July 28, 2020

Can the Olympics survive 2020?

Can the Olympics survive 2020?

The Olympics as we know them have been around for 124 years. A lot has evolved since 1896, but it seems the business model of the Games is one thing not even time can’t change. 

With the Tokyo 2020 Olympics being postponed to next year (for now), it’s time to take the interim 12 months to reevaluate the economics of the Games. Because they don’t always make complete sense…

  • Hosting the Olympics is more often than not a money-losing endeavor. Did you know that it took Montreal until 2006 to pay off the last of its debt from the 1976 Games?
  • Tourism for host cities actually takes a hit when they welcome the Games. 

I learned that (and a whole lot more) from Andrew Zimbalist, today’s guest on Business Casual. Andrew is the best of the best in the field attempting to understand the economics of sport. He’s taught econ at Smith College for decades, specializing in the Olympics and the impacts the Games have on host cities and their economies.

In this episode, Andrew helps me tear apart the Olympics business model, taking into account the perspectives of host cities, athletes, the International Olympic Committee, and more. In addition to understanding what’s broken, we’ll talk about how we fix it. (Hint: Anyone at the IOC listening? We’ve got some thoughts.)

And most importantly: We’ll also parse out the causes, effects, and impacts of postponing Tokyo 2020 due to the coronavirus.

Plus, we're giving away three copies of Andrew's book, Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup. Leave a review for Business Casual on Apple Podcasts and email a screeenshot to businesscasual@morningbrew.com to enter. Winners will be pitched Aug. 3.

You don’t want to miss this one. Listen now.


Transcript

Business Casual - Andrew Zimbalist.mp3


Kinsey Grant, Morning Brew business editor and podcast host [00:00:07] Hey, everybody, and welcome to Business Casual, the podcast from Morning Brew, answering your biggest questions in business. I'm your host and Brew business editor, Kinsey Grant. And now, let's get into it. [sound of a ding]


Kinsey [00:00:20] The Tokyo 2020 Summer Olympics were supposed to begin right around now. Clearly COVID-19 had other plans. And because of that, now we've got about a year to go before we can start saying things like, "Well, if my parents put me in lessons earlier, I could totally beat that guy." Postponing the Olympic Games is about as unprecedented as recent use of the word "unprecedented." Today, we're going to celebrate what would have been the first days of the summer games by doing what we do best on this show, understanding the business implications of an absolutely wonky, almost franchise-like model, created back in the 1800s and still used in large part today—the business model of the Olympics. 


Kinsey [00:00:59] We're going to talk about how pushing the Summer Games back one year impacts the athletes, the host city, spectators, broadcasters, everybody, you name it. And while we're at it, it's probably past time to think more critically about the core model of the Olympics, because a lot of smart people argue that it doesn't work for everyone. I mean, did you know that it took Montreal until 2006 to pay off the last of its debt from the 1976 games? We're answering all these big questions with Andrew Zimbalist, the foremost economist when it comes to studying the business model and the impacts of the Olympic Games. Andrew, welcome to Business Casual. 


Andrew Zimbalist, Professor of Economics at Smith College [00:01:35] Thanks. Good to be with you. 


Kinsey [00:01:36] We're excited to talk today. You've also been an econ professor at Smith College for many, many years, written lots of books, several of which center mostly around the Olympics and the business model of the Olympics. So you are definitely the expert here, and we want to talk about this. I have to say, I'm a little jealous that this is kind of your specialty within the field. It's so interesting, so compelling to me. And I'm sure you're in high demand, especially [chuckles] this summer as everybody tries to understand what comes next, now that this change has happened. 


Kinsey [00:02:05] How do we move forward? And what do the games look like as we do move forward? So today, I want to start with this question. What was your first thought when the International Olympic Committee announced in March that this year's 2020 games would be postponed to 2021 because of the coronavirus? What is the first thing that went through your mind? 


Andrew [00:02:21] Thank God. You know, they postponed it on March 24th after many Olympic athletes had requested it. Olympic athletes, of course, have to train on a regular basis. And many, if not most, of the Olympic athletes who were hoping to go to Tokyo 2020 didn't have a place to train. You couldn't go to gymnasiums. You couldn't go to public tracks. Couldn't go to swimming pools. So what were they supposed to do? And on top of that, of course, they were concerned about getting sick if the Olympics were to happen. 


