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Last Updated: Wednesday, 6 July, 2005, 11:58 GMT 12:58 UK
The Olympics and the need to make money

By Stephen Evans
BBC North America business correspondent

Olympic flag
Whichever city raises the Olympic flag will also hope to make a profit

London has won the race to host the 2012 Olympics - but the biggest challenge is yet to come.

The most important competition in the Olympic Games is not the 100m sprint or the marathon.

Rather it's the need for the games to make a profit, and this competition follows just two rules.

  • Firstly, it's impossible to calculate the benefits of securing the games for your city.
  • Secondly, it's impossible to calculate the costs of staging the games in your city.

    On the spending side, officials have to sell the idea of the games to taxpayers, so there's a tendency to under-estimate, at least for public consumption.

    Money-spinners?

    The Mayor of Montreal said when the city was preparing for the 1976 games that the Olympics "can no more have a deficit than a man can have a baby".

    Three decades later, it's a statement that still provokes sardonic laughter among Canadians where smokers continue to pay taxes on their cigarettes to finance the games.

    Sam the eagle, mascot of the LA Olympics
    The LA Olympics were a huge financial success

    Or try telling the Athenians what a money-spinner the games are.

    Seven years before they secured the games, the provisional cost was put at $1.3bn (741m). When detailed planning was then done, the cost had jumped to $5.3bn.

    And when the Olympic torch had been and gone, the cost had risen to an estimated $14bn, enough to bump up Greece's budget deficit.

    The Los Angeles experience

    The most conspicuous financial success was the Los Angeles games in 1984, which ran at a profit.

    It was perfect for the American television networks, which accordingly stumped up a lot of money.

    Corporate sponsors too were falling over themselves to pay big money for their name in track lights.

    And the size of the city meant that relatively little new building of hotels or venues was needed and many local people could attend events without straining the city resources.

    Backlash

    But that was a different era.

    Since then, television companies have shown signs of balking at escalating charges for rights.

    There's been a backlash against commercialism and the prominence of advertising and name placement.

    Costs have also risen in the past four years because of politics.

    Security in Athens cost about $1.5bn, pretty much what previous games cost in their entirety.

    Cool Barcelona, hip Sydney

    But if costs have a tendency to rise as surely as a pole-vaulter, do the games bring benefits to compensate?

    Olympic rings at Sydney harbour bridge and Sydney Opera House
    The Olympics helped Sydney to step onto the world stage

    Some do and some don't.

    The city of Barcelona, for example, was regenerated by them.

    The authorities used the games there in 1992 as a reason to spend and rebuild the water-front, turning the city into one of the most attractive tourist destinations on the planet (though, the down-side is a ghost-town of new sporting venues on the other side of the city).

    The difficulty is that it's very hard to impute any precise financial figure for benefits to a city.

    Take the case of Sydney.

    How do you put a figure on the rebranding of a city and a country?

    No exact calculation can be made of the worth of the Olympics (and before that the opera house) in terms of its image.

    It now seems like a "world city".

    Where once it might have a had a remote back-woods image, now it seems modern and open and vibrant.

    Whatever the tangible on-the-line costs of the games, there's clearly been an intangible but real financial benefit that might be felt for many years in terms of businesses and people visiting the place - and staying there.





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