by Max Bloom
June 13, 2008

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The Olympics has become a very, very big business. Worldwide media rights to the 2008 Summer Olympics in Beijing sold for $1.7 billion, with NBC Universal paying $894 million for the U.S. media rights alone. That’s a long way from the $50,000 that CBS paid for the U.S. broadcast rights to the 1960 Winter Games in Squaw Valley, Calif. While CBS broadcast only 15 hours in 1960, NBCU plans to offer 3,600 hours of live programming from Beijing. That’s 212 live hours for each of the 17 days of the Olympics. (As was the case in Athens in 2004, NBCU’s live Olympics coverage will be distributed over multiple NBCU-affiliated broadcast networks, including NBC, MSNBC, CNBC, USA, Universal HD, USA HD, and Telemundo.) In addition to the sheer volume of live content to be delivered—three times what was offered in 2004— what’s notable is that most of NBCU’s live programming—2,200 hours—will be delivered online at NBCOlympics.com.

The 2000 Summer Games in Sydney, Australia, were the first for which live streaming was technically viable. But with worldwide television broadcast rights selling for $1.33 billion, the International Olympic Committee (IOC) banned streaming of the games to protect the value of those rights. While the ban remained in place for the 2002 Winter Games in Salt Lake City, the IOC did allow limited live webcasts from Switzerland to test the feasibility of geofiltering. (Media rights for the Olympics are sold by territory. The IOC wanted to make sure that one country’s TV broadcast rights weren’t devalued by viewers opting to stream free webcasts from other countries.)

In 2004, sports fans in the United Kingdom, the Netherlands, and a host of other countries were able to stream hours of live and on-demand coverage of the Summer Games in Athens, Greece, but fans in the U.S. weren’t so lucky. While streaming technology had continued to advance and a decent, convenient streaming experience would have been possible for viewers with broadband connections, NBCOlympics.com limited streaming to on-demand interviews, features, and event highlights with no live or on-demand video of the events themselves.

By 2006, the wall protecting the exclusivity of the TV broadcast was beginning to crack. NBCOlympics.com delivered 9.1 million online video streams—more than 125,000 total hours—from the Winter Games in Turin, Italy. Again, most of that video consisted of interviews, features, and on-demand recaps of events that had long been concluded, but NBCOlympics.com did break new ground by offering the U.S. online audience a live stream of the men’s gold medal hockey game.

The 2008 Summer Games in Beijing will mark the arrival of streaming as a viable alternative to the Olympics’ television broadcast. This summer, NBCOlympics.com will offer 4,400 hours of on-demand streaming in addition to its 2,200 hours of live programming, making the Beijing Olympics the most ambitious streaming media project in history. To make sure its Olympics content is seen by as wide an audience as possible, NBCOlympics.com is partnering with MSN to promote and help deliver its programming from Beijing.

“What we get with MSN is that they have 100 million unique viewers coming through their front door every month,” says Perkins Miller, SVP of digital media for NBC Universal Sports & Olympics. With all that expected traffic, it’s not surprising that MSN’s parent, Microsoft, chose the Olympics as a fitting occasion for the first large-scale rollout of the latest version of its cross-browser, cross-platform media plug-in, Silverlight.

Inside Silverlight
In addition to supporting Windows Media Video 9 (WMV9), Microsoft’s version of the SMPTE VC-1 compression standard, NBCOlympics.com’s Silverlight 2 player offers a number of enhancements that seem custom-made to optimize the Olympics streaming experience. For example, a picture-in-picture feature enables the viewer to watch a minimized view of team handball while badminton action unfolds in the full-sized window. The Silverlight player that NBCOlympics.com demoed in March at MIX08 in Las Vegas featured three minimized windows in addition to the primary window, with each screen displaying a separate video stream. With up to 16 events occurring simultaneously, NBCOlympics.com plans to cover the action with as many as 20 simultaneous live streams. Including redundancy for each one, that’s 40 simultaneous streams.

These days, a single televised baseball game offers enough stats and arcane data to satisfy a gaggle of rotisserie-league die-hards. With 302 events in 28 Olympics sports and more than 10,000 athletes competing, one can only imagine the amount of data that NBCOlympics.com will try to present to its online viewing audience. Collecting and processing that data is one thing, but presenting it to online viewers in a palatable way and developing an intuitive, user-friendly navigation structure is another.

“Every different sport [comprises] multiple events,” says Matthew Rechs, CTO of Schematic, the interactive agency that is designing and building the Silverlight player for NBCOlympics.com. “Trying to figure out how people want to enjoy all of that [programming and related data], organizing it in the interface, and giving viewers the right ways to find it … that’s a really tough challenge.”

