Olympic Finances [Edit]

Olympic Finances are a complex topic which has been the subject of many articles and one fairly definitive book in two editions. Interested readers should refer to the authoritative works by Holger Preuß, The Economics of Staging the Olympics: A Comparison of the Games 1972-2008, (most recent edition is Cheltenham: Edward Elgar Publishing, 2004).

Originally, the International Olympic Committee (IOC) was financed out of the pockets of Baron Pierre de Coubertin, who used his family fortune to support the organization that he had built, although it almost bankrupted him. The only income that the IOC had initially was dues paid by the members, which amounted to 300 SFr/year after World War II, and which were only rescinded in 1975. After World War II, the host cities were also requested to support the IOC with a contribution of varying amounts, noted to be 100,000 SFr in the 1950s. The IOC has been criticized because many of its members are wealthy and several of them have been members of nobility or royalty. But Coubertin designed it this way on purpose. With little money supporting the IOC, he realized that he needed wealthy members so they could afford to travel to the Olympic Games, to IOC Sessions, and so they could support the IOC themselves, if necessary.

In the 1950s, the Olympic Games and the IOC found a new source of financing their projects – television. The first televised broadcast of the Olympic Games occurred in 1936 at Berlin, but there were only a few people with television sets and nobody outside a 10-mile radius from Berlin received the signal. In 1948 at London, the British Broadcasting Corporation paid the IOC about $3,000 for television rights. In 1952 at Helsinki and 1956 at Melbourne, television was available for local broadcasts but technical shortcomings prevented the signal from being sent worldwide. It was not until 1960 that the Olympic Games were first broadcast to a worldwide audience.

Avery Brundage was the IOC president in the late 1950s and he was concerned that television money would bring great problems to the IOC. It was in 1958 that the IOC first amended the Olympic Charter to even mention television, with Rule 49 in the 1958 version of the Charter reading as follows:

The direct, or what is commonly called Live Television Rights, to report the Games, shall be sold by the Organizing Committee, subject to the approval of the International Olympic Committee, and the proceeds from this sale shall be distributed according to its instructions.

But neither Squaw Valley nor Rome would even discuss handing over television rights to the IOC for 1960. Their attitude was that the IOC had made this rule after they had been selected to host the Olympics, and that it did not apply to them retroactively. Rome eventually gave the IOC 5 percent of the money it collected from television rights, which totaled almost $1.2 million (US). Over the next few Olympics, the income from televising the Olympics began to escalate. And in 1965, Brundage’s prediction came true when the International Federation (IFs) demanded a one-third share of the television money. The NOCs followed suit shortly thereafter.

The IOC Executive Board addressed the situation at its meeting in Rome in 1966. Marc Hodler, Swiss IOC Member, who was chairman of the Finance Commission, came up with a scheme to divide the money, one which was eventually accepted. Despite the increased money that the IOC was receiving from television, it was in dire financial straits by the early 1970s. Brundage ran the IOC much like Coubertin, bearing the brunt of the costs from his own fortune, although he never lost his wealth in the process. But in the years 1968-71, the IOC ran a deficit in its capital account of U.S. $1.5 million. IOC President Lord Killanin later commented

I recall that when I took office in 1972 the IOC was working on borrowed money. After Moscow [1980], the IOC became a financially sound organization, but earlier I entered my caveat and reservations on that.

In 1971 the IOC amended the Olympic Charter further by establishing the fact that television moneys were the property of the IOC, and that the IOC would decide on the amounts distributed to the IFs, NOCs, and OCOGs. In the 1970s the television rights fees expanded dramatically. Note the following total rights fees earned from 1968-80:

And with the increased money, the IFs and National Olympic Committees (NOCs) increased their demands for a greater percentage of the television money. Further, not all IFs considered themselves equals. The IAAF (International Association of Athletics Federations), which governs track & field athletics, has long considered itself the most important IF, and that track & field is the showcase sport of the Olympic Games. The IAAF demanded a larger proportion of money than the other IFs, and threatened to break away from the Olympic Games and conduct separate world championships if its demands were not met – there were none until 1983.

