One year from now – theoretically – the Tokyo Summer Olympics will be coming to an end. I say theoretically because there is precious little time to achieve a measure of control over COVID-19 such that an assemblage of athletes and spectators from around the world would make even a shred of sense at that time. I mention this today because I read something recently saying that the postponement of the 2020 Games – which would be ongoing now – for one year has cost the Japanese sponsors approximately $6B. Obviously, I have not audited the numbers here, but let me assume it is about right.
Hosting the Olympics is a financial disaster for cities/countries whose economies are not on the top rung of the world’s economic ladder. China’s economy continues to roll on notwithstanding the unused Olympic Village it built and the under-utilization of the “Bird’s Nest Stadium”; London used the Olympics there as a way to gentrify a portion of the city and that has worked; Los Angeles actually posted a net profit for the hosting of the Games themselves in 1984. However, that is not the story for cities and countries lower on the economic ladder or ones that over-spent prudent limits that were in good economic situations. Financial “problems” have befallen these Olympic venues:
- Montreal 1976: The city funded the Olympic Games there by floating bonds and it took them 30 years to pay off that debt. The Games themselves did not provide nearly the requisite cash flow to do so nor did the “persistent economic growth” materialize from the “investments” made to host the Games.
- Barcelona 1992: The story here mirrors Montreal’s story. The incurred debt to prepare for the Games required debt service that was not nearly covered by any “economic boom” from the Games and taxes had to be raised significantly for the city to remain solvent.
- Sydney 2000: The legacy for the city is abandoned facilities/under-used facilities and debt.
- Greece 2004: The massive economic loss here contributed significantly to the near collapse of the entire Greek economy about 3 years after the Games.
- Rio de Janeiro 2016: One of the massive soccer stadiums built in the hinterlands for these Games is now used as a parking lot for busses. ‘Nuff said?
Tokyo – and Japan in the larger sense – is a large and stable economy. Even with the global disruptions caused by COVID-19, Japan is not teetering on insolvency in 2020 the way Greece was in 2004 or Rio in 2016. Nevertheless, maybe it would be worth a moment to look at the up-front investment estimates that have gone into the now postponed 2021 Games. According to various reports:
- 7 Billion Dollars: That was the original commitment made to the IOC when Tokyo won the right to stage the Games. That was the “investment” that was represented to the good folks in Tokyo for the privilege of being the host city.
- 18 Billion Dollars: This is the mid-range of reported over-runs incurred in the process of preparing for the games to have begun in July 2020. I have seen some reports saying the over-runs are only $16B and others that say it is just north of $20B
- 6 Billion Dollars: This represents the cost of postponing the Games for a year. Please do not ask me to enumerate how a delay can cost that much; I leave that to the economists and the accountants.
If these numbers are even close to correct, Tokyo now has $31B invested in the 2021 Summer Games – and they may not happen at all. [Aside: I am sure that velodrome they built to host the cycling events will find a good and profitable use as something else.] However, even if the Games do take place, it is difficult to see how those Games will bring anything close to $31B to the city in a little over two weeks – – and that assumes that those Games would be “normal Games” with fans in attendance. Holding the Games with limited or no fans in the venues might be financially worse than no Games at all.
Switching from the Olympics to college football, the Power 5 football conferences are coming up with schedules for 2020 that limit teams to conference games. That means no games between Powerhouse U and a Division 1-AA team where the spread is set around 59 points. I like that. It also means that Power 5 teams will not be playing some of the straphangers in Division 1-A where the spread is set merely at 47 points. I like that too. However, there is fallout from those consequences of “only conference games” for Power 5 teams.
- Economic Fallout: Those Division 1-AA schools and the Division 1-A straphangers get paid to take their shellackings – sometimes more than a million dollars. And that payment is a significant part of the athletic department revenue for the season. The effect goes beyond football because football is a revenue producing sport and it contributes to the support of the non-revenue producing sports at the schools.
- Athletic Fallout: UConn became the first Division 1-A school to cancel its football season for 2020. UConn is an independent and faced cancellation of several games because they would have been a “non-conference foe”. The school prefers to call the “risks provided by COVID-19” as the cause for canceling the season, but the fact is that UConn only had 9 games on its schedule to begin with and at least three of those games were not going to happen.
Finally, here is a quotation I have had on my clipboard for an awfully long time. It is not mine, but I do not have a notation to whom it belongs. It deals with one of the unusual Olympic sports:
“Why is luge a sport? You dress up like a giant sperm and go sledding really fast. That’s hardly athletic. Phallic and sexy, yes. But hardly athletic.”
But don’t get me wrong, I love sports………