The Olympic Games have overtaken Netflix as the biggest bandwidth consumer on broadband networks in the United States, according to the National Inflation Association.
In the four years in between the 2008 Beijing Olympic Games and the 2012 London Olympic Games, there has been an explosion in Internet bandwidth consumption in the U.S. with Netflix eating up 32% of bandwidth during peak times. However, during the first seven days of this year's Olympics, U.S. bandwidth used for Netflix has declined 25%, while bandwidth used to watch NBC's Olympic 'TV Everywhere' coverage has peaked at 34% of total bandwidth across major U.S. networks nationwide.
NBC's success with the Summer Games is indicative of the clout that sports programming commands when it comes to commanding viewer loyalty. Netflix and its online streamer brethren can't afford the expensive fees for sports content, making sports--or lack thereof--the Achilles' heel for the model.
"Without live sports programming, cord-cutting and cord-shaving would become a much larger problem for cable, satellite and telco TV providers than it already is today," said the NIA in a statement.
And broadcasters are increasingly willing to pay premium prices for the differentiation. NBC for instance spent a record $1.3 billion to broadcast the London Olympic Games, in turn justifying its retransmission and carriage fees that it demands from pay-TV operators. And costs are on the rsie: The LA Lakers just signed an record $3 billion 20-year television deal with Time Warner Cable that begins next season at an average cost of $150 million per year. The team's previous TV deal was worth only $500 million over 10 years or $50 million per year.
ESPN meanwhile is now the most expensive channel for pay-TV companies to provide, with the average pay-TV company paying $4.69 per subscriber per month to be able to offer ESPN.
However, the NIA points out that the cost is being passed along to the consumer. Live sports programming currently accounts for 20% of programming hours consumed in U.S. households, but the combined costs of national and regional sports networks now make up 50% of the cost of the average U.S. cable bill.