All the while, the Olympic Games themselves were becoming more and more expensive. The tragedy at Munich, in which 11 Israeli athletes and coaches were murdered by terrorists, brought a new dimension to Organizing Committee (OCOG) costs – vastly increased security cost. And as the Games got bigger and bigger, the cost per athlete also escalated. Further, the host cities began to see the Olympics as a way to pay for civic improvements to the city, using some of the money generated to pay for infrastructure needed by the city, above and beyond the Olympics.

The OCOG budgets have escalated in response to the growing size of the Olympic Games and the security costs. In 2004, the bottom line for the Athens Olympic Games was quoted in the press as over U.S. $11 billion, a figure dwarfing all previous Olympics. The previous “record holder” was Barcelona in 1992 with a quoted cost of $7 billion, although the 1964 Tokyo Olympics, costing about $2 billion, probably rivaled Athens as the most expensive Olympics ever, when corrected for inflation. But even Athens looked like a cheapskate when Beijing spent upwards of $40 billion for the 2008 Olympic Games.

The Athens $11 billion had to be raised among the smallest population of any Olympic nation since the Helsinki Olympics of 1952, when the budget was probably nearer $10 million (US) (in 2008 dollars), giving the Olympic Movement a thousand-fold absolute increase in costs in just over 50 years. And much of the cost was allocated to the construction of new athletic venues, which often become white elephants to the host city after the Olympics are over, requiring millions of dollars yearly for upkeep, but generating precious little income in the future. Many of the Athens venues now sit fallow. Even Sydney, in sports-mad Australia, found the cost of maintaining the Olympic venues to be a problem, with over $35 million Australian dollars allocated per year for upkeep of the facilities alone.

Over 100 years ago, even Coubertin asked if these costs are worth it

It would be very unfortunate, if the often exaggerated expenses incurred for the most recent Olympiads, a sizeable part of which represented the construction of permanent buildings, which were moreover unnecessary – temporary structures would fully suffice, and the only consequence is to then encourage use of these permanent buildings by increasing the number of occasions to draw in the crowds – it would be very unfortunate if these expenses were to deter [small] countries from putting themselves forward to host the Olympic Games in the future.

So with these increasing costs beginning in the 1970s, the Olympic Games were rarely profitable. In 1976 at Montréal, the OCOG ran up debt estimated by some at $1 billion (Canadian), and left the citizens of Québec with a tax debt that they finished paying only in 2006. Faced with these escalating costs very few cities wanted to host the Olympic Games. In 1980 Juan Antonio Samaranch succeeded to the Presidency of the IOC. He noted that “… the financing of the IOC is a matter of some urgency.” And Samaranch set it as one of his goals to make the IOC financially solvent. Despite the increased television revenues, the leaching of money by the IFs and NOCs kept the IOC in a difficult financial situation, to say nothing of the host cities. And the IOC was fully dependent on television money, notably from the United States’ networks, which paid the greatest rights fees. At the IOC session in Berlin in 1985, Samaranch expressed the hope that the IOC “would no longer be totally dependent on the revenues from the sale of television rights.”

In 1978, a former Canadian Olympic swimmer named Dick Pound was co-opted as a member of the IOC. Pound was a tax lawyer who brought immediate financial expertise to the IOC and Samaranch was quick to take advantage of it. In the 1980s, Pound was placed in charge of negotiating television rights and of a new IOC Commission, the New Sources of Financing Commission. Samaranch charged Pound to make the IOC financially independent, removing the grip held by American television.

At almost the same time, the Los Angeles Olympic Organizing Committee (LAOOC) chose a former college water polo player named Peter Ueberroth as its president. Ueberroth, a self-made businessman who had started one of the largest travel agencies in southern California, approached the problem of financing the 1984 Olympic Games in a way not done before by organizing committees – he looked at the economic history of the Olympic Games by studying the previous Official Reports. He immediately noted two things. One was that the biggest cost for all OCOGs was the building of new stadia and sports facilities. Secondly, he noted that the OCOGs had sold Olympic sponsorship but that they had sold it indiscriminately, to almost any bidder. In 1976 at Montréal there were 168 sponsors, with over 200 in 1980 at Moscow, and fully 380 at Lake Placid in 1980.

