How NBC Got the Gold

NEW YORK —  This deal had it all. Speed. Fabulous sums of money. Atlantic crossings on a corporate jet. Clandestine meetings. Double-dealing. And an end game with a spy-like code name: the Sunset Project.

At the center of it all: NBC’s Dick Ebersol. Suave. Perpetually tan. A man with a fondness for Cuban cigars and a disdain for neckties. A man with a determination to get the Olympic Games for his network, no matter the opposition or obstacles.

When the cigar smoke cleared, NBC had landed two exclusive broadcasting contracts for a staggering $3.5 billion that would shape what U.S. television viewers will see at Sydney next month and at every other Olympics, summer and winter, through 2008.

What NBC and Ebersol had done was remarkable, unprecedented.

Ebersol “outhustled everybody,” said Rick Burton, director of the University of Oregon’s Warsaw Sports Marketing Center. “And he did it when no one else was thinking about doing that kind of stuff.”

The story of this historic deal--reconstructed through interviews with key players and previously undisclosed documents--speaks volumes about the economic forces and personalities that drive both the modern Olympic movement and the seductive dance between the International Olympic Committee and the television networks.

The repercussions still linger, five years later. The deal--cut without competitive bidding--guaranteed NBC a monopoly and ensured the IOC’s long-term financial security by spawning similar broadcasting arrangements around the world.

The pact also ended careers at rival networks, damaged longtime friendships and sowed allegations that NBC sweetened the pot with a $1 million donation to the Olympic Museum near IOC headquarters in Lausanne, Switzerland. Critics say it illustrates an imperious attitude that has led the IOC to scandal and controversy. The most damning: the recent allegations of gifts and other inducements linked to Salt Lake City’s winning bid for the 2002 Games.

“This was the deal of my life,” Ebersol says. “I hate the fact thatbecause of the climate [surrounding the IOC] the past two years, people are pointing fingers.”

Ebersol has long been the devoted prisoner of two passions, television and the Olympics.

Early in his career, he had worked as an aide to ABC’s legendary sports chief, Roone Arledge.

In the mid-1970s, at NBC, Ebersol helped create “Saturday Night Live.” At 28, he was an NBC vice president. In the 1980s, he left to run his own production company. But in 1989, he was wooed back with a mandate to make NBC a “major player” in sports.

Always, the centerpiece of Ebersol’s sports strategy has been the Olympic Games. And in 1995, as president of NBC Sports, he found himself on a quest for two. Then, remarkably, five.

The tale actually begins with a bold gambit by one of Ebersol’s rivals--Rupert Murdoch and his network, Fox.

The Australian-born media baron wanted U.S. rights to televise the Summer Games that get underway next month in Sydney. Wanted them bad.

On Monday evening, July 31, 1995, a delegation from Fox arrived in Montreal bearing a typed, two-sentence letter for Canadian tax lawyer Dick Pound, the IOC vice president who deals TV rights to the all-important U.S. market.

“Fox hereby offers to license the exclusive United States broadcast rights to the Sydney 2000 Olympic Games for $701 million,” the letter began.

The figure was an eye-opener. It was more than half again as much as the $456 million NBC had paid to televise the 1996 Atlanta Games.

Fox was willing to pay a premium despite the logistical difficulties of broadcasting from Sydney. Because of time zone differences, it was likely that most or all of the Games would need to be shown on tape. And tape-delayed broadcasts traditionally have been tougher to sell to advertisers.

After reading the letter, Pound thanked the crew from Fox--which included network chief Chase Carey--and said he would get back to them.

First Deal: Day 1

Fox’s overture came amid tumult in the television universe.

Within that 24-hour period, the Walt Disney Co. announced that it was buying Cap Cities/ABC for $19 billion, and Westinghouse Electric Corp. offered $5.4 billion for CBS Inc.

With two major competitors in flux, NBC’s Ebersol headed back to New York from Atlanta, where he had been making preparations for the 1996 Games.

There was plenty to discuss at NBC headquarters. Everything seemed up for grabs--and the spoils would go to the swift.

The IOC had been expected to hold a four-network bid process in September.

Ebersol already knew that Fox had sent its A-team to Canada to see Pound.

And he had heard rumors that Murdoch was willing to pay at least $700 million to land the Sydney Games.

“Everybody knew the number,” recalled Rick Gentile, then CBS’ executive Olympics producer. “I knew it. My kids knew it.”