Andrew [00:02:55] The Olympians happened to be housed in something known as the Olympic Village, or the Athletes' Village. And that brings together 16,000 people from around the world, about 11,000 athletes and 5,000 trainers and coaches and others, all living in the same complex, all living in the same complex, all eating in the same complex. All working out at the same gyms and so on and so forth. So the Olympic athletes started to speak out in early March and speak out very vociferously about their concerns. After that, several Olympic Committees, including the one in Canada, said, look, whether you hold the games or not, we're not going this summer. Our athletes are not able to train, and this is much too dangerous. So we're not going. 


Andrew [00:03:38] Canada, a few other countries, said that. And then a bunch of the international sports federations began to urge the International Olympic Committee, the IOC, to postpone the games. The WHO, the World Health Organization. So this was going on for several weeks. Sort of in the middle of that period, Thomas Bach, the head of the IOC, said, OK. We promised to let everybody know by May 1st whether or not we'll have the games. But the pressure, the political pressure, got much too great. Some of the corporate sponsors of the Olympics started to say, look, you can't just be sitting on your hands now. So finally, on March 24th, they said, OK, OK, we'll cancel the games. 


Andrew [00:04:16] But I think they made it pretty clear to the world that even though they like to say that games are about the athletes and of course, the conception of Pierre de Coubertin back in the 1890s was precisely that. These were supposed to be athletic events. They've turned into major commercial events and construction events. And Thomas Bach was worried about his corporate sponsors and he was worried about the construction development companies that had been enlisted to build the facilities. And so that's why they were delaying. In any event, when the announcement came on March 24th, I was very pleased and relieved that they had done that. 


Andrew [00:04:51] But by doing that, they've taken on a very enormous challenge. And they have almost 40 venues that they'll be using for the Olympic Games. And they have to reserve those venues for next year. So they're in the midst of planning right now. And there are some estimates that say it's going to cost up to up to $3 billion additional cost to do this. And they're not going to get any additional revenue, by the way. They'll be lucky if they can sell the tickets that they sold for 2020. They probably won't be able to. And indeed, if we don't have an effective vaccine that's widely distributed, they might have to play the games without any fans in the stands at all. That'll be a loss of a billion dollars in ticket revenue. 


Andrew [00:05:32] Some corporate sponsors are saying they don't want to be a part of the games in the next year. So you have costs going up by perhaps as much as $3 billion. Revenue is going down. Who's going to pick up the slack? Well, the IOC has said they'll contribute $685 million. That's a little bit more than one-fifth of the projected increases in costs. And so it's going to fall ultimately on the government of Tokyo and the government of Japan to pick up those costs, making what was already a dubious proposition economically that much worse. 


Kinsey [00:06:06] Yeah. And we will talk about just how dubious the economic proposition is in just a second. But I do want to talk a little bit more here about the decision that the IOC made. I think that that answer definitely illustrates well, The New York Times, when they wrote about this decision to postpone the games, said the decision brought both a sense of, quote, relief and impending chaos to international sports. And I can't think of better words to describe it. Relief is obvious in terms of thank God that they canceled this. Thank God that we are going to be able to preserve people's health. 


Kinsey [00:06:38] And we're not going to basically create the perfect storm for spreading disease, which is essentially what would have happened. But the impending chaos is clear when you speak about what you just said about these apartment complexes being sold. These are people who aren't even on the IOC. It's not even just the athletes. It's the people in the country as well who are going to have to deal with the ramifications of these decisions. 


Kinsey [00:06:58] I want to understand better the economic impact. So we had a report in early March projecting that the cancellation of the games would erase 1.4% of Japan's economic output for this year. Do you think that that is something that we should be considering right now? Obviously, the investment has already been made in infrastructure that needs to be built to host the games. But when we think about losing economic output, is that a concern or should it be a concern, I guess, right now? 


Andrew [00:07:24] I tend to believe that the report that you're referring to is bogus. 


Kinsey [00:07:30] Ah, interesting. 


Andrew [00:07:30] I don't see any way that the GDP goes down by 1.4% as a result of canceling the games. To the extent that it goes down at all, and I don't think it will, the games will be held in 2021. So whatever wonderful things were gonna happen this year that are not happening this year will happen next year. But look, what is the economic impact? The economic impact comes when you bring new spending into the economy. And that's from people coming from outside of Japan, coming and staying in hotels and buying meals and buying memorabilia and buying tickets. 


