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IOC’s Business is Better-Balanced than Before, but Remains Dependent on Corporate America

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Photo: Olympic Channel via Youtube

By David Owen |

And so, it seems, postponement of Tokyo 2020 might have enabled NBC to discard its agreement to broadcast the Games in the key United States market.

Apparent confirmation of this can be found on page 30 of the newly-published 2019 consolidated financial statements of the United States Olympic and Paralympic Committee (USOPC). 

Note P of this worthy document states that the one-year postponement “triggered the Termination Rights clause in the NBC Agreement, allowing NBC 10 days to terminate its contract”.

One proviso: Note J a couple of pages earlier makes clear that the USOPC has its own agreement with NBC.

This is valued at $558.6 million (£427 million/€474 million) out of an overall value of $4.38 billion (£3.3 billion/€3.6 billion) for the US broadcaster’s four-Games deal with the International Olympic Committee (IOC), covering the 2014 to 2020 period.

So it is possible that only the clause in the USOPC deal was triggered.

It seems reasonable to think, however, that the same rights would probably have applied in the overall agreement, which was reported to have ascribed a fee of $1.418 billion (£1.08 billion/€1.2 billion) for US rights to the 2020 Games.

As the aforementioned Note P makes abundantly clear, NBC elected not to terminate the agreement.

Frankly, I doubt that the broadcaster, which is signed up to show the Games to US-based viewers all the way through until 2032, entertained the possibility of pulling out of covering Tokyo even for a second.

And if it had, others would no doubt have stepped up to the plate – though how quickly, and at what sort of discount to the original $1.418 billion (£1.08 billion/€1.2 billion) fee must remain a matter for conjecture.

But the very existence of the clause illustrates the fragility of even the sturdiest house of cards when something as devastating as the present pandemic emerges essentially out of the blue.

As Scotland’s national poet Robbie Burns put it in a still oft-quoted line: “The best laid schemes o’ mice an’ men/ Gang aft agley”.

In these trying times, with resources of cash, stamina and ingenuity in high demand, I would not mind betting that there were a few sighs of relief in Lausanne when either confirmation came that the termination rights clause would not be exercised or the relevant 10-day period post-postponement had duly elapsed.

Of course, the IOC is no longer as dependent on this one huge TV market as it was in the early days of the sports business.

As former IOC marketing director Michael Payne writes in his book Olympic Turnaround, still required reading for anyone seeking to comprehend the business underpinning the Games, “total broadcast revenue from the 1980 Lake Placid and Moscow Games was $122 million (£91.5 million/€102.5 million), 83 per cent of which came from the US”.

The IOC’s commercial teams have worked hard in recent years to boost revenue from other broadcast markets such as Japan, Europe and China.

Assuming COVID-19 can be overcome, the potential for further geographic diversification of revenue flows exists, notably from India, if interest in the Games can somehow be stimulated in the sub-continent.

There is also the second leg to the Movement’s business model of recent decades, that is to say corporate sponsorship.

This has actually been growing much faster over the current quadrennium than broadcasting, with revenues from The Olympic Partner (TOP) worldwide programme on course to double, pre-COVID-19.

Notwithstanding all of this, the $2.38 billion (£1.78 billion/€2 billion) that NBC agreed in 2011 to pay for US rights to the 2018 Pyeongchang Winter Olympics and to Tokyo 2020 is still set to make up a hefty slice of the IOC’s 2017 to 2021 revenues: somewhere in the region of one-third, I would estimate, without making any attempt to adjust original projections for the pandemic’s ravages.

In an ideal world, this level of dependence on the US broadcasting rights-holder would continue to dwindle – not least because of another potential problem hinted at in the small print of the USOPC report.

Returning to Note J, we learn that, under the 2014 to 2020 contract, there are certain requirements that must be met before the agreed sums will be passed on to the USOPC.

One of these is participation at the Games in question of “the official US Olympic Team”.

Until the world took its recent increasingly nationalistic turn, one might have felt entitled to view this as more or less a formality.

But the mounting strains between the West and China, designated host of the 2022 Winter Olympic and Paralympic Games, have changed this.

The way things are going, while I would still regard a boycott of Beijing 2022 by US athletes as fairly unlikely – assuming that the Games are able to take place at all – one cannot rule it out.    

I should add that Beijing 2022 should be the first Games covered by the new NBC deal, stretching to 2032 and worth a colossal $7.65 billion (£5.8 billion/€6.4 billion), and that the USOPC document does not state that participation by the US team is a requirement for payment, as under the current deal.

But you can imagine the impact on US viewing figures if the Games took place with no US athletes.

We are a world away from Moscow 1980, which was of course boycotted by the US along with 65 other countries, but it seems apposite to note that NBC was the US rights-holder then too.

According to Payne, NBC’s 1980 contract was valued at $85 million (£63.75 million/€71.4 million).

He goes on: “At the time the US Government issued its embargo on further rights fee payments, some $12.32 million (£9.3 million/€10.35 million) was still due to the Moscow organisers, and $6 million (£4.5 million/€5 million) to the IOC.

“In August 1981, NBC paid the amounts due to the IOC having recouped some of its losses from insurance coverage from Lloyds of London.”

History never repeats itself exactly.

With all hands currently at the coronavirus pumps, the IOC will be hoping fervently for the beginnings of a thaw as the countdown clock ticks.

Republished with permission from insidethegames.biz.

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