Ueberroth was fortunate as regards the first problem in that he was organizing the Games in a city that had already held the Olympics, in 1932. Further, Los Angeles was a city with numerous major sports facilities. Ueberroth was able to hold the Olympic Games in 1984 by building only a cycling velodrome and a swim stadium, and he had both of them paid for by sponsors. For the main Olympic Stadium, he was able to use the Los Angeles Coliseum, the site of the 1932 Olympics.

Ueberroth’s financial acumen was brought to bear on the second problem of Olympic sponsorship. He protected the Olympic emblems, making them highly desired entities to sponsors. He sought not more sponsors, but fewer. His reasoning was that he would vastly increase the rights fees for each sponsor, but he would guarantee the sponsors use of the Olympic emblems, and also guarantee them exclusivity within their own category of sales. For instance, there would be one soft drink company sponsoring the Olympics, not several, but that company would pay dearly.

And it worked. In the end the LAOOC realized a profit of about U.S. $220 million. The profit brought howls of protests from numerous sources, as Ueberroth had often pleaded poverty to bring in and save more money, and the extra money gave his critics additional ammunition. Eventually the profits were used to support the United States Olympic Committee and sports programs in Los Angeles.

Dick Pound saw all this happen and realized that Ueberroth’s approach was a new paradigm that was ideal for the IOC and the Organizing Committees. The IOC had what nobody else did – the Olympic Symbol, the Olympic Flag, the Olympic Rings, and it could control the rights to these emblems. By controlling these rights, the IOC had the ability to produce large amounts of revenue by granting exclusive rights to the emblems. But like Ueberroth and the LAOOC, the IOC would limit the number of these sponsorships, making them highly valuable and sought after. Enter The Olympic Programme, later renamed The Olympic Partners (TOP).

The Olympic Partners (TOP) began in 1984 as a means of developing worldwide sponsorship of the Olympic Movement. Previously, a corporation could only sponsor the various OCOGs, the IFs, or the NOCs. It was difficult for them to be guaranteed worldwide rights to the Olympic emblems.

Each TOP program lasts for four years. It is an exclusive group as for each Olympiad only 9-12 worldwide sponsors are selected. Further, each sponsor is guaranteed exclusivity within their own category. Thus, Coca-Cola has always been the only drink associated with Olympic sponsorship under TOP. But the sponsors pay a very large rights fee, following the concept that Ueberroth brought to the Olympic Movement, now paying close to $100 million per quadrennium, but bringing in almost $900 million to the IOC for the 2009-12 Olympiad, or TOP VII.

The IOC actually keeps only 10 percent of TOP income to finance itself. TOP money is distributed 50 percent to the Organizing Committees and 50 percent to the Olympic Family. The Olympic Family money is currently distributed as follows: 20 percent to the NOCs, 10 percent to the IOC, and 20 percent to the United States Olympic Committee. No TOP money is allocated to the International Federations, but they receive money from television rights fees distributed by the IOC (see below).

Note that the United States Olympic Committee (USOC) receives fully 20 percent of TOP monies, although it was 12 percent for TOP I. This is an unusual arrangement and one engendering great controversy within the Olympic Movement. The United States Olympic Committee demanded this money from the IOC because most of the TOP sponsors were primarily based in the United States. It was their reasoning that by bringing these sponsors into TOP, this was sponsorship money that had formerly been available to the USOC exclusively. They felt they should be reimbursed above and beyond the other NOCs, and threatened not to participate in TOP if this demand was not met. Negotiations to change this are a major concern among many IOC Members, who feel that the USOC receives an unfair proportion, and has led to much ill-will and resentment against the United States by other members of the Olympic Movement.

TOP has been very successful, achieving Samaranch’s goals. At the 93rd IOC session in Puerto Rico in 1989, Dick Pound confirmed that “The Olympic Movement no longer depends solely on the revenues from American television.” Mission accomplished. But the money brought problems. First of all, it was no longer true that no city wanted to host the Olympics. Cities were lining up to be selected. For the 1992 Olympics there were six candidate cities, but this number increased over the next few years: 1996 – 6, 2000 – 8, and in 2004 – 11. With the increased number of cities bidding, it became more difficult for cities to get noticed, and the Olympic Bribery Scandal that was exposed in late 1998/early 1999 was surely a result of this, and the fact that the Olympic Games were now awash in cash.