Andrew [00:08:05] The evidence that we have from most recent games is that the level of international travel, the level of tourism in a city, either stays the same or it goes down when you host the Olympic Games. Why is that? Well, it's true that there's an Olympic family that's approximately 40,000 people. That has to do with the number of athletes, the trainers, the referees, the television people who come in, the International Olympic Committee members who come in. Something in the neighborhood of 40,000 people. On top of that, you'll get parents and family members and friends coming to the games, and Olympic aficionados will all travel. And so you'll obviously get more than 40,000. You'll get a couple of hundred thousand. 


Andrew [00:08:46] But, if you're a normal tourist and you were thinking of going to Tokyo this summer, there's a good chance you were going for the Japanese cultural events, the Japanese food, the Imperial Gardens, the Buddhist temples and so on and so forth. That's why you were going to Tokyo. But what are you going to say to yourself about travelling to Tokyo in the summer of 2020? You're going to say, well, it's very hard to get hotel rooms and they are more expensive. The traffic congestion is going to be even worse than it normally is. And you're going to have to potentially, God forbid, deal with the possibility of terrorist incidents or security incidents. 


Andrew [00:09:27] And so the normal tourist is more likely to say, I'm going to stay away from Tokyo this year. I'm going to Bangkok instead, or I'm doing something else instead. This is all assuming that we don't have a COVID situation. And so what happens is that the reduction in normal tourism often fully offsets or more than fully offsets the increase in Olympic tourism. And so the net effect is that tourism can actually go down. It happened in London. Tourism went down in the summer of 2012 when London hosted the games. Went down by about 5%. It happened in Beijing in 2008 and went down, by some reports, almost 30%. 


Andrew [00:10:06] Now, there are some cases where there's a small net increase. But when there is such an increase, it's a small one. And so the notion that you're actually increasing GDP by hosting the games is not very credible. There are always some special circumstances. But in the typical case, you wouldn't expect that to happen. 


Kinsey [00:10:27] It sounds like visiting a host city and going to the games is like coming to New York and going to Times Square [chuckles]. There are other things to see and do, and why would you want to put yourself through—it could be a great spectacle to observe, but — 


Andrew [00:10:41] If you're an Olympic fan, yeah. 


Kinsey [00:10:42] Yeah. OK. So it seems like all-in, this was probably the right decision to make. Is your position from the IOC perspective that they needed to cancel and postpone the games? 


Andrew [00:10:52] Well, so let's be careful in talking about that. The games so far have only been postponed. The Olympic Games have never been postponed in the past. There've been two cancellations. During World War I and during World War II, there were cancellations, but they've never been postponed before. It's still possible that the games will be canceled and they won't be held in 2021. That'd be kind of a shame because the Japanese have spent somewhere in the neighborhood of $30 billion creating all of the infrastructure and the facilities to host the games. 


Kinsey [00:11:25] Why do you think they would be canceled entirely? What would need to happen for that to be the decision? 


Andrew [00:11:30] Well, if the public health situation doesn't improve markedly and if we don't have a vaccine. Even if you take the extreme measure that some sports leagues in the United States are now taking and say that fans will not be in the stands, that they can't come to the facilities to watch. Even if you take that measure, to have 16,000 athletes and trainers living in the same complex and eating and exercising, training in that same complex, is terribly dangerous. Why would you do that to anybody, let alone the world's best athletes? A lot of these athletes come from poor countries. A lot of the athletes are people of color. It would look pretty abusive if we just decided, you know, we want our entertainment. So we're going to subject all these athletes to that exposure. 


Kinsey [00:12:17] Yeah, and I think it's worth drawing comparisons between—we've called it the bubble here in the States—the NBA bubble has already not been entirely successful. We've still had athletes testing positive. We've had people breaking the rules. We've had visitors coming in. And that is on such an incredibly smaller scale than what it would be to say, like you said —


Andrew [00:12:37] Exactly right. 


Kinsey [00:12:37] Like 16,000 athletes and trainers in, quote unquote, bubble from all over the world, not just from the United States. So, that was a question was why can't we just mimic the model that has been made with the NBA? But I think the obvious answer is it's just too big. They are just too many people and too many interests at stake here. 


