Money Lost With the Ongoing Changes to the Summer Olympics
With a state of emergency declared through Aug. 22, the Tokyo Olympics will look like the bad old days of peak-pandemic sports — the greatest athletes in the world will represent their home countries in empty stadiums. Despite talk of a post-pandemic recovery, a coronavirus resurgence has transformed the world’s biggest athletic stage into a television-only event.
Empty stadiums can make even the biggest events look small and sad, but the announcement out of Tokyo in early July is not disappointing only because of aesthetics. No fans translates into a whole lot of lost cash for an event that is otherwise a money-making machine.
Keep in Mind, This All Follows a Very Expensive Postponement
You might notice that while the Olympics will unfold in the summer of 2021, the event is still officially called “Tokyo 2020.” That’s because the games were supposed to take place last year. There was no getting around postponing the Olympics last summer, but putting off an event of that magnitude is difficult and expensive — particularly during a global health crisis — so the games arrived in 2021 already in a deep financial hole.
According to Reuters, organizers originally estimated that postponing the Olympics would cost $2.8 billion, but that number has since grown to $3 billion.
No Fans Means No Ticket Sales
The most obvious hit to the Olympics economy will be in the form of bodies not moving through turnstiles at stadiums and other facilities where the greatest athletes in the world will converge to test their mettle. Organizers originally expected to make 7.8 million tickets available, according to MarketWatch, but high demand convinced the committee to bump that number to 9 million tickets.
Had they sold them all, which they probably would have, it would have been a new record — but there was more on the line than just bragging rights. Those 9 million tickets never sold represent $800 million in lost revenue. That would have accounted for 12% of the Olympics budget and been the No. 3 overall source of revenue for the entire event.
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Record Ad Spends Are Now in Question, Too
Empty stadiums gouge open another kind of money-bleeding financial wound on top of lost ticket revenue. The Olympics attracted an investment of $3.3 billion from domestic advertisers, according to MarketWatch.
Reuters reported that more than 60 Japanese companies combined to invest that record ad spend, and they were already reeling from the postponement. Those companies had been forced to spend an extra $200 million just to extend their contracts from when the Olympics were supposed to be held in 2020. Without fans in the stands, those advertisers can’t recoup a reasonable ROI. The outcome of those deals is uncertain, according to MarketWatch.
As Bad as All That Is, It’s by No Means the Worst-Case Scenario
Keep in mind, however, that things can always get worst. The Olympics’ opening ceremony is on July 23 and the event ends on Aug. 8. However, as of July 20, the head of the organizing committee would still not rule out canceling the Olympics outright.
Should that armageddon scenario play out, all the money invested in the 2020 Games, the long, grueling postponement and the take-two effort in 2021 would have been for naught. That would leave some insurers very unhappy.
According to Reuters, the International Olympic Committee (IOC) takes out about $800 million worth of insurance to cover most of the $1 billion it invests in every host city. On top of that insurance, local Tokyo organizers took out a $650 million policy and another $600 million for hospitality. When you toss in sponsorship and TV rights, the insured cost of the Olympic Games is $2 billion.
Massive Media Contracts Are on the Line
For context as to just how enormous Olympic broadcasting deals are, it’s worth noting that NBCUniversal had already pulled in a record $1.25 billion in advertising revenue from U.S. companies alone before the Olympics were even delayed in 2020, according to Reuters. Comcast — the parent company of NBCUniversal — agreed to pay $4.38 billion for the rights to broadcast the Olympics in the U.S. from 2014-2020. Discovery Communications paid the equivalent of $1.4 billion to broadcast the Olympics in Europe from 2018-2024.
Then, of Course, There Are the Athletes
One of the hardest costs to quantify is the amount of money never earned by athletes who might otherwise have landed sponsorship deals, commercial endorsement contracts, sneaker or apparel deals, or chances to appear on TV or even in the movies had the Olympics not been postponed, slimmed down or canceled altogether. Many athletes will never again get the chance to cash in on their sports, which otherwise don’t offer a lot of earning potential.
The Real Hit Comes From Tourist Dollars Never Spent
Domestic spending was always expected to be low during the Olympics. The real money comes from outside tourist dollars. The empty stands alone will cost the economy around $1.34 billion, according to a report from the Nomura Research Institute (NRI). If they actually cancel the Olympics wholesale, Japan will miss out on 1.8 trillion yen — that’s about $16.4 billion never injected into the local economy.
But even that, according to Reuters, would pale in comparison to the economic damage of renewed shutdowns had the Olympics been allowed to turn into a super-spreader event.
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Last updated: July 21, 2021