Every Olympic Games since 1960 have exceeded their budget by an average of 172 percent, according to an Oxford University study. However, economists believe the Tokyo Olympics will cost about 400 percent more than its original budget. Most of it will not be competent to compensate.
The combination of the postponement, the pandemic, and the already over-budgeted Summer Games prior the pandemic have made the 2020 Olympics one that could potentially preserve taxpayers $800 million. It forces Japanese taxpayers to bear the cost of the Olympics that barely one in 10 of them wanted them to happen, as well as the billions in debt to the Tokyo Committee.
Smith College economist Andrew Zimbalist and author of Circus Maximus: The Economic Adventure Behind Hosting the Olympics and World Cup, told The Post he expects the organizing committee to spend $35 billion on the Summer Games — a far sob from the $7.3 billion. Initial budget.
Zimbalist expects the local committee to lose at fewest $30 billion in Tokyo 2020. Both Zimbalist and economist Victor Matheson said there is no conceivable way for the organizing committee to make up for the losses, even if it allows fans.
“They’re going to come back somewhere near $4.5 or $5 billion. There’s a massive shortfall,” Zimbalist said.
Just postponing the Olympics annually amounted to an additional $3 billion in expenditures from utilities, maintaining the COVID-19 protocol and additional funds for public health measures. The organizing committee had to negotiate unused contracts with venues, delaying the sale of Olympic Village dormitories as housing units, among other cost increases due to delays. Overall, Zimbalist estimates that the delay carries a $5 billion price tag.
Matheson, a professor of economics at College of the Holy Cross and author of Going for Gold: The Economics of the Olympics, told The Post that moving ahead with the “mega-disaster” of the Summer Games is costing the organizing committee “more than it does to ‘re-saving’ rather than canceling the Olympics.” Increasingly expensive and perilous.
The IOC contracts with the local organizing committees which incur the costs of complying with health and safety guidelines, building the Olympic Village and renting or constructing the stadium space.
All of this is supposed to be paid for through local sponsorship earnings, licensing agreements, ticket sales, and increased tourism. With international travel bans for fans coming to Japan, ticket refunds due to the emergency, and local sponsorship — which reached a record $3 billion in Tokyo prior spectators were canceled — sponsors withdrew from the games fearing it would become a liability.
Continuing the games required significant money from the organizing committee. However, for the IOC, making sure they survived, according to Matheson, was its only priority.
The IOC maintains media rights and international sponsors and this is how they generate their revenue. So, this year, the combination of television rights and international sponsorship rights will be about $5 billion. “As lengthy as the Games go on, it will not be affected at all. So, in a strange way, despite the ongoing catastrophe of the Olympic Games, the IOC itself is getting away with all its revenue streams.
Even big stars who have contracted COVID-19 or are out of the Olympics altogether cannot affect the profits the IOC can make, simply because they require enough athletes to compete. Instead, the power of the stars is needed by the LOC for their ticket sales profits.
Matheson added, “Whether it’s the NBA team led by Steve Curry and LeBron James, or a local lofty school team from Honolulu, it doesn’t make any difference at this point because they don’t sell any tickets for that game,”
A Tokyo 2020 spokesperson said that “ticket revenue is expected to decline significantly,” but the organizing committee declined to comment on how much it expects to lose, how many tickets have been sold, and how much those tickets are worth, according to its rationale. It has not been decided whether the Paralympic Games will have spectators. Matheson believes the commission lost $1 billion in ticket revenue.
“The IOC doesn’t concern if there are any fans [at the Olympics] Anymore, they don’t really concern about the political commotion, and they don’t really concern about the health risks to the people of Tokyo. All they concern about is having these events shown on TV and nothing else matters because they get all their money from TV and they don’t incur any costs for politicians losing jobs, people getting ailing or the cost of hosting games, he said.
Going forward, both Zimbali and Matheson believe the 2020 Olympics will dissuade other nations from taking on hosting responsibilities, which is already becoming the trend. Several bids for the 2022 Winter Olympics were dropped, and five European cities were dropped out of the race for the 2024 Summer Olympics. According to Zimbalist, a lack of enthusiasm toward hosting is one of the reasons the IOC pushed for its sites in 2024 and 2028.
“[The IOC] Putting all bids behind closed doors so we don’t see cities seep in and the IOC doesn’t have to confront the humiliation and embarrassment of cities holding referendums and overwhelmingly voting residents because they don’t want to do so,” he said. Or fewer and fewer cities would like it, and that will only make it worse.”