Kinsey [00:12:55] So we're verging here some, Andrew, on the business model itself. What works? More importantly, what doesn't work [chuckles] with the business model of the Olympics? And we want to talk more about that. Quickly gonna take a short break to hear from our partner. — And now back to the conversation on the business of the Olympics with Andrew Zimbalist. So, Andrew, we've talked a little here in the last couple of minutes about the impact of tourism and of people coming into a city to visit on, you know, when the games are happening, when they're not happening. There are a lot of other interests at stake. 


Kinsey [00:13:25] There is also the host city, beyond just the tourism aspect. There are the athletes, the sponsors, spectators, broadcasters, a lot of different parties working together and sometimes not working together here. We'll go through all those and figure out what is the status of every one of these interests. But first, all-in. Do you think that the Olympics are a moneymaking business right now? 


Andrew [00:13:48] They are moneymaking business for many of the actors you just described. So the IOC makes a good deal of money off of the Olympics. Of course, the IOC is a nonprofit. So there's no, what economists call it, there's no residual claimant. There's nobody who gets profits, no dividend checks sent to them at the end of the day. But there are members of the IOC, 100 members of the International Olympic Committee, more or less, and there are the top executives like Thomas Bach, who live very high on the hog off of Olympic revenue. So they make out pretty well. 


Andrew [00:14:20] The corporate sponsors make out pretty well. That's the reason why they buy the sponsorships. It's not because they want to promote the Olympics, it's because they want to promote their company. Construction companies, developers—they make out really, really well. And some of the investment bankers and some of the lawyers who work for the developers and construction companies, they make out pretty well too. So those are the people who make out well. 


Andrew [00:14:43] The people who don't make out well are the citizens, the residents, the politicians in the city that host the Olympics, with very few exceptions. I think Los Angeles in 1984 and Barcelona in 1992 constitute exceptions or special circumstances that we could discuss, if you like, that I think led the Olympics to be a positive for those cities, but for all of the other cities, at the very best they can hope for is a neutral impact. Many of them get hit very hard, financially and environmentally and socially, by the hosting of the games. 


Kinsey [00:15:20] Right. And from what I can understand, and at least in the case of Los Angeles, it was that it suddenly became expensive to vie for the hosting rights to an Olympic Games, and LA could get it on the cheap. They already had existing structures in large part that could be renovated to host all of these events. And it was sort of an outlier situation. So my question is why any city would want to host right now? Why is it still considered a competition that you have to bid for to win the rights to host the Olympics if none of it makes sense? 


Andrew [00:15:50] Well, in point of fact, there don't seem to be any cities that want to host the Olympics anymore. Between 2014 and 2018, 11 different cities that had been in the running to be selected as the Olympic host for subsequent games, 11 cities dropped out. The IOC is having great difficulty in finding cities who are willing to undertake the enormous costs of hosting, which typically, on the low end, can be $10 billion; on a higher end, they spent more than $50 billion to host the Winter Olympics in Sochi, Russia, in 2014. Cities are realizing that it doesn't work economically for them, and the IOC is struggling to try to find a new model. 


Andrew [00:16:37] The model that they'd like to have, and the model that is their traditional model, at least since 1984, but to some extent it happened before then too, is for them to say, OK, ladies and gentlemen of the cities of the world. Now we're ready to take your bids. Go ahead and bid. And they say that nine years before the games begin. Bidding goes on for two years and then seven years before the games, they vote somebody in. For many years, it was the case that you'd get 10 or 15 cities that would start entering the bidding. What's been happening since 2012 is a very rapid reduction in the number of cities bidding. 


Andrew [00:17:12] For the games that are going to happen in Beijing next year, or in two years, 2022—at least we think they're going to happen in Beijing—there were only two cities at the end of the day that were still bidding. There are five European cities that had dropped out. 


Andrew [00:17:23] For the 2024 games, they started out with about six or seven bidders and four of them dropped out. Only Los Angeles and Paris remained in the bidding process. And the IOC was so worried that if they held a bidding process for the 2028 games, that nobody would show up. And so what they did is they awarded the game. They had hadn't done this before. They awarded the '24 games to Paris in the '28 games to LA, thereby averting the potential catastrophe and embarrassment that nobody would be bidding at all. They have also changed the formal structure of the bidding, because now what they say is there's not going to be bidding anymore. 


