How will the Tokyo Olympics make money?

Tokyo is under a state of emergency (due to COVID-19 and the delta variant) for the duration of the 2020 Olympics. This implies stadiums are operational for athletes with an eerie silence minus the crowds. The Olympics are not earning revenue through tickets — so how does the math add up? In today’s article, we lay down the financial planning of the event and glance at the pandemic’s repercussions on the same.

According to the Olympics Organizing Committee, the cost of the event exceeds $20 billion, while the revenue projection is at a relatively low reaching $6.7 billion. In the absence of fans crowding the stadium, the obvious revenue-earning sources become the sponsors. However, Japan’s public has had a polarizing response towards conducting the event amidst a world health crisis, and this has, interestingly, reflected in the uptake of event advertising and related sponsor associations. For example, Toyota has refused to advertise in Japan for the Japan Olympics. Other major sponsors like Coca-Cola, Airbnb, Alibaba, and General Electric have not publicly commented on how they plan to advertise during the ongoing Olympics.

The Olympics Organizing Committees projected revenue of $6.7 billion includes money from fans buying tickets, thus making the actual revenue estimates more ambiguous. This brings us to Governments posing another answer to our question — the Olympics bring in revenue through creating employment before and during the event. This cannot, however, be tangibly estimated in terms of volume of revenue. While many studies don’t readily accept this claim, it seems an obvious outcome irrespective of the amount of revenue it generates. More so for the ongoing games, the Organising Committee has reduced this aspect to a cost-cutting amounting to about $280 million.

So, if the numbers don’t add up and alternative revenue estimates cannot be tangibly calculated, then why are the Olympics conducted, or for that matter why weren’t the Tokyo Olympics called off? Interestingly, Olympics games don’t always generate profits or cover costs. For example, the 2008 Beijing Olympics had costs over $40 billion and revenue of only $3.6 billion and the 2012 London Olympics’ revenue fell short of their costs by around $12 billion. Having stated that, while the Japan Olympics do not seem to make a lot of economic sense, but, they are estimated to have had to refund around $4 billion to its broadcast partners. Conducting the games protects the IOC’s sponsorship and broadcasting contracts set up since the previous 2016 Rio Olympics.

Let us think about what happens when the games do make profits? The International Olympic organization forwards these revenues to game and athlete development, making it a so to say not for profit venture focussed more on the larger picture of developing sports culture.

Hence, while the direct economics behind hosting of the Olympics don’t add up, the tangible benefits that the event brings to the host country, which includes all the direct and indirect employment generation, along with also being a major source of entertainment for the citizens and of inspiration for the sportspersons and athletes make the events larger than just the sources of revenues and costs behind the events.

Disclaimer: The views expressed in this article are personal, and are not to be associated with the organisations we are a part of.