Few people, however, knew that Ebersol and his counterpart at ABC, Dennis Swanson, were quietly engaged in talks aimed at a joint bid for the Sydney Games: some sports on one network, some sports on the other.

At nine that Wednesday morning, Aug. 2, in NBC’s offices, Ebersol, along with Randy Falco, NBC’s broadcasting president, delivered a nine-page financial analysis on the joint bid to network CEO Bob Wright. Falco by then had been at NBC for two decades and had a reputation for creativity; he oversaw the design of the “Today” show set looking onto Rockefeller Plaza.

Wright opposed a joint project with ABC. “Hard to promote, difficult for people to understand,” he said.

When Wright stepped out to take a phone call, Falco turned to Ebersol and said: “Have you ever thought about going for two?”

This was radical speech. Salt Lake City had been awarded the 2002 Games just six weeks before. In the ordinary course of business, it would be years before the TV rights to those Games would be up for consideration.

Start thinking, said Wright. It was 10:15 in the morning.

Out came the pencils and calculators. Ebersol, Falco and a financial aide sketched a rough draft. By noon, they figured that NBC could afford to bid $1.25 billion for the two Games--without ABC.

Now Wright was enthusiastic. Salt Lake would be an American event broadcast live to an American audience. The profit potential was enormous. Packaging Salt Lake with Sydney would help offset the more limited profit potential of taped Games from Australia. It would also give NBC the opportunity to build the Olympic “brand” via its news, sports and entertainment programming.

Looking at Ebersol, Wright said, “Can you live with this?” He wasn’t referring to the monstrous amount of money. He meant that Ebersol would have to break his word with ABC’s Swanson that there would be a joint bid for the Sydney Games.

“Yeah,” Ebersol said, “I can live with it.”

“Well,” Wright said, “can you sell it [to the IOC]?”

“One chance in five,” Ebersol replied. “And it all depends on speed.”

The IOC was not obligated to accept a bid, no matter how high--but NBC officials were betting that their $1.25-billion offer would preempt all others.

They had to get to top IOC officials. IOC President Juan Antonio Samaranch and Pound were expected the next day in Goteborg, Sweden, site of the track and field World Championships.

First, though, NBC brass had to clear the plan with their parent, General Electric Co., specifically GE Chief Jack Welch, who was recovering from heart surgery on Nantucket.

Without hesitation, Welch embraced the idea. Take my GE plane to Sweden, he said.

Next, Ebersol conferred with Alex Gilady, an NBC executive who, since 1994, has also been the IOC member in Israel. As one of Samaranch’s confidants, Gilady has consistently given NBC unmatched entree.

Ebersol told Gilady about the idea for a package but, to avoid a potential conflict, withheld information about the price tag.

“No way,” Gilady said of the deal.

“I don’t want to hear no way,” Ebersol replied.

That night, GE’s Gulfstream IV jetted Ebersol, Gilady and Falco across the Atlantic.

Day 2

The plane landed in Sweden Thursday morning. Then the NBC delegation scurried into the local Sheraton. The lobby was full of Olympic and track officials, as well as members of the news media.

Not wanting to arouse suspicion, Ebersol and Falco hustled to the elevators while Gilady retrieved the room key.

Samaranch was not due in town for several hours. So the NBC executives killed time in their room, smoking cigars--so many that Gilady had to make a run for more.

After the IOC president entered the hotel, Gilady slipped downstairs and whispered to Samaranch that Ebersol was upstairs with a proposal.

Ebersol and Falco took a service elevator to the hotel’s top floor and sneaked down the hall to Samaranch’s room.

Making his pitch, Ebersol outlined the $1.25-billion offer. He said he needed an answer the next day.

Almost immediately, Samaranch pulled a note pad from his suit pocket and scribbled the essentials. In his accented English, the Spaniard addressed Ebersol:

“Dick, I am very, very impressed with this.”

But Samaranch reminded the NBC officials that Pound handled the IOC’s TV deals. Then Samaranch picked up the phone and called him; Pound was in Montreal, not Sweden.

“Ebersol and this other man have made a very impressive proposal,” Samaranch said. For an embarrassing moment, he couldn’t remember NBC broadcasting chief Falco’s name. “I am not someone who is easily impressed. Can you receive them tomorrow?”

Of course, Pound said. He was mystified. Samaranch provided no other details.

Day 3

As dawn broke Friday in Sweden, Samaranch began contacting the IOC’s ruling Executive Board, securing its members’ assent to a deal with NBC, should one be worked out.