To help meet that challenge, the NBCOlympics.com player offers a “metadata overlay” feature, which allows the player to display transparent data and navigation tools over the video window. This enables users to access statistics and other data without covering up, pausing, or leaving the primary video display. For example, play-by-play announcers’ dialogue can be keyed into an XML data stream, then rendered as a timecoded, scrolling text caption that transparently overlays the bottom of the video display. The player also enables the TiVo-like experience of pausing, rewinding, and replaying content, and these two features together allow viewers to use either the timecode or the play-by-play captioning to rewind to a specific point in the on-screen action and replay it.

In addition, the “enhanced player mode” in the NBCOlympics.com player expands the video window into a full-screen view while retaining the transparent interface overlays. For those who lose track of time while watching women’s clean and jerk weightlifting, the “viewing alerts” feature enables pop-up notifications that let viewers know when selected events are starting.

Schematic was the logical choice to design the NBCOlympics.com player for a number of reasons. Besides having designed NBCU’s first broadband player in 2006, Schematic had been hired that same year by Microsoft to provide feedback on Silverlight (before it was called Silverlight) and Microsoft’s Expression line of development tools. By the time NBCOlympics.com was ready to hire a designer for the Silverlight player, Schematic already had a team of 25 who had been working on Silverlight for more than a year. But taking responsibility for designing the player that would showcase Silverlight in its high-profile Olympics rollout was no small task.

“It comes with a certain element of danger and jeopardy to be building something this big and important on a brand new platform,” says Rechs. “That always ups the excitement level.”

Going After Adobe
The features that Silverlight offers to improve the user experience may be impressive, but perhaps just as important to the technology’s acceptance in the marketplace are the attributes that only developers would appreciate. One of the key innovations of Silverlight 2 is its integration into Microsoft’s .NET technology ecosystem. (.NET is both a business strategy from Microsoft and its collection of programming support for web services—the ability to use the web rather than one’s own computer for various services.) Tens of thousands of developers identify with .NET and think of themselves as “.NET developers,” but prior to the advent of Silverlight, those developers who wanted to make a rich internet application (RIA) with video, animations, transitions, vector graphics, and a great user interface would most likely turn to Adobe’s Flash. Now, .NET developers can work with the familiar .NET toolset to create RIAs at least as sophisticated as those offered in Flash.

“Part of what you get when you use Silverlight are components that Microsoft provides to do a lot of the stuff that they know you’re going to want to do,” says Rechs. “We have to do less and less of it from scratch, so we’re able to get more done in less time for less money.”

For the past few years, Microsoft has also been seeking to streamline the Windows-based development process with the introduction of its Expression Studio suite of design tools, which is meant to facilitate the interface between designers using Expression and developers using Visual Studio. With Silverlight, Expression, and Visual Studio all working under the .NET framework, Microsoft hopes to keep .NET-savvy developers from straying off the Microsoft ranch. (Expression Studio can be used to create cross-platform RIAs, but with the exception of Expression Media, the Expression Studio suite is not available for a Mac development environment.)

Microsoft’s introduction of Silverlight is clearly a shot across Adobe’s bow. The online video player battle is essentially an arms race; when one side seizes an advantage, the other has to innovate its way back into contention. With Flash having become a de facto standard in the online video advertising world, Microsoft has its work cut out for it.

“Adobe has come at it from the strength of the creative community,” says Steve Sklepowich, group product manager for Silverlight Media at Microsoft Corp. “We’ve come at it from the strength of Windows Media together with the strength of the developer community, and now we’re reaching out to the design community with the Expression tool.”

Getting designers and developers on board is a start, but reaching critical mass in user adoption is ultimately the name of the game. With Flash 9 claiming more than 96% penetration, Adobe has a huge head start. Microsoft may claim an average of 1.5 million daily downloads of Silverlight’s 4 MB plugin, but it’s at the Olympics that Microsoft expects Silverlight to make its biggest splash.

Monetizing the Games
With so many broadcast advertising dollars at stake, NBCU is not offering live coverage online simply because it thinks streaming video is “cool.” Rather, it appears as if online video is attracting an increasing share of ad spending, and NBCU’s view of the advertising future—perhaps influenced by the DVR’s impact on broadcast advertising—no doubt includes a growing online video component. The Beijing Olympics will offer NBCU the opportunity to gauge the willingness of advertisers, agencies, and end users to accept and pay for online video ads. (NBCOlympics.com had already sold 70% of its ad inventory 4 months before the start of the games.) But while ad sales are clearly critical to its success, NBCOlympics.com wants to be careful not to trash the user experience.

“There is something magical about amateur athletics,” says Miller. “Our online strategy is the same as on the broadcast … which is to ensure that [advertising] doesn’t intrude on the user experience to the extent that it diminishes what we’re trying to celebrate. … We’re obligated on behalf of our users to make sure they have a great experience, and our advertisers expect that.”

