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Published: February 28, 2007

 
 

A Gold-Medal Partnership

Political upheavals weren’t the only trouble; the Olympics suffered severe financial setbacks. With shaky government support and no private funding to draw on, some Games were outright financial disasters. To cite just one example, the cost of hosting the 1976 Montreal Games was originally estimated at $310 million. But overruns on the construction of Montreal’s Olympic Stadium left the city with debts of $1 billion. When the books for the Montreal Games are finally cleared this year, the final tab will be about $2 billion.

By the late 1970s, far from being a national showcase and cash cow, the Games were regarded as a financial millstone, with most of the costs being borne by the host city. With no secure source of funding, the IOC relied on government and commercial handouts. Shortly before the Moscow Olympics in 1980, the IOC was on the verge of collapse, with less than $200,000 in cash and only $2 million in assets.

The Games had become such a burden by the 1970s that Los Angeles had no competition when bidding for the 1984 summer Games (though the Iranian capital, Tehran, had briefly considered bidding before the fall of the shah). When Juan Antonio Samaranch became president of the IOC in 1980, it was teetering on bankruptcy. He was determined to get the committee enough financial muscle, political independence, and international stature to keep it from ever again becoming a geopolitical pawn. Prior to Samaranch’s term, the IOC had let the national federations arrange local sponsorships; Samaranch moved instead to sell global sponsorships and to assume responsibility for global broadcasting rights, two changes that rescued the IOC from near insolvency and would eventually give it unprecedented global standing. But pulling the movement up from its knees took time.

The 1984 Summer Olympics proved to be the financial turning point. With almost no public financing, the Los Angeles Organizing Committee was left to its own devices to find backing. As a result, the Games were the first to be funded primarily by the private sector. The chief visionary was Peter Ueberroth, the Committee’s president, who would later go on to become commissioner of Major League Baseball and then chairman of the U.S. Olympic Committee. Ueberroth actively cultivated corporate sponsorships and separated them into three categories: official sponsor, official supplier, and official licensee. Declaring that he saw nothing ignoble in developing the Games’ commercial potential, he often quoted Winston Churchill: “Some people see private enterprise as a predatory target to be shot, others as a cow to be milked. But few are those who see it as a sturdy horse pulling the wagon.”

The visionary faced resistance on all sides. “You, Mr. Ueberroth, represent the ugly face of capitalism,” one IOC member reportedly thundered. Even as his colleagues on the Los Angeles Organizing Committee battled him, Ueberroth went ahead and struck a deal with telecommunications giant AT&T to sponsor the Olympic torch relay from Athens to Los Angeles. The deal was mutually beneficial: Reeling from its battle to avoid a corporate breakup, AT&T used the torch relay to buff its image by selling each relay slot for $3,000, generating close to $11 million for U.S. charities. Ueberroth turned to private corporations to fill in the infrastructure gaps. McDonald’s funded a swimming arena for $3.6 million and Southland Foods paid $3.1 million for a cycling arena. Purists squirmed, but the Los Angeles Games were the first ever to pay for themselves — even turning a profit of $223 million for the host committee — and provided the business model that continues to support the Games today.

The success in Los Angeles spurred dramatic growth. In 1984, 6,829 athletes from 140 nations competed in 221 events monitored by 9,190 media representatives from 156 countries. At the 2004 Games in Athens, 11,100 athletes from 202 nations competed in 301 events covered by 21,500 media representatives and broadcast to more than 220 countries. As the Games have grown, they’ve required ever greater investments in infrastructure, making private management of the event unfeasible. With the world watching, public and private sectors have had to learn to work closely together.

 
 
 
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Resources

  1. Alain Ferrand and Luiggino Torrigiani, Marketing of Olympic Sport Organisations (Human Kinetics Publishers, 2005): Advice for marketers on working with the Games, with insight into the differences between for-profit and not-for-profit sports organizations.
  2. Mark Gerencser, Fernando Napolitano, and Reginald Van Lee, “The Megacommunity Manifesto,” s+b, Summer 2006: Describes how public, private, and civil leaders can develop their own Olympic-style mutual efforts. Click here
  3. Philip Kotler, Donald Haider, and Irving Rein, Marketing Places: Attracting Investment, Industry and Tourism to Cities, States and Nations (Free Press, 2002): How places can turn themselves into appealing “products” by cleaning themselves up, helping their industrial base, and marketing themselves more effectively.
  4. Michael Payne, Olympic Turnaround: How the Olympic Games Stepped Back from the Brink of Extinction to Become the World’s Best Known Brand (Praeger, 2006): An inside account by the first marketing director of the International Olympic Committee (and author of this article).
 
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