Andrew [00:18:03] Thomas Bach is fond of saying that there were too many losers in the bidding. He's not really worried about the losers—he's worried about nobody showing up. And so their process now going forward—and this is something they introduced last year in 2019—is there's not going to be bidding anymore. They created a special committee, an exploratory committee for the Summer Olympics, an exploratory committee for the Winter Olympics. And what those exploratory committees are going to do, via Thomas Bach's interventions, is go around to the cities of the world and say, let's make a deal. You show me what you've got and we'll entertain the possibility that we'll just select you. You won't have to bid against anybody. 


Andrew [00:18:43] So there's no formal bidding, and they're not going to make an announcement for the 2032 games that this city is bidding against that city and that city and that city. They're just going to make an announcement that we've gone through the process. And I can tell you now, my projection is they're going to take Queensland in Australia to host the games. So they're going to try to avoid this problem of the bidding not working anymore. But there'll still be bidding, but it will be under the table. It will be hidden from the public view. 


Kinsey [00:19:10] So will that save the cities money? I know that these bids, even if they don't get the actual hosting responsibilities, can be enormously costly. 


Andrew [00:19:19] Sure. I think that they will. There've been reforms that go back to December of 2014. There was a reform that the IOC introduced, it's called Agenda 2020. Then they introduced another reform in 2018 called The New Norm. Then last year, they introduced the reform that says no bidding at all. And what happens inevitably, as a result of these measures that the IOC is introducing to save itself, is that they have to make some real concessions. They're not large concessions, but they're real. 


Andrew [00:19:50] Tokyo—the official budget is $12.6 billion in Tokyo. The actual amount, according to government studies, is closer to $30 billion, but they only acknowledge $12.6 billion. But if you're in a situation where you have a budget of $12.6 billion, and the IOC starts making some of the concessions that they're willing to make—letting you use older venues, being more flexible about the adaptation of older venues—if they start making those concessions, well now instead of spending $12.6 or $30 billion, depending on which of the ends you want to take, maybe it'll be only $11.6 billion. That's a billion dollars. So that's a lot of money. For me, it is. 


Kinsey [00:20:27] Me too. [chuckles]


Andrew [00:20:28] Yeah, good. But it's still, in this example, in this hypothetical example, it's still $11.6 billion or $29 billion, depending on what items you're counting. So on one side, you do have a reduction in costs—modestly. But what's on the positive side? If you're spending—I think the real number is closer to $30 billion, so let's say that—you're spending $30 billion on venues and on infrastructure, and maybe now you're knocking it down to $29 or even $28 billion. What do you get for that? 


Andrew [00:20:59] The revenues that come in from hosting the summer games are about $5 billion. And so if you got $5 billion on the revenue side and you've got $28 billion on the cost side, that's not a very good economic calculus for you. It doesn't tend to pay off. Now, the cities like to believe what the politicians like to say, well, OK, maybe in the short run there's a loss like that. But, we get to be on the world stage and now all these people are gonna want to travel to Japan who didn't want to travel to Japan before. And all these companies are going to want to trade with us and invest with us. Now, that's a nice story, but it's just not true. There's no evidence of that. Nobody says, OK, I'm going to invest in Tokyo because I saw three of the streets filmed on television during the Olympic Games. 


Kinsey [00:21:43] Yeah, it's going to take a lot more to convince me to buy a ticket to Tokyo or Rio or any of these cities than just seeing it on TV. 


Andrew [00:21:51] Yeah, and very, very often what happens is exactly the opposite, which is to say that the city has to contort itself and strain its finances to such a degree in order to be able to finance the games, that they have to make the fiscal environment less hospitable for investors and traders. 


Kinsey [00:22:08] Yeah, it's just so astounding to think about these giant dollar figures, regardless of what the city is. It's just hard to see exactly what the benefit is. And I also just have to wonder, as we're all facing a recession here in the U.S. and certainly a slowdown in countries that have been affected by COVID-19—their economies have been deeply affected by the disease too—if that's going to impact the way that the Olympics are played. Like you said, LA has a lot of the infrastructure that they need. 


Andrew [00:22:34] All of it, basically. 


