In this two-part feature on the economics of the Olympics, Global Finance delves into the financial strategies and innovations that the 2024 Paris Games, which run from July 26 to Aug. 11, are implementing to avoid the pitfalls of past host cities. Part one explores the historical context of Olympic costs and the steps the Paris Games organizing committee is taking to ensure fiscal responsibility. Part two examines the revenue generation and economic legacy of the Games, providing a detailed look at how the 2024 Summer Olympics might set a new standard for future host cities.
Revenues from the Olympics are generated primarily by two main protagonists: the local organizing committee, this time 2024 Paris, and the IOC. Each also has clearly defined responsibilities.
For the most recent Summer Games in Tokyo, the IOC received a total of $7.6 billion between 2017-2020/2021 (slated for 2020, those games were postponed a year by the Covid pandemic). Media broadcasting rights accounted for 61% of revenues and the The Olympic Partner (TOP) corporate sponsorship program for 30%.
Broadcast fees have jumped by over four-fold since the 1990s, reaching $4.5 billion for Tokyo. TOP revenues increased from less than $300 million to $2.3 billion over the same period.
The TOP program was launched in the 1980s with five partners, and gradually expanded to the current 15. The stable of sponsors reflects changes in recent economic history. The original group included Kodak and Xerox. Current members include Atos, Airbnb, Alibaba and Intel. It also reflects the growing interest in the games. “We sweated bricks” to secure sponsors at the beginning, said Chris Renner, Global Head of Consulting at rEvolution, a Chicago-based sports marketing agency and a founder of TOP. Now, four-year contacts have been replaced with eight-year ones.
The main sources of income for local committees such as the 2024 Paris Games are domestic sponsorships, ticketing, licensing within the host country, hospitality and merchandising. As IOC revenues increase, local organizers also get more of that pot. Paris gets $1.7 billion for this edition, while the 2028 Los Angeles Games and the 2032 Brisbane Games are earmarked for $1.8 billion each. Christophe Dubi, IOC executive director of the Olympic Games, said, “We make more, everybody makes more.”
Each of the 206 National Olympic Committees (NOCs) around the globe and the dozens of International Federations (IF) for specific sports also generate their own revenues. The best known of the latter are probably FIFA for soccer and FIBA for basketball, but the list includes the World Archery Federation, the World Badminton Federation, and more.
The IOC spends 10% of its revenues on internal operations and distributes the rest through what it calls a solidarity program to local organizing committees, the NOCs, IFs and other relevant sports promotion initiatives. This revenue sharing system is considered essential to the survival of some modalities. “This is very important for smaller sports like rowing, archery and fencing,” said Renner. “I don’t know if they could have sustained themselves through Covid without the solidarity program.”
The local committee is expected to handle venue operations, the workforce, technology and games services. Local public officials control security and other essential public services. Capital expenditures, often but not always in the form of public-private partnerships, may include sporting venues, enhanced or expanded public transportation networks, housing (such as the Olympic Village) and more. Budget-breaking cost overruns tend to fall into the capital expenditures category. “The operations budget usually makes a small profit,” said Renner.
Whether or not they formally make a profit, proponents argue that the games still leave a positive economic legacy. An independent study touted by the IOC concluded that the Paris Games will end up generating between $7.3 billion to $12.1 billion for the city and surrounding Île de France region between 2018-2034. The big gains are coming from tourism, construction and the organization of the games, said the report published by the Centre de droit et d’économie du sport (CDES) of the University of Limoges. The $3.3 billion in public spending will generate a multiplier effect of three, said the study.
Not everyone agrees, of course. In Paris, already one of the world’s top tourist destinations, there is much talk about sports tourists crowding out others who would normally visit. Local press reports have highlighted sectors such as luxury retailers who worry that they will sell fewer handbags than normal. The emblematic bouquinistes, the second-hand book sellers who line the banks of the Seine, successfully fought off efforts by local officials to remove their stalls to make more room for the riverside opening ceremony. Taxi drivers are moaning about traffic restrictions.
“A common feature of the economics of large-scale sporting events is that our expectations of them are more optimistic than what we make of them once they have taken place,” wrote Ivan Savin, associate professor of quantitative analytics at the ICTA-UAB ESCP Business School in Spain and co-author of an article that he outlined on The Conversation, a website that encourages the dissemination of scholarly studies among the general public. Savin and two colleagues did an econometric study of the effects on tourism of large sporting events between 1995-2019. “Typically, expenditure tends to tip over the original budget, while the revenue-side indicators (such as the number of visitors) are rarely achieved.”
Dubi accepts the crowding out concept but argues that the phenomenon is already factored into studies showing wider benefits. He also stressed that the IOC is open to outside scrutiny, saying it “forces everyone to ask the right questions.”
Ultimately, the financial side is only part of the process, everyone agrees. As for the local committee breaking even or making a profit, “I suppose it’s a good result,” said Anaïs Guillemané Mootoosamy, director general for Strategy at the Conran Design Group, a London-based brand and design consultancy that is working with the 2024 Paris Games. “But the Olympics aren’t meant to be a cash machine. It is to push the values.”
— Read Part 1 of 2024 Paris Games: Can The Olympics Finally Claim Financial Victory?
