2024-07-27
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author:Lian He,edit:Jiaxin
This is probably the greenest Olympic Games.
Before the official opening of the 2024 Paris Olympics, social media platforms have given this Olympics enough attention. The attention is mainly focused on complaints about the Paris Olympics, including the lack of air conditioning and the medals being forged from waste materials from the Eiffel Tower.
Netizens’ harsh comments: Famous for environmental protection, but stingy in doing things.
In fact, according to a WalletHub analysis of the cost of the Paris Olympics, the Games are estimated to cost $8.2 billion, making them the sixth most expensive Olympics in history, both summer and winter.
If you look back at the history of the Olympics, you will find that most of the previous Olympics ended up losing money. For example, the 1972 Munich Olympics generated a fiscal deficit of $893 million.
Even so, many countries and cities will still spare no effort to participate in the competition for the right to host the Olympic Games. If once fails, try twice, and if twice fails, try three times.
The failure of the Olympic bid even led to a tragedy in which a political tycoon committed suicide.
In 1988, two months after the opening of the Seoul Olympics in South Korea, a Japanese man named Yoshiaki Nakatani committed suicide at home.
In 1977, Yoshiaki Nakatani was the governor of Aichi Prefecture, Japan, and he was in charge of the bid for the 1988 Olympic Games in Nagoya, Japan. In simple terms, he was equivalent to the governor of a province in Japan, and Nagoya was equivalent to a provincial capital city.
The bad news was that Nagoya lost to Seoul at that time, which became a hurdle in Nakatani Yoshiaki's heart. He lost his job because of it. When the Olympic Games were later held in Seoul, he became more and more upset, and ended his life without thinking it through.
This reflects a true reality about the Olympics, that is, many cities' eagerness to host the Olympics has far exceeded our imagination.
Why are people rushing to do unprofitable business? Where did the tens of billions of dollars go? How should the economic account of the Olympics be calculated?
The Olympics not only burns money, but is also a long-term, large-scale project that burns money. This is because the impact of the Olympics begins 11 years before the opening ceremony, and so does the cost.
Simply put, after a host city decides to bid for the Olympics, it must first spend two years to pass the International Olympic Committee's assessment. Most cities may have to pass two assessments before they are successful. After obtaining the bid qualification, the host city must spend seven years preparing for the official hosting of the Olympics.
Dealing with the IOC's assessment is a small expense; the real money-burning part is the intensive preparation period that follows.
Let’s first take a look at how much it costs to host an Olympic Games.
The high cost can be seen from the above figure, and Cost overruns are inevitable in almost all cities.
The 2014 Winter Olympics in Sochi, Russia, is the most vivid example, costing nearly $20 billion and experiencing a 289% cost overrun, making it the "most expensive Olympics in history."
Where did all this money go? A common basis for classification is to divide Olympic expenditures into construction expenditures and operating expenditures based on whether the expenditure items can continue to be used after the Games:
To put it simply, construction expenditure refers to the expenses incurred by the host city in order to host the Olympic Games, including the Olympic Village, Media Village, etc. The construction and maintenance costs of sports venues and related facilities are also included.
Operating expenses can be simply understood as the money spent to maintain the normal operation of the Olympic Games during the more than half a month of the Olympic Games, including the opening and closing ceremonies, cultural activities and competitions, services to the international Olympic family, doping testing, Olympic Village management and maintenance, transportation and security services, etc. The hundreds of thousands of condoms prepared for each Olympic Games are also included here.
The larger of these two expenditures is obviously construction expenditure. The construction of sports venues and Olympic villages alone is enough to give host cities a headache.
For example, the chart below shows the expenditure proportions of the 1988 Seoul Olympics, and it is clear which end is more important.
Who is responsible for which expenditure varies from country to country.
Those responsible for construction expenditures may be the Olympic Committee, relevant government departments, and various state-owned and private institutions. For example, during the 2018 Beijing Olympics, 90.8% of the money was spent by the government.
The Olympic Committees of each country are generally responsible for operating expenses.
However, it is not easy to prepare for the Olympics with such a large amount of money. It is easier for economically developed cities, but it is hard for those cities that do not have much money but want to host the Olympics.
