"Comcast, the parent company of NBC Universal, an American television company, paid a whopping $7.75bn for exclusive broadcast rights to the games from 2022-2032. But the IOC pockets an ever-greater share of these revenues: today it gives less than 30% of television revenues to the host city. In 1992, by contrast, it gave Barcelona 69% of the broadcast spoils (see chart)."
Classic sporting body empire building techniques. This scenario applies to the AFL as well.
Full article below.
The business model for the Olympic Games is running out of puff
Budapest is the latest city to withdraw its bid to host them
The Economist | Business Mar 16th 2017
PIERRE DE COUBERTIN, the French aristocrat who founded the modern Olympics, was seduced by the world’s fair. In 1900, 1904 and 1908 his games were embedded within such exhibitions. He soured on the arrangement eventually because the games were overshadowed, “reduced to the role of humiliated vassal”, as he put it. The Olympics still criss-crosses the globe, but with city after city ditching ambitions to put on the world’s largest sporting event, the model is under threat.
The latest blow comes courtesy of Budapest, which on March 1st withdrew its bid to host the 2024 summer games after public opposition. Its retreat comes on the heels of Boston, Rome and Hamburg canning their bids within the past two years, whittling a once-crowded pool of candidate cities down to only two: Los Angeles—itself a replacement for the torpedoed Boston bid—and Paris.
The situation ought to feel familiar by now to the International Olympic Committee (IOC), the governing body of the games. After lots of cities bowed out of the competition for the 2022 winter games it was again left with two options: Almaty, Kazakhstan and Beijing, China. The prospect of having no bidders for future events—or of having a bidding contest between autocrats eager to host a vanity project—seems likelier than it once did.
A study in 2016 from the University of Oxford’s Saïd Business School found that from 1960-2016 (when data were available), the average cost overrun of hosting the games was 156%, the highest of any megaproject. Tokyo has already seen its costs rise to ¥3trn ($26bn), four times the original estimate. The IOC’s contract with host cities includes a taxpayer guarantee, which puts them on the hook for overruns.
There is no end of enthusiasm from sponsors or television broadcasters to pay fat sums to affiliate themselves with the Olympic brand. Broadcasters are still making the bet that live sports will continue to fascinate TV audiences. Comcast, the parent company of NBC Universal, an American television company, paid a whopping $7.75bn for exclusive broadcast rights to the games from 2022-2032. But the IOC pockets an ever-greater share of these revenues: today it gives less than 30% of television revenues to the host city. In 1992, by contrast, it gave Barcelona 69% of the broadcast spoils (see chart).
If no cities wish to host the games, however, this model is unsustainable. The IOC has been here before. Interest in hosting the five-ringed circus waned in the 1970s after a series of games tainted by terrorist attacks, crippling debt and boycotts. Los Angeles was the sole bidder for the 1984 event. Peter Ueberroth, the businessman heading its bid, ripped up the taxpayer guarantee and imposed spartan conditions, such as housing athletes in university dormitories. The games turned a profit for the city, of $215m.
Could similarly radical reform save the day again? In 2014 the IOC passed Agenda 2020, changes that try to make the games more affordable. They have made little difference. After Budapest withdrew its bid, the IOC said in a statement that politics were to blame, before conceding that further adjustments to the bidding process would need to be made because “the current procedure produces too many losers.”
It could simply tinker with the existing model and give a larger share of its revenues to the host city, or promise to cover a portion of a city’s cost overruns. Some suggest a more decentralised hosting model, with different Olympic events taking place in those cities around the world that have the right sports infrastructure for them. This would spread the costs more widely and decrease the probability of white elephants. But broadcasters would bear the cost of setting up teams around the world.
The really radical answer would be to designate one or a few permanent host cities so that the Olympics sports infrastructure has a life beyond the extinguishing of the Olympic flame. Christine Lagarde, managing director of the International Monetary Fund, has spoken favourably of this idea. The proposal is not new. In 1896 Greece’s King George pleaded with de Coubertin to make the country the permanent host. The Frenchman would not have it. “I decided to act as if I were stupid, pretending not to understand,” he wrote. Thomas Bach, the IOC’s president, may not have the luxury of ignoring reality for much longer.