Kinsey [00:22:35] Yeah. I wonder if anybody is still going to go. Is this the kind of disposable income that we want to—would we want to use disposable income on something like this when there is a recession happening? I don't know. I just—I have a lot of questions [laughs] about the hosting in general. But, I also want to talk about some of the other aspects here. The athlete idea that they can't train anywhere is obvious, and I think it makes a lot of sense for anybody listening to this, that if you can't train to go on the biggest stage for your respective event in the world, you don't want them to happen right now. You don't want the games to happen immediately if you can't be ready for them. 


Kinsey [00:23:17] But what else are the implications for these athletes? I have to wonder about sponsorships or getting the kind of attention that they need on social media that can only come when the games are being played. How do you think the athletes are recouping after this? 


Andrew [00:23:30] Well, I think this is painful for almost all the athletes. The problem is what you suggested, which is that the alternative is more painful. The alternative is that here's an athlete who's been training since the age of four or five or six in their sport. And they've advanced and they've advanced. And they have a certain training regimen that they depend upon. And then all of a sudden, five months before the games are supposed to begin, they can't do that anymore. They can't train. 


Andrew [00:23:56] And so how are they going to show off these talents that they've been developing over the previous 15 years of their life? How are they, in the course of showing off those talents, how are they going to be able to enlist corporate backers if they're not performing properly? So all of the things that they had hoped for really just crumble. And now they're faced with a different problem, which is they've got to train for an additional year. 


Andrew [00:24:26] Some of them were hoping to go to college or graduate school or they had other employment opportunities available to them, and now they're gonna have to do this instead. Some of them in certain sports were already kind of at the end of their peak performance years. And now instead of having to compete at age 28, they have to compete at age 29. And that's disadvantageous to them. So this is a choice between the lesser of two evils rather than something that's positive for anybody. 


Kinsey [00:24:56] Yeah. A year in athlete years is like a year in dog years. 


Andrew [00:25:01] [chuckles] That's right. 


Kinsey [00:25:01] So is the bulk of the money that these athletes make coming from deals that they're brokering themselves with brands that sponsor them? 


Andrew [00:25:09] It really depends on the athlete and the sport. I think a lot of the lesser sports and the athletes who aren't internationally renowned depend on financing from their international federations. And international federations get bulk of their money from the International Olympic Committee. But if you're a star athlete, if you're Simone Biles, then yes, the corporations are all over you and you've got an agent who's setting up one deal after another for you. 


Andrew [00:25:38] And if you're going to make real money, then you have to be an international star like that. And of course, it helps to be an international star from the United States rather than an international star from Botswana, because there obviously is more money to back you in the United States than there is in less developed countries. 


Kinsey [00:25:54] Yeah, I mean, if you're thinking by the hour, the number of hours that these athletes are putting into training — 


Andrew [00:25:58] It's way below the minimum wage, yeah. 


Kinsey [00:25:59] Yeah. Exactly. Way below [laughs] minimum wage. But I'm interested in this concept of the brands. Why is it so attractive for brands to advertise in and around the Olympic Games? What makes it a banner kind of advertisement? 


Andrew [00:26:15] Well, the Olympic Games, they claim, has some something like 3 billion eyes, or sets of eyes, that tune in to watch the games. The people who watch the Olympics tend to watch it live. And so there's this more attention than there would be, say, to watching a television serial show. When you're watching a television serial show, of course you can tape it and watch it whenever you want. And you can turn it off and watch the first five minutes of a 30-minute show and turn it off and go have a cup of coffee or a glass of wine and come back a half an hour later. 


Andrew [00:26:51] And so you don't spend the same amount of concentrated energy watching commercials if you're not watching a sports event. Sometimes the news commands the same level—sometimes commands the same level of attention. But sporting events you'll watch live, they're watched usually with some intensity. And that's something that corporate advertisers are very anxious to grab a hold of. 


Kinsey [00:27:17] Right. And you think about something like here in the United States, the Super Bowl, there's a reason that those ads go for such a premium is because, like you said, we are glued to the screen for a certain number of minutes, or in the case of football, hours. [laughs] But for these events that we don't want to miss anything and we don't want to miss what comes next, we don't want to miss, you know, Michael Phelps wins another gold. We want to be there to watch it so we can say we saw him break a record. 