With the flow of online video ad dollars set to grow from a trickle to a flood, companies in the online video ad space are competing to facilitate and reap the benefits of the long-promised monetization of online video. Microsoft will use the Olympics as an opportunity to showcase Silverlight’s support for third-party ad servers such as Atlas and DoubleClick, and it will also demonstrate two features on its 2008 web server that promise to raise the bottom line. “Web playlists” enable publishers to securely sequence content and advertising, preventing end users from skipping online video ads, and with “bit-rate throttling,” the server meters how fast content is sent to the client and stops delivering if the end user clicks away. This allows publishers to save on bandwidth costs by serving only the 500KB watched by the user rather than the entire 5MB video file.

Both web playlists—formerly called “server-side playlists”—and bit rate throttling were previously available only on the Windows media server. Their availability on the Windows web server is indicative of Microsoft’s long-term strategy to transfer functionality from the media server to the web server.

“We’re essentially bringing more intelligence to progressive downloads,” says Sklepowich. “Ultimately, we’re going to bring streaming-like capabilities to web servers.”

Moving Overseas
The U.S. isn’t the only country competing in the Olympics, and NBCU isn’t the only entity broadcasting or streaming the games. Mexico City-based Televisa, the largest media company in the Spanish-speaking world, is working with Move Networks to stream the Olympics to Spanish-speaking audiences. Move’s streaming technology breaks video down into small, 1 to 2-second files called “streamlets.” Using “adaptive streaming” on the client side, the player analyzes available bandwidth and processing power on the client machine, then reassembles the streamlets to maximize the quality of the downloaded stream. Move promises faster start times, smoother playback without buffering, and high-quality video resolution. (Its technology powers much of the streaming at ABC.com.)

At MIX08, Microsoft announced that the Move plug-in would be bundled with Silverlight 2, so instead of downloading the 200KB Move plug-in, sports fans south of the border can download Silverlight if they want to stream the Olympics. (NBCU’s Telemundo network will stream the Olympics to Spanish-speaking audiences within the U.S.)

Game Time Decisions
As of press time, NBCOlympics.com had yet to make a number of important technical decisions. A slew of DRC-Stream software and encoder boards from Canada-based Digital Rapids are being deployed in Beijing to populate NBCOlympics.com’s encoding farm, but other than committing to VC-1, NBCOlympics.com has yet to confirm encoding bitrates, frame rates, or frame sizes. (Without offering more specifics, Miller says NBCOlympics.com will be streaming through a managed bitrate solution to optimize the user’s connection, with a target maximum bitrate of 650KB/sec.) Digital Rapids is also supplying software to enable transcoding from other digital media formats into VC-1.

Miller promises hundreds of hours of online HD video, but again, bitrates and other encoding parameters are still up in the air. The NBCOlympics.com player is also still being tweaked, with input from all parties.

“There’s a room here at Schematic in our NY offices,” says Rechs. “When I walk past it, sometimes I see Schematic people in there, sometimes I see Microsoft people, and sometimes I see NBC people.”

Streaming’s Niche
The shift from virtually no live streaming of previous Olympics to hundreds of hours of live streaming from Beijing may be dramatic, but online coverage is not intended to replace the television broadcast—at least not this year. Millions of people will still convene in living rooms across the country to watch the gymnastics finals on TV, and advertisers will still pay millions of dollars to reach that audience. (The IOC shifted the gymnastics and swimming finals to the morning in China so they can be shown live in prime time in the U.S.)

“The broadcast is the dramatic engine of the Olympics,” says Miller. “We feel that that’s going to be the source and the destination for people."

But while broadcast television may be the most appropriate medium for live events that attract a mass audience, the web is designed for niche audiences. There may not be enough fans of archery, field hockey, or tae kwon do to justify a share of network prime time, but for those who live and breathe these sports or who may be working the swing shift when their favorite sport is happening live, the ability to log on 24/7 and select a stream from hundreds of available hours could be a big deal. In fact, the Olympics may be the perfect internet/streaming event. Each sport has its own niche with thousands of devotees hungry for stats, features, and video of the events, and no matter where the games take place or where in the world the viewer is, much of the action occurs at inconvenient times. With on-demand video, every event is on “when you want it, where you want it.”

Conclusion
Every Olympics since 1976 has turned a profit. That’s because the IOC can command top dollar for media and sponsorship rights. Media companies such as NBCU pay the IOC big bucks because they, in turn, can charge advertisers big bucks and then some. The 2008 games will be the biggest test yet of the market value of online video ads relative to broadcast TV ads for similar programming. This will be the first year for serious steaming from the Olympics, and it’s unclear what expectations NBCU has for the short term. For the long term, though, NBCU’s commitment to streaming from Beijing anticipates online video making a substantial impact on the advertising landscape in the coming years. If online video’s impact is as significant as NBCU is betting, whether this year or down the road, that could presage the evolution of another very, very big business.