NBC had a decided advantage. It had broadcast the Summer Games in 1988 and 1992 and had already been chosen to televise the Atlanta Games in 1996.

“I had a very strong feeling for doing business with people we knew and trusted,” says Australia’s R. Kevan Gosper, a key IOC delegate.

Under Ebersol, who is both knowledgeable and passionate about the Olympics, NBC Sports traditionally has focused on the personalities and the stories of the Games, not on uncovering scandal. As one Fox official put it, “No steroids, no doping, no 14-year-old gymnasts with anorexia.”

By contrast, Fox was more of an unknown quantity at the IOC. And what was known at the IOC was not altogether positive. In 1991, for instance, Murdoch had pulled out of a European sports satellite venture involving the IOC’s longtime European broadcast partner.

As Samaranch went about his work, the NBC executives slipped into the hotel lobby at 6:30 a.m. They were greeted by a limo driver holding a sign in big letters: “Ebersol.” The NBC executive took it down before anyone noticed.

Flying west across the Atlantic, Ebersol leaned back in his leather seat and pondered an added enticement. He would offer the Sydney and Salt Lake City organizing committees $10 million apiece in promotional air time.

As the jet bore down on the Canadian coast, Ebersol looked down and saw an iceberg. At that moment, the plane was not far from where the Titanic sank.

“I took it as a good omen,” Ebersol says. Unlike the crew on the Titanic, “I saw the iceberg.”

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In a pouring rain, Ebersol and Falco arrived at Pound’s Montreal law office at 10 a.m. Pound did not seem thrilled to see them.

“Why are you going around me?” he said.

The NBC officials swore they thought Pound was going to be in Sweden with Samaranch.

OK, Pound said, mollified. What’s the deal?

After hearing the particulars, Pound picked up the phone and dialed his boss.

“What do you think?” said Samaranch.

“I think we should take it,” Pound responded.

“OK,” Samaranch said.

Grabbing a laptop computer and cigars, Pound led his guests to a room where smoking was allowed. He began typing a contract. In the distance, Ebersol could see Olympic Stadium, where Bruce Jenner had won gold in the decathlon in 1976.

As morning turned to afternoon, a sticking point emerged: how to divide the $1.25 billion NBC was offering as a lump sum.

How much would Sydney take?

Pound called Australia, where it was already Saturday and predawn. Qantas Chairman Gary Pemberton, who then headed the local organizing committee, was groggy but snapped to when he heard NBC was offering a combined $1.25 billion for the Sydney and Salt Lake games.

Knowing that Murdoch was rumored to be offering $700 million for Sydney rights, Pemberton asked for, and got, $705 million.

In a brief call, Tom Welch, then the Salt Lake organizer, quickly settled for $545 million. Salt Lake had been expecting only $400 million.

Organizers from both Sydney and Salt Lake knew they would ultimately get only 60% of the amounts agreed upon. Still, they would receive more than any organizing committee for any previous Olympics had gotten.

Another phone call or two later, and NBC had its deal. Shaking hands, Pound, Ebersol and Falco put out the cigars and promised to meet Monday for a press conference.

First Deal: Fallout

At 8 a.m. the day of the announcement in New York, Ebersol picked up the phone and called Swanson at ABC to personally break the news. “I’ve got something very tough to tell you,” he said. “We’re going to announce in a few hours that we made a deal for the Sydney and the Salt Lake City Olympics.”

The line was quiet. Finally, Swanson said, “When did this happen?”

“It happened Thursday and Friday,” said Ebersol. “In Sweden and Canada.”

Again, the line went silent. Then Ebersol said, “Dennis, look. I’m really, really sorry.”

Swanson said, “Congratulations,” but nothing more. Ebersol hung up.

As the news broke, a reporter phoned CBS’ Gentile for reaction.

“What deal?” Gentile was stunned. How, he wondered, could NBC just name a price and win?

The deal seemed patently unfair to him. “I had been part of the Olympic business since ‘84,” Gentile said recently. “In every discussion . . . we were always told that there would be a level playing field.”

Senior management at Fox was bitter. “There’s no doubt in our mind we were screwed,” one executive said, speaking on condition of anonymity.

Pound said he did not consider the Fox proposal as anything more than an offer to negotiate. Moreover, he said, the IOC never seriously considered awarding the Games to Murdoch because Fox hadn’t yet proven its ability to handle big-time sports in the U.S.

