Missed this post from a few days ago, but Jodi Beggs sees the winner’s curse in NBC’s bid for the Winter Olympics.
Now, back to NBC…basically, NBC was the bidder and the Olympics was the jar of quarters. There is a more or less objective valuation of the Olympics that becomes known after the rights are purchased. This value is the amount of revenue that the event generates for the holders of the rights. Granted, this valuation depends on how well the ad sales and whatnot are implemented, to some degree, so it’s not quite as fixed as in the quarters example, but the point still holds. Each network had its own interpretation of the available information, and perhaps even some private information, but no network has enough information to know for sure how much money the Olympic broadcast is going to bring in. NBC, apparently, was the network that had the rosiest outlook and/or didn’t scale down its bid enough to overcome the winner’s curse.
It’s worth adding that mega sporting events and award ceremonies are prized by television networks not simply to make money on ads, but to promote other shows, particularly new ones, on the network. This isn’t to say that the Winter Games weren’t a big financial loser for NBC, but the mathematics for calling it a winner’s curse wouldn’t be as simple as total Olympics revenue minus Olympics costs. It would be total Olympics revenue plus additional ad revenue from other network shows due to Olympics promotion minus total Olympics costs.