning network and vowed to IOC President Juan Antonio Samaranch that ABC never again would enter open-ended bidding.

From a programming standpoint Arledge, who will return to ABC Sports for 16 days as the hands-on producer of the Calgary Games, has no reason to squawk. More than any previous Olympics, these Games have been tailor-made for U.S. television, which will pay an incredible 95% of Calgary's worldwide TV rights fees. To increase the value of the Calgary Games to American television, Frank had asked the IOC to move the Olympic schedule forward by a week and a half—so that all the competition would occur in February, one of three annual TV "sweeps" periods that determine ad rates for the ensuing four months. Also, these Winter Olympics were scheduled to extend over three weekends instead of the usual two, adding to their value in the eyes of the networks.

Still, the money paid for Calgary marked the end of an era for ABC. NBC won the bidding for the Seoul Games with a bid of $300 million and a share of advertising revenue that may add as much as another $200 million; ABC reportedly offered a bid of only $250 million. It's questionable whether ABC will ever again pay the price for exclusive rights to the Games. Two years after the Calgary deal. Capital Cities took over the network, Arledge was reassigned to the news division, and Jim Spence, his deputy that day in Lausanne, left ABC and started his own company. Spence is now writing a book that will focus in part on the Calgary bidding. He ought to call it Shootout at the Barry Frank Corral—and ask Arledge to write the preface.