Olympic Games Set to Break $8bn Revenues Barrier in Four-year Cycle Ending with London 2012

The media rights for 2010 and 2012 have together brought in $3.91 billion, compared with $2.57 billion for the previous cycle. The increase means that media rights are now worth over four times the $957 million brought in by the IOC’s top-tier TOP sponsorship programme for the 2010 and 2012 cycle.
The media rights and TOP sponsorship figures together, plus $989 million from the Vancouver 2010 organising committee’s commercial programme, and an estimated $2.14 billion from the London 2012 programme, mean that the games will be worth a staggering $8 billion in the present cycle.
The media rights fees for the 2010 and 2012 games include: $2 billion for the US rights from NBC, the national network; €560 million ($703 million) from the European Broadcasting Union for the rights in Europe (excluding Italy, which opted out because of a financial crisis at Rai, its public-service broadcaster); and $412 million for the Japanese rights from The Japan Consortium comprising broadcasters NHK, NTV, TV Asahi, Fuji TV, TBS and TV Tokyo.
The 52-per-cent rise in the overall value of Olympic media rights can be attributed to:
• The maturing of new television markets, such as China, where CCTV paid $99.5 million for the rights, compared with the previous cycle in which CCTV was part of an Asia-Pacific Broadcasting Union deal which acquired the rights across the whole of Asia, including China and Hong Kong, for just $17.5 million (before the 2008 games had been awarded to Beijing)
• Increased competition in mature markets, such as USA, where NBC’s $2-billion rights fee compares with $1.5 billion in the previous rights cycle, and Europe, where the EBU’s $703-million fee (excluding Italy) compares with $578.4 million for the previous cycle (including Italy)
• The increasing role of pay-television: Sky Italia in Italy acquired exclusive rights for €112 million ($141 million), on condition that it sub-licensed a minimum number of hours of coverage to a free-to-air television rival (Rai, which is paying Sky Italia $37.8 million for a total of 315 hours of coverage of the 2010 and 2012 games); ESPN acquired ‘non-standard’ (pay-television) rights in Latin America for $9.5m; and ESPN Star Sports acquired pay-television rights in Asia for $5.2 million
• The developing market for broadband and mobile rights (Terra Latin America is paying $8 million for broadband and mobile rights only in Latin America – excluding Brazil)
• The added allure of an Olympic Games in London, a time zone more suited to many of the main Olympic Games television markets than Beijing, in the previous rights cycle (however, it should be noted that some media rights deals for the 2010/2012 cycle were agreed before London was chosen as host city in 2005, including the NBC deal which was concluded in 2003)
Currency conversions into US dollars are as of June 18, 2012, so do not take into account currency fluctuations since the deals were originally agreed.
The $8-billion overall revenues figure is made up of:
• $3.91 billion from the sale of media rights
• $957 million from the IOC’s top-tier ‘TOP’ sponsorship programme (the IOC had hoped to sign a 12th TOP sponsor in time for the London games, taking the total over the $1-billion mark, but was ultimately unsuccessful in this ambition)
• $989 million in commercial revenues from the Vancouver organizing committee, comprising: $688 million from its domestic sponsorship programme; $250 million from ticket sales; and $51 million in licensing (merchandise) income
• An estimated $2.14 billion raised by the London 2012 organising committee, comprising: $1.08 billion from domestic sponsorship; $931 million from ticket sales; and $125 million from licensing (the stated targets of the organising committee)
Over 90 per cent of commercial revenues from the games are distributed to “organisations throughout the Olympic movement,” such as national Olympic committees and international sports federations, according to the IOC, with under 10 per cent being used for the operational and administrative costs of governing the Olympic movement.
About half of the revenues from the IOC’s top-tier TOP sponsorship programme go to the games organising committees to assist them with their costs, while since the Vancouver 2010 winter Olympics the IOC has also entirely funded the host broadcaster operations, managed by Olympic Broadcast Services.
Costs The $8-billion overall revenues figure does not, of course, take account of costs: virtually all of the London 2012 organising committee’s $2.14 billion in revenues will go towards staging the games, for example.
In April, Paul Deighton, chief executive of the organising committee, said that the organising committee was on track to meet its target of raising £2 billion in commercial revenues to meet the operational costs of staging the games.
Deighton told Reuters: “I broadly expect us to break even. One way I describe our project is trying to land about £2 billion of revenues, with about £2 billion of costs. We have got committed just over 92 per cent of the revenues we need.”
Deighton, who said that the remainder should come from ticket sales and merchandising, described as “gravity-defying” the £700 million that had been raised in local sponsorship in the face of the worldwide economic crisis of the last few years.
Ticket sales are expected to top £600 million, compared with a target of in excess of £400 million, after unprecedented demand.
A further £9.3 billion of (mainly) public money has been budgeted for associated infrastructure work and other costs involved in staging the games in what was a derelict part of east London.
In June, the UK government announced that uncommitted contingency funds totalling £476 million were still available ahead of the July 27 opening ceremony.
Sports minister Hugh Robertson said: “All being well we should be able to hand half a billion pounds back to the Treasury.”
The £9.3-billion ‘non-organising committee’ budget, which included a £2-billion contingency, was set in 2007 and was almost four times the estimated cost at the time London handed in its bid to host the games in 2005.
The budget was revised upwards after taking into account previously overlooked costs such as VAT, increased security costs, and an expanded brief for the Olympic Delivery Authority to regenerate the lower Lea Valley area.
Robertson said that the latest figure for the games was “a great advert for the British construction industry, for sport and for UK Plc.”
Jeremy Hunt, secretary of state for Culture, Olympics, Media and Sport, said that the country had proved it can deliver “big construction projects on time and on budget.”
The Department of Culture, Media and Sport has long stated its confidence that the Olympics would be delivered under budget, despite the Public Accounts Committee, the government spending watchdog, declaring in March that the full cost to the public of the games and legacy projects would be nearer £11 billion because of wrong estimates over the cost of security.
This article is excerpted from a longer study, including tables of top broadcast deals by value, commercial rights values and increases for five Olympic Games quadrennial periods and sources of funding for the non-organising committee budget for the 2012 games, in a special Olympics-themed issue of Sportcal Magazine published today.
Click to view Sportcal Magazine - Issue 26 which is available free of charge online
To order a copy of the Sportcal Magazine or to find out about the range of products and services that Sportcal offers, please click here for more information.
UK Office
Allington House, 25 High Street, Wimbledon Village,
London SW19 5DX, England
Tel: +44 (0)20 8944 8786
Fax: +44 (0)20 8944 8740
sales@sportcal.com
www.sportcal.com
Europe Office
Maison du Sport International, Avenue de Rhodanie,
1007 Lausanne, Switzerland
Tel: +41 (0)21 310 0740
Fax: +41 (0)21 310 0741
sales@sportcal.com
www.sportcal.com