Will Canadians Be Watching 2014 and 2016 Olympics on Yahoo Instead of TV?

by Brad Moon | March 8, 2012 12:29 pm

Yahoo (NASDAQ:YHOO[1]) is not the company one would look to as a role model of Web success — at least not since 2000. An ongoing series of stumbles has seen the company that was arguably the dominant Web presence in the late 1990s reduced to layoffs, asset sales, and patent litigation in an apparent attempt to buy time while it formulates a strategy to remain relevant. Meanwhile its market cap has plummeted from a high of close to $100 billion in 2000 to $19 billion.

One of the areas where Yahoo has been focusing of late is streaming video. The rebranded Yahoo Screen service features movies and TV shows, along with eight original Web shows (including “Electric City,” featuring Tom Hanks).

The problem with streaming movies and TV shows is that the marketplace is extremely crowded (and getting more so) and Yahoo Screen — even with original content — is competing against companies like Netflix (NASDAQ:NFLX[2]) that have large, paying user bases. And where the competitors are streaming video to a range of devices, including mobile platforms, Yahoo Screen uses Flash and recommends a PC for viewing.

One area where Yahoo has differentiated itself from the pack when it comes to streaming video is live events. The topic became a hot one this week when it was revealed that Yahoo might be in a position to swoop in and scoop the Canadian broadcast rights for the 2014 Winter Games in Russia and the 2016 Summer Games in Brazil. The reason? The International Olympic Committee (IOC) rejected low bids by Canadian television broadcasters CBC and BCE (NYSE:BCE[3]), opening the door for Yahoo.

YHOO’s history of success in Canada

If this seems like another oddball move by Yahoo, there is some background to the story. For one thing, Yahoo has enjoyed better performance in Canada than in its home market. According to Forbes, Yahoo’s audience and advertising revenue are experiencing faster growth in Canada than in the U.S., and 60% of Canadian Internet users visit its websites on a monthly basis.

A big part of this is likely the fact that Rogers (NYSE:RCI[4]), the country’s second largest ISP, uses Yahoo mail for its clients. Yahoo released mobile applications that provided up-to-the-minute updates for Olympic events during the 2010 Winter Games in Vancouver and packed its site with video clips and athlete info, resulting in 40 million hits.

Presumably, live coverage would significantly boost those numbers and garner significant ad revenue, but it would be a stretch to think it would recoup its investment. Yahoo has also made other moves toward Web broadcasting of live premium events, including “A Decade of Difference,” the concert for the William J. Clinton Foundation, which drew an estimated 65,000 live Web viewers and continues to generate viewership through replays and performance clips.

A chance to right the ship

While comparing TV and Web ad rates is dicier than comparing apples to oranges — and the Canadian and U.S. markets are also significantly different — it’s worth noting that the 2010 Winter Games cost NBC (NASDAQ:CMCSA[5]) dearly, with the network booking $233 million in losses attributed to the coverage. That was after paying $820 million for U.S. broadcasting rights and collecting $800 million in ad revenue.

Will Yahoo seal the deal? The Toronto Star says the rejected CBC and BCE bids were in the range of $60 million to $70 million. Yahoo recently committed $100 million toward creating original programming and to come up with near that amount just for coverage of two events, even as the company’s new CEO, Scott Thompson, is looking for ways to cut costs, makes this one a long shot.

Then again, if Yahoo is looking to break out of its funk and do something disruptive, wrestling coverage of the prestigious Olympics away from traditional television broadcasters is certainly one way to do it, and starting in the comparatively cheap (and friendly) Canadian market minimizes its risk.

As of this writing, Brad Moon did not own a position in any of the stocks named here.

Endnotes:
  1. YHOO: http://studio-5.financialcontent.com/investplace/quote?Symbol=YHOO
  2. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  3. BCE: http://studio-5.financialcontent.com/investplace/quote?Symbol=BCE
  4. RCI: http://studio-5.financialcontent.com/investplace/quote?Symbol=RCI
  5. CMCSA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMCSA

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