When Pound briefed the IOC Executive Board in September, 1995, the minutes show that he did not even mention Fox. Explaining the choice of NBC, he said ABC had just been sold, CBS was in “perpetual flux” and the “prospect of having as a partner a well-known ally for six years appeared attractive.”

Making a Second Deal

After the delirious celebrations died down at NBC, Ebersol picked up the phone and dialed Samaranch in Sweden.

The IOC chief was pleased. He liked the “stability” of the deal.

“We should talk some more,” Ebersol said.

“Yes, indeed,” Samaranch replied.

To Ebersol, that sounded like an opening for a second deal. Was it possible?

Days later, NBC’s man on the IOC, Gilady, checked in with Ebersol. Samaranch, he said, “liked the idea of a long-term stream of income.” Guaranteed U.S. TV money would enable the IOC to dictate financial terms to the local committees hosting future Games.

NBC’s chief executive, Wright, laughed when Ebersol first suggested that they could score even more Games.

But, a few weeks afterward, at a ceremony in Switzerland where the formal contracts were to be signed, Samaranch invited Ebersol and Falco to his suite at the Lausanne Palace hotel.

There, Ebersol broached the idea of a second deal--and the “stability” it could afford.

Samaranch said he had the same thought. Again, he said, NBC should talk to Pound, his television point man.

At a celebratory dinner, Samaranch passed out Rolex watches to key players in the first deal. And Ebersol announced a $500,000 gift to the Olympic Museum, so the network could be listed on the wall of honored donors.

Nice gestures both, and particularly the $500,000 donation. But within an hour, Ebersol was told that a place on the wall would cost another $500,000.

Meanwhile, Samaranch stopped Pound and said, “I want you to see if we can do more Games.”

He suggested a new NBC deal through 2006. Pound said 2008 made more sense. Good, Samaranch said, adding: “Listen, this is secret. You understand? Secret.”

Before leaving Lausanne, Pound and the NBC contingent agreed to prepare assessments of a long-term deal. He called them “term papers.”

Back in Montreal, Pound wrote an Oct. 2 memo to Ebersol as part of what already had been code-named the Sunset Project--”Like the old Western movies, where you ride off into the sunset.”

“Dear Dick,” the memo began. “There is nothing like a drink or two and a good cigar for leading to interesting speculation and this week was no exception.”

The challenge, the memo went on, was how to swing a deal for the Games of 2004, 2006 and 2008 when the only thing that could be reliably guessed was that none would take place in the United States--not after Atlanta in 1996 and Salt Lake in 2002.

Playfully, Pound added, “The use of any expletives in your response will result in a significantly lower grade on the [term] paper.”

After a few weeks of back and forth and meetings, NBC settled on an offer of $2.245 billion for the three additional Olympics.

This time Samaranch weighed in. Before an IOC Executive Board meeting in early December, he called Ebersol and suggested rounding off the figure to $2.3 billion--a $55 million difference.

Do it, said GE chief Welch.

At the IOC board meeting, Samaranch called the deal “a golden opportunity, which would guarantee the survival of the Olympic movement for the next 16 years.”

And the second deal was announced a few days later in New York.

Second Deal: Fallout

For public consumption, NBC’s competitors were once again congratulatory.

However, the second deal set off another round of seething criticism among insiders. “If you look at it today, those Games are worth $200 million to $300 million more than what the IOC got,” said Barry Frank, a sports agent who had negotiated Olympic TV deals with the networks since the 1980s. “Ask me in three or four years and--the way rights fees are going--it might be up to $500 million.”

Frank was cut out of the NBC deal and felt that he deserved better from the IOC. He severed his longtime friendship with Pound, although they recently had lunch together in New York.

“The people who got screwed even worse than I did was CBS,” Frank said, adding, “I hope that comes out in the story. CBS had paid a total of over $1 billion for three straight Winter Olympic Games. To have done this deal without giving CBS so much as a ‘by your leave’--there was nothing illegal about it but it was a major breach of courtesy and ethics.”

The deals launched conspiracy theories, many involving secret Swiss bank accounts--rumors rekindled by last year’s corruption scandal linked to Salt Lake’s 2002 bid.

No one, however, has offered proof of misconduct. “They can look for this money,” Samaranch said. “They will not find anything. It is not our style.”

During congressional hearings last year into the IOC, Rep. Henry A. Waxman (D-Los Angeles) suggested that the $1 million NBC paid to get its name on the Olympic Museum wall raised “appearances of impropriety.”

NBC executives are adamant that the $1 million donation was unrelated to the contracts.