Montreal is tough.
At the 1976 Montreal Olympics, the Canadian government did not provide any financing guarantees, resulting in the poor Montreal city government's revenue accounting for only 5% of its required expenditures at the end of the Olympics, leaving it with a deficit of US$2.729 billion to make up.
They couldn't come up with the money, and Montreal taxpayers were left on the hook for the repayment, until 30 years later when the deficit was paid off.
So the question is, if the Olympics costs so much money, where does the money come from?
Generally speaking, the funding for the Olympic Games is jointly completed by the host country's government, regional/provincial/federal governments, cities/communities and the private sector, and the proportion of funding contributed by each party varies from country to country.
Speaking of this, we cannot fail to mention several typical Olympic Games in history: Montreal in 1976, Los Angeles in 1984, Atlanta in 1996.
As mentioned above, the 1976 Montreal Olympics was fully funded by the city government, leaving Montreal with a heavy debt for 30 years.
By 1984, the citizens of Los Angeles, frightened by the devastation in Montreal, decided to quit, forcing the State of California and the Los Angeles City Government to refuse to invest public funds.
This resulted in these Olympics becoming the first in history to have no connection with the host city, with funding provided entirely by the private sector. The history of the Olympic Games, which was organized with the government as the main source of funding, was thus rewritten;
After the 1996 Atlanta Olympics, the Olympics organized entirely by the private sector were also banned - this time it was the International Olympic Committee that refused to allow it. What happened? The Olympic Charter stipulates: "Each candidate city must provide a financial guarantee approved by the International Olympic Committee."
Translated, it means that the International Olympic Committee has to ensure the quality of the Olympics and also make money, but the private sector cannot give them a sense of security.
However, in terms of specific fundraising methods, some sources of funds are actually difficult to distinguish from the income of the Olympic Committee.
For example, at the 1972 Munich Olympics, all government-licensed revenues of the organizing committee came from "special fundraising channels", including Olympic commemorative coins, Olympic commemorative stamps, Olympic lottery tickets, etc. These can be classified as fundraising and can also be included in the income of the Olympic Organizing Committee.
Let me first throw out two conclusions:
1. The 1984 Los Angeles Olympics was a watershed. The Olympic business model was formed and the revenue structure changed dramatically since then.
2. The International Olympic Committee is the one that makes the most money in all the Olympic Games.
When talking about how the Olympics makes money, we have to mention the magical 1984 Olympics.
The reason why it is so magical can be summarized in three sentences: there was no competitor when applying, the government gave up during the preparation and it had to be handed over to private individuals, and after the meeting, the net profit was calculated to be 150 million US dollars.
How did they make money? This was thanks to Peter Ueberroth, the chairman of the Los Angeles Olympic Committee. In this Olympics, he first adopted a bidding method to sell television broadcasting rights, reformed the business model of Olympic sponsorship, and pioneered the sale of Olympic tickets.
Euberros To put it bluntly, they did one thing: they brought auctions into the Olympic business and did it to the extreme.
In fact, the organizing committee began to sell television broadcasting rights exclusively in 1960, but until 1984, the broadcasting fees were relatively low. Euberos thought that he could not make money at the same rate as before, so he simply raised the bidding price. In the end, ABC spent 225 million US dollars to win.
Euberos also introduced a concept called "exclusive expensive sponsorship", also known as the "top plan". Of course, this method was not his idea. It was Dassler, the founder of Adidas, who promoted this concept to the IOC. Euberos was amazing in that he limited 30 industries, and only one company in each industry could enter the "top" plan.
The next step is the auction. Want to enter the "top plan"? No problem, the reserve price is $4 million, you can bid, whoever offers the most money will get the most quota. In the end, Coca-Cola paid $13.5 million to beat Pepsi, and Fuji of Japan paid $10 million to beat Kodak.
This Olympic Games made Eubers famous and gave him a new name: the father of Olympic commerce.
The reason why this Olympic Games is considered a watershed is that it opened the door to the commercialization of the Olympic Games, and the income structure of previous Olympic Games has also undergone significant changes.
