That model no longer works in the modern age. Simply put, there is demand for viewing coverage of the olympics that is not being met, thus they are leaving money on the table. Unfortunately for them and for their potential customers they are constraining themselves to a business model that is obsolete. They are doing the equivalent of covering the olympics via newspaper in a television era.
They need to provide live streaming coverage of a wide variety of events, whether for free (with ads) or for a fee. That's the minimum bar these days, if they can't meet that bar people will just get their olympics coverage some other way (such as pirated bbc coverage) and NBC will still have lost out on a massive amount of potential revenue. And in the meantime they will have tarnished their brand as well.
I don't think it's as clear cut as all the armchair CEOs on the internet say.
By making this stuff available online, the amount of money they can get for the primetime TV spots is reduced, because fewer people will watch the primetime stuff, and it has less cachet because it's no longer exclusive. They will recoup some of that loss by charging money for internet access and having ads on the internet stream, but the ads online will be even cheaper, because that's just how internet ads work. Not only that, but they have to have a platform that they can use to deliver and charge for this content at scale (they might already have such a platform, but it may not be up to this kind of scale, I'm honestly not sure.) So that costs money, too. It's likely the folks at NBC did this analysis and found that it didn't work out in their favor, or there was too much uncertainty.
Meanwhile, most people will be at worst annoyed by the lack of internet coverage, but they'll just record it on their DVRs, or miss out on an event here or there. A very small number of people will go the trouble of pirating it, but those people are likely a margin of error in the grand scheme of things.
How can you say the model no longer works? The model just doesn't fit your view. There's no requirement to provide live streaming online. In any case they do have online streaming if you have a cable subscription, I've heard it could be a better service but it's there. The only people complaining about this are tech savvy, and if they were to get free viewing online with just some ads how many of those people would use some form of ad-block? How is that profitable for NBC? People act like they are entitled to view the Olympics for free when they're not. Even the British don't get to watch online for free as they all pay taxes to BBC.
They do. I watched the swimming race in question today live in HD with NBC's iPad app. It's a shitty app, no true full screen (there's an ad) and I can't send it to my Apple TV, but it was free with my TV subscription and provides a dozen or more live feeds in very high quality.
They need to provide live streaming coverage of a wide variety of events, whether for free (with ads) or for a fee. That's the minimum bar these days, if they can't meet that bar people will just get their olympics coverage some other way (such as pirated bbc coverage) and NBC will still have lost out on a massive amount of potential revenue. And in the meantime they will have tarnished their brand as well.