Jul 17, 2021 - Economy & Business

The dire economics of the Olympics

Illustration of a sports field shaped like a dollar with a rip through it
Illustration: Sarah Grillo/Axios

The Olympics haven't made financial sense in decades. Host cities spend billions preparing for the games, inevitably suffering massive cost overruns and going deep into debt, with a lasting legacy of little more than a group of buildings ill-suited to any other use.

Why it matters: This year, the games' physical location is more of a liability and less of an asset than ever. The Tokyo competition risks spreading COVID-19 in a country with a very low vaccination rate, while bringing no glory (or tourists) to a city that has banned spectators from all events.

The big picture: Pandemic aside, Olympic ideals — amateurism, fair play, noble competition — have failed to stand the test of time and countless corruption scandals.

  • What remains is an increasingly lopsided spectacle, the medal table dominated by whichever countries happen to be willing to shell out for state-of-the-art training and youth development facilities.

By the numbers: The Beijing Olympics cost $45 billion; its revenues were $3.6 billion, most of which went to the International Olympic Committee. The Sochi winter Olympics came in closer to $50 billion, with much lower revenues.

  • The Tokyo Olympics will cost about $28 billion, according to an estimate put together by financial newspapers Nikkei and Asahi.
  • The decision to ban spectators means foregoing another $1 billion in ticket sales, not to mention whatever amorphous boost Tokyo might have received to its reputation as a tourist destination.

Broadcast rights constitute the lion's share of Olympic revenues, and the IOC has sensibly locked in a multi-billion-dollar revenue stream from Comcast through 2032, the year in which Australia will host the games because there were no other bidders.

  • U.S. television rights are more valuable than those of every other country in the world combined. But five years ago, the Rio Olympics — in pretty much a perfect time zone for the U.S. market — had very disappointing ratings.
  • The Tokyo Olympics, without a live audience and in a terrible time zone for American viewing, will struggle to do any better.

Sponsorships also risk being less valuable to brands now and in the future. 

  • The absence of spectators in Tokyo means local sponsors have significantly fewer opportunities to get their products in front of people — and therefore fewer chances to see their collective $3 billion investment paying off.
  • There are also reputational risks to brands that sponsor games held in politically sensitive cities like Beijing, which is hosting the 2022 Winter Olympics.

The bottom line: An Olympic gold medal remains the pinnacle of athletic achievement in most sports. But the edifice supporting that podium is crumbling.

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