Before that, the Olympic Committee made money through commemorative coins and lottery tickets, which did not generate much income. But after that, the contributors were no longer just ordinary people, but entrepreneurs who wanted to seize the market and suppress their competitors. After all, they had money and were willing to spend a lot of money.
To date, the three most profitable ways for the Olympics are selling television broadcasting rights, sponsorship fees, and ticket fees. Sponsorship-related matters are divided into many levels from top to bottom, including top plans, organizing committee partners, sponsors, suppliers, and franchised enterprises.
Other sources of income include donations, interest, equipment rental, membership fees, fees, government subsidies, test match proceeds, issuance of commemorative coins, commemorative stamps, lottery tickets, etc. However, from the perspective of overall revenue, the above three items alone account for more than 50% or even higher.
But many people may not know that the Olympic Committee is not the one that makes the most money.
On the one hand, it is difficult to separate the host country's Olympic Committee and the host city. Although the host city is generally responsible for the pre-Games venues and infrastructure, and the Olympic Committee is responsible for the in-Games operations, it is difficult to "settle accounts clearly" when calculating the final profits and losses. We should be thankful if the final income does not break even after deducting the expenses.
Just like the 1984 Los Angeles Olympics, one important reason why it was profitable in the end was that the government had little involvement in this Olympics and made almost no investment in transportation facilities and sports venue construction.
On the other hand, the organizing committee also has to share a lot of revenue with the International Olympic Committee. For example, after the 1996 Atlanta Olympics, the International Olympic Committee's share was about 40%, and after 2004, this figure rose to 51%.
From this perspective, the Olympic Committees of various countries are more like real workers, and the International Olympic Committee holds the power to distribute income - they claim to be a non-profit organization, but over the years, the power in their hands has grown, and their wallets have become fatter.
For example, the right to sell broadcasting rights was originally in the hands of the organizing committee. Before 1968, the IOC could only get 1%-4% of the revenue. Later, they saw that the TV broadcasting rights were becoming more and more profitable, so they simply took the rights into their own hands. Starting from the 1998 Nagano Winter Olympics, the International Olympic Committee announced that onlyIOCOnly then can television broadcasting rights be sold, and the organizing committee can only obtain less than 50% of the revenue.
In short, the International Olympic Committee will take a considerable proportion of television broadcasting rights and sponsorship-related marketing revenue, and ticket revenue will be slightly lower, accounting for no more than 10% of the revenue of the current session. At the 2008 Beijing Olympics, the International Olympic Committee collected 7.5% of ticket revenue.
The most amazing thing is that if there is a surplus in the Olympic Games, the IOC will take a portion of it as income. In Athens in 2004 and Beijing in 2008, the IOC stipulated in advance that the proportion of the withdrawal would be 20%.
And since 2004, the Olympics has also stipulated that candidate cities must separate investments (venue and infrastructure expenditures "not related to the Olympics") from other expenditure items in their expenditure lists, which is clearly a means for the IOC to protect its own interests.
However, the money is not spent only on itself. Officially, the International Olympic Committee will distribute 90% of its revenue to national Olympic committees, national Olympic committees and international sports federations to support the global and national Olympic movements, and the remaining 10% will be used to maintain the daily management of the organization.
But the wonderful thing is that the 10% proportion has not changed, but the actual income is actually increasing. No matter how you calculate it, they are making a profit.
so, As the highest governing body of the Olympic Games, the International Olympic Committee actually faces much less pressure than the host city.
As early as the 1970s and 1980s, the International Olympic Committee made clear provisions on the issue of Olympic funding: "The responsibility for financing the Olympic Games will be shared by the host city and the Olympic Organizing Committee."
However, the biggest expense in organizing an Olympic Games is the construction costs of urban infrastructure, sports venue construction and maintenance, which makes the Olympic Games a losing business for most cities in the end.
Looking at the entire Olympic history, Japan may be one of the most persistent countries in the Olympics.
During World War II, Japan won the right to host the 1940 Olympics, but for well-known reasons, this Olympics was eventually cancelled.