Kinsey [00:27:39] But the broadcast side of things also is really compelling. Speaking of actually being glued to our televisions, which is not something that we often are in the streaming age, it's also a huge moneymaker for the IOC. A huge chunk of their revenue comes from selling broadcast rights. Can you explain that a little more? 


Andrew [00:27:54] Yeah. So this is something that's developed rapidly over the last 20 or 30 years. The IOC sells the rights to broadcast the games to networks in each country. Used to be really almost all the money came from NBC and the United States, but especially when European television was deregulated about 20 years ago, there's a lot of competition amongst the European companies, television companies as well. NBC is still by far and away the largest broadcaster for the Olympic Games. And they're currently under a deal that lasts through 2032. They pay for the Summer Olympics. 


Andrew [00:28:32] They paid close to $3 billion for the rights to broadcast those games. It also costs a great deal of money to send out all of the reporters and all the cameras and the equipment and set it all up. But it's still very, very profitable for NBC. It's one of the most profitable things that they do during the course of the year. Other than broadcasting, the second most important revenue source for the IOC is corporate sponsorships. They have a program called TOP—T O P. They line up 15 to 20 corporations. 


Andrew [00:29:03] Each of them pay big bucks, tens of millions of dollars per year in order to be considered a top sponsor for the Olympics. And the Olympics, when they go to a city, they require the city to basically clear all of the public billboards in the city. These can be billboards along the highway. They can be billboards on public busses, they can be billboards in an airport. Those billboards have to be made available for the TOP sponsors, the corporate sponsors for the Olympics. 


Kinsey [00:29:32] So we spent a lot of time, Andrew, tearing apart this business model of the Olympics. When we come back, I want to talk a little bit more about some of the solutions that have been proposed to fix this broken model. But quickly, we're going to take a break to hear from our sponsor. —


Kinsey [00:29:46] And now back to the conversation with Andrew Zimbalist. A lot of what we've spent the last several moments [chuckles] talking about, I think illustrates exactly how broken this model feels—that we feel like not a lot of people are benefiting from this except for maybe a select few who are in the IOC. I guess, with all of these problems, the question is, how do we fix it? What should we be doing? This isn't just a problem of deciding who hosts the games. This is clearly a problem that has lasting impacts, a ripple effect for the environment, for the people, for everything. So what should be done to make a better system? 


Andrew [00:30:20] So back when the modern Olympics were introduced in 1896, it was the case that there was no international jet travel and there was no international telecommunications. And in order to share the experience of the Olympic Games back then, it was necessary to move the Olympics. You shouldn't have them in Athens or Olympia, Greece every four years. You had to move them around so everybody could participate and experience them. 


Andrew [00:30:52] In this day and age, with international jet travel, with international telecommunications, we don't have to move the Olympics every four years to a new venue, to a new city. We can have one city build what's needed and keep there what's needed, and have the Olympics return there every four years. There's no reason to rebuild the Olympic Shangri-La in a new city every four years, particularly given the kinds of direct and indirect costs that are involved. 


Andrew [00:31:23] So I think in terms of a rational plan, how this should go forward, I think that the International Olympic Committee, or whoever it is that's making this decision and implementing it, should find a city that's appropriate to host the summer games once every four years and to host the Olympic Games, the Winter Olympic Games, once every four years. In between the Olympic Games, those facilities can be used for training purposes. They can be used for lesser competitions. That would make economic sense. 


Andrew [00:31:53] And that would bring back the vision that Pierre de Coubertin had of the Olympic Games as an athletic event, as the best athletes in the world coming together to compete peacefully on playing fields rather than aggressively on the battlefields, and living together in an Olympic Village. And it becoming an athletic event again rather than a construction event and a commercial event, which is what the IOC has turned it into. 


Kinsey [00:32:19] I just wonder if it's possible to turn back what's been done, though, in terms of this being a commercial event. Now that people are making money off of it or are profiting off of the Olympics, are they going to be willing to put that down for the greater good of coming together as athletes? 


Andrew [00:32:34] It's a very good question. And certainly the kind of engineering solution that I just proposed doesn't deal with the political entrapments and hurdles that you have to confront. And those are hurdles and challenges that exist for many, many dimensions of our life today in 2020. 