With the increased revenue from TOP, there has been a concomitant increase in the rights fees paid by the television networks. In fact, Dick Pound produced still another new method of bringing in revenue, or at least guaranteeing its availability. The American television network NBC was chosen to broadcast the 1996 Olympic Games. Shortly before those Olympics, Pound and NBC President Dick Ebersol announced that the IOC and NBC had signed a contract in which NBC would televise the next five Olympic Games – 2000 Sydney, 2002 Salt Lake City, 2004 Athens, 2006 Torino, and 2008 Beijing.

The early announcement came as a shock, especially to the competing networks, but it was a win-win situation for both NBC and the IOC. NBC could count on hosting the Games long-term and make plans accordingly, possibly saving themselves money by not having to reinvent the wheel with a new production organization for each Olympiad. The IOC could count on revenue for its own coffers and for the members of the Olympic Movement. And the OCOGs could plan their expenditures more precisely, knowing in advance how much television money they were to receive, both from television and from TOP. Further, since some of this money would be paid in advance, both the IOC and the OCOGs could generate further revenue from interest earned. This policy has since continued with networks bidding for the Olympic Games in groups of several games on an international basis, and has also continued somewhat in TOP, with a few companies signing on for more than one Olympiad in advance.

The television money greatly escalated. The worldwide rights fees for the 1984-2008 Olympics went up, in U.S. dollars, as follows:

The rights fees for the Olympic Winter Games have also increased commensurately.

With all this increased television revenue, the other parts of the Olympic Movement have increased their calls for greater percentages to be given to them. Currently, Olympic television rights fees are distributed by the IOC as follows:

Nothing is allocated above to the NOCs directly, except for the USOC, which has again demanded an exception, but the money allocated to Olympic Solidarity eventually finds its way to the NOCs, although it is distributed by Olympic Solidarity to the neediest NOCs, and not distributed evenly.

Not all International Federations are considered equal when it comes to distribution of funds realized from television. The IOC recognizes four categories of IFs – Categories A-D – with Category A receiving the most money and Category D the least. The categories and IFs within them, and the current distribution of funds (Summer IFs only) was as follows through 2012:

In 2013 the categories were change, with a fifth category added, and from 2013-date the categories for the sports is as listed below. It should be noted that the IOC and the ASOIF (Association of Summer Olympic International Federations) no longer announces the percentage distributed to the sports in each category.

Other problems related to Olympic Finances still exist, and they are far from solved. In addition to the bribery problems, the IOC must now address the problem of rampant commercialism at the Games, which turned downtown Atlanta in 1996 into an almost circus-like marketplace. After Atlanta, the IOC took steps to curtail commercialization at future Olympic Games and Sydney was a major improvement. But to some degree, commercialization is necessary to support the increased costs of the Olympics. Business Life noted in 1996, “There is little doubt that the prudent development of marketing and sponsorship has saved the Games … Without such corporate support, it would be extremely difficult for a modern city to host the Games.”

The IOC is also concerned about companies which attempt to use the Olympic image for their own promotion, without actually supporting the Olympic Movement financially. The use of the Olympic Rings and Olympic Symbols is expressly forbidden without permission by the IOC, National Olympic Committees, or the Organizing Committees. But many companies attempt to circumvent the huge costs of sponsorship in what the IOC terms “ambush marketing”.

And the Internet has brought many new problems. Should real-time video be allowed on the Internet, which usurps the exclusive right of television networks to video presentation? In December 2000, the IOC hosted an international conference on New Media, to address many questions and policies related to the Internet. They have since formed a new IOC Commission to look into these problems.

So we have come full circle. From an Olympic Movement completely financed by the deep pockets and personal fortune of a French baron, the IOC has seen the depths of near corporate bankruptcy in the 1970s, followed by a flow of almost unimagined riches. Like all sudden wealth, problems have come with the money. These problems are ongoing, but the IOC has begun to address many of them by their response to the Olympic Bribery Scandal of 1999. But there are surely more issues to come.