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JUL. 23, 2021

The Olympic (Prize) Price

The Opening Ceremony of the Tokyo Olympic Games has just started. There was a lot of newsflow in the last few weeks surrounding the event, with the head of the Tokyo 2020 organising committee announcing just Wednesday that he would keep an eye on infection numbers and discuss whether to cancel or further downsize the Games if necessary.
The 2020 Olympics and Paralympics were initially postponed for a year due to the COVID-19 pandemic. This year the event is taking place, despite the widespread protests both locally and globally. The event is on track to be among the most expensive Olympics ever, while also being the least profitable.

When Tokyo won the bid for the 2020 Olympics in 2013, the estimated cost was USD 7.3bn. The official estimated costs at the end of 2020 had risen to USD 15.4bn. Recent expert estimates, according to Business Insider, are around USD 26bn. Various factors contributed to the cost overrun: the numerous venues, some of which were built from scratch, the construction materials, in many cases imported from abroad and the housing in the Olympic village. The latter in particular is what is supposed to generate profits after the conclusion of the games, as the apartments are sold to the general public. According to Japan Property Central, about 20% of the units were sold in 2019 while the bulk of the sales was supposed to happen in 2020. This was then postponed as the pandemic struck. Since last year, the city of Tokyo has been paying for the maintenance, the surveillance and the rent of the Olympic venues.
On top of all these costs, the city will suffer from lower revenues, as the Games will happen with no public and the revenues from tickets alone were estimated to be around USD 850mn. Local sponsorship were also cancelled as companies decided not to be associated with a controversial event that drew so much negative publicity. TV revenues were historically shared between the International Olympic Committee and the hosting venue, but in recent years the IOC has been taking a much larger share of TV rights: more recently, at the 2016 Rio Olympics the IOC revenue share was 75%.

These Olympics have an additional burden from the pandemic, but the issues related to hosting the Games are well known to the cities and countries that have been Olympic venues. The stadiums have huge maintenance costs and are seldom repurposed after the Olympics. The same goes for the media center and the Olympic village, in many cases abandoned just a few months after the games. In the end, those infrastructures did not exist previously because the hosting cities did not need them, and they will not need them after the event.

Despite the costs of the event, the Olympic Games remain the highlight of many athletes’ lives and keep people worldwide glued to the TV. The Olympic Committee is aware of the issues and is taking action to make the Olympics more affordable and sustainable for the host cities going forward.

We thank you for the continued support.

The FAM team