Andrew [00:32:53] How do you get over the political hurdles and deal with the environment? How do you get over the political hurdles and deal with economic inequality? How do you deal with the political hurdles and deal properly with the existence of racism in the United States? So the Olympics is in that same boat. Members of the IOC are often royalty in their countries. If they're not royalty, they're business people with connections to very large and powerful corporations. 


Andrew [00:33:20] And those individuals on the IOC also derive their status in the world from their ability to choose among competing cities every four years about who gets the honor of hosting the Olympic Games. So I don't have a simple solution for that. I think that, hopefully, this COVID crisis will help us live up to the maxim "never let a good crisis go to waste," and they'll teach us that we've been living in profligate and wasteful and unfair ways, and we need to amend the way we live our lives and we need to amend the way we organize the Olympic Games. 


Andrew [00:33:55] So there's a big battle ahead to deal with this. One of the things that gives me encouragement is that the IOC, at least, has realized that their old model is failing them and that cities are not willing to play by their rules anymore. And so it may be forced upon them to do something, maybe incrementally—they won't do it all in one step—but maybe they'll move to a system where instead of finding a brand-new place to host the Olympics every four years, maybe they'll start with three cities where there can be a rotation in three different continents. But we'll have to see how the political process plays out. 


Kinsey [00:34:31] Do you think that on the whole, the IOC is a capable governing body right now? 


Andrew [00:34:37] Well, no, not really. You know, if you look at the IOC composition, they're not people who are trained or have very much awareness about urban development issues, urban planning issues. Yet they pretend to make a decision about finding the city that will most benefit from hosting the games. Well, they have no idea what that city is. And what they're looking for at the end of the day are cities that offer them the most perquisites and offer the IOC the most prestige because of the construction of their venues and the design of the Olympic villages and so on. 


Andrew [00:35:14] So I don't think that they are competent to do what they have assumed to be their responsibility for what they've [indistinct] to be their right to decide. Having said that, Thomas Bach has been a proactive president of the IOC. You have to give him credit for realizing that there were these problems and at least making some serious efforts to begin to deal with them. Jacques Rogge, who came before him, and Antonio Samaranch before him, I think were disastrous in that regard. So I can say I think that the IOC has actually moved a little bit to understanding the necessity of reform and taken some small steps in that direction. 


Kinsey [00:35:58] And I like thinking some about the possibility of optimism or even a silver lining here. And I would like to reiterate one more time what you said: Never let a good crisis go to waste. That hopefully all of the stress and the uncertainty of what has come from the last five or so months of our collective lives and postponing the games in general will actually teach us something and make us take a step back and recognize that things need to change. And I'm hopeful that things do change. Not necessarily [chuckles] certain that they will. 


Kinsey [00:36:30] But I think that you've done a fantastic job here of showing exactly what is necessary to change. And we have a lot of broken parts of this model and hopefully we figure out how to fix them. And Andrew, if people who are out there listening want to keep up with your work and follow you, where can they find you? 


Andrew [00:36:47] Well, serendipitously, a brand-new edition of my book, "Circus Maximus," which is on all of these questions, has just come out. The third edition of "Circus Maximus." It has a postscript that updates everything from earlier editions of the book, and that would be the best place to look at. Book is called "Circus Maximus." 


Kinsey [00:37:03] All right. Fantastic. Andrew, thank you so much for taking the time to come on Business Casual and sharing such great insight with us. I love talking about the Olympics, like I said before we started this recording, and I feel so much more energized to go out and learn more and think more critically about it. So thank you so much. This was awesome. 


Andrew [00:37:21] Thank you, Kinsey, it was a pleasure to talk to you. It's always good to be interviewed by somebody who's smart and well-informed. 


Kinsey [00:37:27] [chuckles] Thank you. 


Kinsey [00:37:33] Thank you so much for listening to this episode of Business Casual. Like Andrew mentioned, he is a prolific author who just published the third edition of his book, "Circus Maximus." It's a great read and producer Marilyn can happily vouch for it. If you want to win a free copy of "Circus Maximus," all you have to do is rate and leave a review for Business Casual on Apple Podcast. Once you do rate and leave a review for this show, email a screenshot to businesscasual@morningbrew.com. That's businesscasual@morningbrew.com and you'll be entered into the running. Have a good one, and see you next time. [sound of a ding]