Olympics' 'Austere' Budget Could Be Good Omen for Chicago

As IOC Negotiates TV Rights, a U.S. Host City Could Open Wide Broadcasters' Wallets

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NEW YORK (AdAge.com) -- Citing a stagnant economy, the International Olympic Committee today said it would adopt an "austere, realistic budget" for 2009 and delay its negotiations for U.S. broadcast rights fees for the next cycle of games. While that sounds ominous, experts said it is actually a shrewd move that could bode well for Chicago's bid for the 2016 Summer Games.

Delaying negotiations for U.S. broadcast rights for the next cycle of games could bode well for Chicago's bid for the 2016 Summer Games.
Delaying negotiations for U.S. broadcast rights for the next cycle of games could bode well for Chicago's bid for the 2016 Summer Games. Credit: AP
"The IOC is on a winning streak here and, although this is a bit out of the normal, it makes sense," said Robert Boland, a professor of sports-business management at New York University. "The IOC is coming off a huge, huge win in Beijing. It was the best programming they've had in the last four or five Games, it did well in advertising, it held up on TV over the course of the 17 days. ... So if the IOC holds off a bit on negotiations and gets Chicago out of the group of cities vying for those Games, it will be far more valuable in the next go-round."

2016 Olympic Games
The cycle of Olympic Games currently up for bid is the 2014 Winter Games in Sochi, Russia, and the 2016 Summer Games -- host city unknown. The candidates are down to Chicago, Tokyo, Rio de Janeiro and Madrid. The winner will be selected in October 2009.

In many instances, the IOC has negotiated broadcast-rights deals for Olympic Games without knowing who the host city or cities would be. Now it has leverage, especially if the U.S. hosted its first Games since the 2002 Winter Olympics in Salt Lake City and the first Summer Games since 1996 in Atlanta.

"That's why the IOC did this," said a former network TV executive who asked not to be identified. "They're a little nervous. This is almost like what happened several years ago when they re-upped with NBC [in 1995 for five Olympic Games for a total of $3.5 billion] without even putting it out to bid. They were scared. Now they can't afford to go backward from Beijing. They got a big boost in rights for Vancouver-London, and they want to stay on that pace for 2014 and '16."

Indeed, NBC Universal paid $2.2 billion for the 2010 Winter Games in Vancouver and the 2012 Summer Games in London -- more than half of the $4 billion the IOC will gain in all rights deals around the globe. That represented a 46% increase in rights fees from the $1.5 billion NBC paid for the 2006 Winter Games in Torino, Italy, and the 2008 Summer Games in Beijing. Some $894 million of that $1.5 billion was expressly for the Beijing Games, which NBC easily recouped with more than $1 billion in ad sales.

Fox, Disney expected to bid
NBC is expected to bid for the 2014/2016 cycle. News Corp.'s Fox and Walt Disney Co.'s ESPN and ABC have already publicly expressed their interest in bidding.

Richard Carrion, an IOC member and chief negotiator for broadcasting rights, admitted to reporters today in Lausanne, Switzerland, that knowing the host city "removes some of the uncertainty and could work to our advantage."

Mr. Carrion added that "I don't see us moving quickly forward because all prognostications we are seeing are that advertising will be down," and he also said that the IOC has taken some "market hits" because of the economy. Reuters reported that IOC reserves have dropped 14% in the last few months, to about $400 million -- all reasons why Chicago is suddenly emerging as the strongest candidate for 2016.

"The IOC is worried about filling its coffers," says Marc Ganis, president of SportsCorp, a sports consultancy. "If they select Chicago, it has broad economic advantages. For starters, the TV rights fees go up dramatically. I think NBC is going to make a reasoned estimate, but it wouldn't surprise me if the other networks make huge bids and justify it as a sound business decision because the [2016 Summer] Games would be on U.S. soil. Then you have the marketing and sponsorship opportunities for companies, which will increase just because they're here in this country again."

Organizers for Chicago2016, the official bid committee for the Games, could not be reached for comment.

"Frankly, this is a win-win for everybody if it's Chicago," Mr. Boland said. "Chicago would win -- cities practically re-invent themselves, it's why they go after Olympic Games in the first place. The IOC would win. Marketers would win; the sponsorship packages would be more valuable. I think even the networks would win. For what somebody will pay for [broadcasting] a Chicago Olympics, they'll get back in ad revenue."

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