Chapter 6 Economics and Financing of the Games

Content Political economy Financing (funding) the Games Economic impact – on the host community

Political economy Involves both economics and politics Rick Gruneau: –writing at the time of the 1984 LA Games, –and from a neo-Marxist point of view: –highlights: Commercialisation Amateurism Nationalism Elitism Resistance The role of the state Prof. Richard Gruneau, Simon Fraser University, Canada

Political economy contd Commercialisation –The Olympic Games are an ‘expression of the incorporation of sporting practice into the ever- expanding marketplace of international capitalism’ Amateurism, (part of the Olympics until the 1980s): –Reinforced class divisions, but –Can be seen as ‘resistance to sport’s absorption into capitalism’s universal market’ Nationalism –The Olympics are used to boost the national interests of the hosts, including: LA 1932: ‘The American Dream’ Berlin 1936; Nazism Cold War period: East vs West 1960s: increasingly: ‘powerful international bloc of financial, travel, retail, and media interests’ (more global than national)

Political economy contd Elitism –Olympics are a ‘highly specialised, elite’ form of sport, rather than recreational sport for all. Resistance –Opposition to the Games can be seen as a form of resistance to the march of capitalism The role of the state –While apparently supporting non-market aspects of sport, the state underwrites capitalism and the commercialisation of sport.

Financing the Olympic Movement In the early years of its existence the IOC was not wealthy Relied financially on wealthy individuals and governments Two things changed this: –Broadcasting rights –Sponsorship: The Olympic Programme/ Partners (TOP) $

Broadcasting rights From Table 6.1

The Olympic Programme/Partners (TOP) World-wide sponsorship programme Sponsors sign up for an Olympiad – 4 years Have the right to use the logo and indicate partner status in advertising About 12 sponsors related to particular products Cost: about $US70m. total $US866m. in in cash and kind But additional sponsorships (eg. of individual athletes, corporate activities) are extra

TOP Members CompanyCategory Atos OriginInformation Technology Coca ColaNon-alcoholic beverages General ElectricEnergy, healthcare, transportation, etc. Johnson & JohnsonHealth-care products KodakFilm/photographics LenovoComputer equipment ManulifeLife insurance/annuities McDonald'sRetail food services OmegaTiming, scoring services PanasonicAudio, TV, video SamsungWireless communication VisaConsumer payments systems (Credit cards etc.)

Financial relationships (Fig. 6.1)

Funding individual Games Organising Committee costs (Summer Games): Based on Table 6.4, Source: Preuss, 20004

Funding individual Games: OCOG cost-headings 1.Preparing the bid 2.Building new or refurbishing/adapting existing: –sport venues –infrastructure (e.g. transport facilities) –athletes’/officials’ village –facilities for the media 3.Training and equipping volunteers 4.Staffing and servicing the Organising Committee 5.Organising the Torch Relay 6.Support for athletes’ and officials’ travel 7.Hosting athletes and team officials (during the Games) 8.Hosting the Olympic Family (IOC, IFs, NOCs, etc.) –(before and during the Games) 9.Security 10.Cultural Programme (Table 6.5)

Investment in infrastructure Built facilities (transport, stadia, etc.) which will last long after the Games: –the whole cost should not be charged to the individual Games Holger Preuss shows that if the above items are properly treated every Summer Games since 1972 has made a surplus. –Including Montreal, which is often referred to as a major loss-maker …

Individual Games: income (Fig. 6.2)

Economic Impact: 4 steps 1.Identify all the expenditure items attributable to the event: ie. expenditure which would not have taken place without the event; 2.Measure expenditure items in money terms; 3.Estimate impact of expenditure items direct and indirect on local, regional and/or national incomes; 4.Convert expenditure into job estimates

Economic impact: expenditure items Direct expenditure: –fees for international broadcasting rights –international sponsorship (inc. TOP) –international broadcasters in host country –foreign athletes and officials in host country –international spectators to the Games –international sponsoring organisations (over and above sponsorship fee) Induced expenditure: –foreign tourists visiting as a result of heightened profile –additional international ‘spin-off’ events (e.g. sport congresses) which take place as a result of the Games

Economic impact: examples GamesAuthorsImpact, US$ ‘000s Jobs ‘000s Time period yrs Sydney 2000 KPMG Peat Marwick, 1993 NSW Treasurey/CRE, 1997 Madden/Arthur Anderson, ,300 6,400 6, Athens 2004 Balfousia-Savav et al. Papanikos 11, Vancouver 2010 InterVISTAS, 20023, London 2012 Blake, 20053,

Economic impact misc. Multiplier concept: –Initial expenditure circulates in the economy – eg. hotels spend money on local suppliers who spend money on wages, who spend money on … etc. Effect on GDP is generally quite small Cost-benefit studies examine all costs and benefits, including non-financial impacts –Such studies rarely conducted