World’s biggest franchise: Who profits from the Olympic Games?
As the 23rd Winter Olympics get underway in PyeongChang, South Korea, let's take a look at what the Romans (big fans of the ancient Olympics themselves) addressed as “Cui bono?” or “who stands to benefit?”
To make it more specific – whose money makes the Olympics roll?
There's arguably no sleeker money-making machine in the world than the IOC currently is – selling its name & symbols for a major buck. But let's address common misconceptions first.
The IOC is somewhat similar to the UN – it exists on fees paid by respective country members or, more specifically, National Olympic Committees.
The IOC is, essentially, a private organization incorporated in Switzerland as a non-profit.
It proudly says about itself
...As an entirely privately funded organisation, the IOC’s commercial partnerships continue to prove invaluable to the staging of the Olympic Games and the operations of every organisation within the Olympic Movement.
The IOC and the Olympics organizers share costs of preparing and staging the Olympics.
The Olympic Games are the world biggest franchise – an applicant-city has to convince the IOC that is has already prepared, or will prepare in time, what is necessary for the Games. Bearing all associated costs. ‘What's necessary’ is at the sole discretion of the IOC. In exchange the successful bidder gets the right to call its competition ‘the Olympic Games’.
The lion’s share of expenses is always borne by the organizers. Including, but not limited to, building sport facilities, organizing lodgings and transportation for athletes and officials, feeding them during the Games etc., etc.
The only large expense borne by the IOC is the organization of television broadcasting of the events.
Surely, the profits are shared between the Olympics organizers and the IOC?
Barely. The IOC retains and controls almost all the marketing rights associated with the Games. Profits from on-site Olympic paraphernalia and venue tickets sales are shared – but those are minor compared to the main sources of income. The main profits from those marketing rights always go straight to the IOC.
Speaking of main sources of income: the Games are largely underwritten by all those transnational corporations whose ads you get to see all the time, both as posters on the Olympic arenas and on your TV, right?
Yes and no. In order to be associated with the IOC and have the right to display patented Olympic Rings on your wares, one has to buy into the Olympic Partner (TOP) Programme. Currently there are 13 large corporations, mostly US-headquartered that “pay the IOC for the rings.” They pay hundreds of millions of dollars per year for the privilege.
Yet the TOP Programme, while important, is a secondary source of money for the IOC.
Did we mention that all the money from the TOP go straight into the IOC coffers, the Games organizers have nothing to do with that?
...So, if ticket sales are minor source of income and even the money from those mighty Coca-Cola, P&G and Visa are small fry in comparison – who's the IOC’s main financial sponsor?
The answer is simple: NBC Universal. An American media conglomerate that provides the IOC with a whopping 40+ percent of all its revenue from any given Olympic Games.
That follows from simple math: the New York City-headquartered corporation paid the IOC $4.38 billion for the TV rights for the US market for the four Olympics from 2014-2020, inclusive of PyeongChang 2018, or $1.1 billion on average (the contract does not distinguish between the Summer and Winter Olympics).
For those stunned by the amount of money the Americans are willing to send to Lausanne, here's an even more impressive figure: as early as 2014, NBC and the IOC extended their deal to cover the next six Olympics till 2032 – for $7.75 billion, or 1.3 billion each.
How and if NBC makes return on such a huge investment (the biggest sum paid in television history) is a separate story – but the fact is, the Americans are the Olympic movement’s biggest ‘shareholders’. One might even call it having a ‘controlling stake’.
But that's not it. Tired of haggling with European broadcasters individually, the IOC decided to sell the TV rights to the whole of Europe in one package. The Europeans tried, but failed, to appease the IOC’s appetite. The rights went to another US-based media behemoth – Discovery Communications. The deal is not as sweet for the IOC as the NBC one, but not a pesky number by any means: the Maryland-based corporation paid €1.3 billion for four Olympics 2018-2024 (about US$1.6 billion at the current rate, or $40 million ‘per item’). Discovery then proceeded to resell the rights piecemeal to individual European broadcasters, which caused no end of anguish for the latter, but again, that's a separate story.
Compared to the NBC and Discovery deals, the rest of the world is paying a lot less – while not publicly disclosed, estimates indicate that the two biggest IOC earners outside the US and Europe – the Japanese and Chinese TV rights – give the Olympic right-holders $250 and $125 million per ‘Olympiad’, respectively.
All in all, the latest breakdown of the IOC revenue looks as follows:
• 73 percent broadcasting rights
• 18 percent the Olympic Partner (TOP) Programme marketing rights
• 5 percent other revenue
• 4 percent other rights
The total IOC revenue for the upcoming Games could be (rather conservatively) estimated at $2 billion. Does that mean the IOC bosses get to put it into the Swiss bank vaults nearby? Of course not! Most of the money will be spent on aiding poorer countries’ sports development, as well as staging loss-making competitions such a Youth Olympic Games. The IOC, however, modestly mentions in its documents that “somewhat less than 10 percent of revenue goes towards keeping it functional” – not a small chunk of money by any means.
More importantly, the IOC is barely hiding that these days its prime function is to increase the revenue flow by selling what could be sold to the highest bidder. Whoever that bidder is and wherever it comes from. As a result, it starts to resemble a corporation in which key investors demand more compliance from the management – “or else.” So much for the ‘international Olympic movement.’
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