Therefore, when the smoke of war cleared 20 years later and Japan once again won the right to host the 1964 Olympics, it was self-evident how important this Olympics was to Japan. Japan needs to boost national confidence through this Olympics and also urgently needs to use it to restore its international image.
In order to host this Olympic Games successfully, Japan has made large-scale investments. Including the construction of competition facilities and Olympic villages, operating expenses, roads and other infrastructure construction, Japan has invested approximately US$3 billion in preparation for the Tokyo Olympics.
The money was not wasted. Japan's manufacturing, construction, service, transportation, communications and other industries experienced strong development, allowing Japan to enter the "Olympic Boom" period from 1962 to 1964.
This also drove up Japan's employment rate.
Later, this Olympic Games was widely regarded as one of the most successful in Olympic history. There is even a saying that Japan is the first country in the world to use the Olympic Games to promote rapid social and economic development. "The 1964 Tokyo Olympics not only showed the world Japan's revival, but also opened the prelude to rapid economic growth, becoming an important milestone in Japan's economic development."
Even if we leave Japan aside, Many host cities and even countries experienced good economic performance in the years of preparation for the Olympics.
From a macroeconomic perspective, hosting the Olympics means an additional increase in total demand, and the impact on the economy is a demand shock.
Simply put, the Olympic Games can affect the output, income and employment levels of the host city by triggering investment in infrastructure, investment in Olympic venues and additional facilities, consumption of tourism services, consumption of various sports products and services, etc.
Therefore, it is actually unreasonable to measure the success or failure of the Olympics simply by whether it makes money or not.
The Olympics is more than just a competition. In a short period of time, it makes the host city the focus of the whole world. It is the best display window, allowing the city's history and culture to be recognized and trusted in the fastest time.
Moreover, the impact of the Olympics on the host city and country is not only economic, but also includes improving urban construction, promoting the city's globalization, and so on.
To sum it up in one sentence, the Olympic Games is the best way for a city or even a country to build its external image.
So behind the global enthusiasm for the Olympics, what people value is not the event itself, but the vast opportunities behind it, an opportunity for the city to be seen by everyone.
But from a longer-term perspective, the boosting effect brought by the Olympics will not last long in many host cities and countries.
Just like after the 1964 Tokyo Olympics, Japan soon fell into an economic depression in 1965. That year, Japan's economic growth rate dropped sharply from 13.2% in the previous year to 5.1%, the number of corporate bankruptcies increased by nearly 2,000, and the number of unemployed people increased by more than 200,000.
As shown in the above figure, the GDP growth rate in the eight years after previous Olympic Games and in the eight years before the Olympic Games has basically shown a downward trend, especially after the 2004 Athens Olympic Games in Greece, there was a negative growth.
This is The "trough effect" of the post-Olympic economy.
In order to prepare for the Olympic Games, many cities often carry out large-scale construction and invest heavily in urban construction, building sports venues, and improving urban ecology. However, after the Games, it is easy for the venues to be left vacant, and they have to continue to invest heavily in maintenance.
So the Olympics is like the two sides of a coin to a city. Everyone knows which side they want to see when the coin is tossed, but the final result will only appear after it lands.
The organizers not only need to consider whether the city can afford the huge investment in the preparation period, but also whether it can maintain relatively good economic development after the meeting.
Like Montreal mentioned above, it is undoubtedly the worst case. The economic development of the entire city has been dragged down by debt for 30 years.
But no matter what, the success or failure of an Olympic Games should not be measured by whether it makes money or not, and even judging it purely by economic benefits is a bit biased.
However, neither praising nor criticizing too much should be the most reasonable and fair attitude towards the Olympics. After all, no one can say that one game can change a city once and for all.
Just like 89 years ago, when Liu Changchun, the first Chinese athlete to officially participate in the Olympics, went to Los Angeles alone, he would never have thought that 72 years later in 2004, a colleague named Liu Xiang would complete his unfinished dream.
Just like in 1957, when Xu Haifeng won the first Olympic gold medal for China, he would never have thought that half a century later in 2008, we would host our own Olympic Games and stand at the top of the Olympic gold medal list.
So change is happening, and history is happening just like that, magnificent.
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