Ebersol says he spontaneously offered the first $500,000 after learning that NBC was not going to have to produce a weekly Olympics show until 1998--a saving of millions.

Said Wright, who ultimately approved the other $500,000, “We didn’t get any benefit from that other than goodwill.”

After ABC was bumped out of the picture, Swanson left the company. He landed at NBC, where he runs the local New York affiliate and serves as one of Ebersol’s chief Olympic aides.

Gentile also was out at CBS. He is now a consultant.

Samaranch and Pound have taken to laughing at critics who say NBC grossly underpaid the IOC. The second of the deals contains a little-known insurance policy: The IOC gets half the profits after the network’s advertising sales exceed the cost of buying the rights and producing its broadcast of the Games. That is likely to mean millions more dollars.

Said Pound: “When you have the chance to acquire certainty on a short-term basis and then certainty plus an upside on a longer-term basis . . . I didn’t think that was rocket science.”

Burton, the sports marketing expert at the University of Oregon, concurred, saying that NBC “swung a great deal” and that the IOC “made a very logical deal.”

Ebersol, now chairman of NBC Sports, said a few weeks ago that the network expects to make money from the Sydney portion of the deal even though the Games will be shown entirely on tape delay.

Meantime, the 2010 Games, the next ones up for sale, don’t seem all that far away. A shrewd broadcaster might want to sit down with Samaranch before the IOC president retires next year--and chat about the future. Maybe over a cigar.

“It’s entirely plausible,” Ebersol said with a smile.

About This Series

For decades, the Olympic movement has promoted itself as the United Nations of sport, a force for fair play. Then came reports of gift-giving and other corruption in Salt Lake City’s bid for the 2002 Winter Games. As disturbing questions swirled around the International Olympic Committee, The Times embarked on a yearlong examination of the movement: Who runs the IOC? How does the organization spend its money? How does it treat athletes? Can the IOC really change its ways?

This is the fifth of seven weekly reports leading to the Sydney Games.

Week 1--Struggle behind the Games: While the IOC brings in almost $1 billion a year, little trickles down to athletes in developing nations.

Week 2--All about money: Mighty nations and sports get a disproportionate share of IOC money through power politics and side deals.

Week 3--Man behind the IOC: The private side of IOC President Juan Antonio Samaranch as he confronts his damaged legacy.

Week 4--The IOC’s new breed: After breaking ground for Arab women in sport, Nawal el Moutawakel of Morocco fights to change an organization long dominated by Europeans.

Today--Deal that had it all

Next Week--War on doping

Complete series on line at www.latimes.com/ioc

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The Geography of TV Money

A breakdown of rights fees for the Sydney Games shows that the U.S., European and Japanese television contracts account for the vast majority of the International Olympic Committees broadcast revenue:

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Source: IOC

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The Making of Two Historic Deals

In preemptive strikes against competing networks, NBC landed the broadcast rights for Olympic Games from 2000 through 2008 for $3.5 billion. Here is how two unprecedented deals unfolded in a flurry of bold moves by NBC and the International Olympic Committee in 1995, leaving other networks caught unaware and crying foul.

Deal One

Scene setter: The 2000 Sydney Games are apparently up for grabs. Rupert Murdoch’s Fox makes a $701 million overture, and NBC and ABC are considering a joint bid.

The strike: NBC officials secretly decide in early August 1995 to make their own bid of $1.25 billion for Sydney and the 2002 Salt Lake City Games.

Doing the deal: NBC officials fly by corporate jet from New York to Sweden to privately pitch their offer to Samaranch. With the IOC chief’s blessing, they fly back across the Atlantic to seal the pact with IOC television point man Pound in Canada.

Elapsed time: Three days

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Deal Two

Scene setter: With Fox, ABC and CBS still smarting from the first deal, NBC’s Ebersol goes to Switzerland in September 1995 to finalize the arrangement.

The strike: Samaranch and Ebersol discuss the idea of a second pact covering more Olympics. Pound and Ebersol are directed to prepare assessments of what is code-named the Sunset Project.

Doing the deal: After a few weeks of meetings, NBC makes a $2.245-billion offer for the 2004, 2006 and 2008 Games. At Samaranch’s request, the bid is bumped up to $2.3 billion--and the IOC board buys it.

Elapsed time: Three months

Key Players:

Alex Gilady, NBC

Randy Falco, NBC

Dick Ebersol, NBC

Dick Pound, IOC

Juan Antonio Samaranch, IOC

Sources: NBC and IOC officials and documents