Bidding to Televise
the Olympics668
CHAPTER 16
Auctions and
Competitive Bidding
Two rules for succeeding in business: (1) Never underestimate the importance
of money, and (2) everything is up for bid.
ANONYMOUSYears before each Olympic Games, a competition takes place that is just as intense
as the Olympiad itself—namely, the high-stakes bidding competition by the U.S.
networks to televise the games. The following table shows the spectacular growth
in the price paid for these television rights. Part of the revenue growth is attribut-
able to price inflation over the past 25 years. Part, too, is due to the growth in U.S.
television audiences. (Larger audiences allow networks to charge higher rates
to advertisers.)
However, the greatest part of the revenue increase is owing to the skill with which
Olympic organizers have arranged the bidding competition. Since 1976, when ABC
was awarded the games without any real competition (before the other networks had
a chance to bid), the organizers have implemented a number of bidding innova-
tions.^1 For instance, in 1980, the Soviets organized a ruthless bidding competition
involving multiple rounds. At each stage, the current leader was announced, and los-
ers were required to up the bidding by at least 5 percent. For the 1988 Seoul summer
Olympics, the organizers limited the competition to two rounds of sealed bids. NBC’s
winning bid included a novel revenue-sharing agreement: a $300 million guaranteed(^1) John McMillan provides an incisive analysis of this competition. See Chapter 12 of J. McMillan,
Games, Strategies, and Managers(New York: Oxford University Press, 1992).
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