CC: The (Tough) Economics of the Olympic Games

The balance sheets often end up in the red. But there is a model for success.

By Simon Constable

The world is always revved up when the Games start. Tickets sell like hot croissants. The finest athletes in the world ready themselves for competition. And this year, Paris is the stage for it all. What’s not to love? When it comes to money, quite a lot, actually. Historically, hosting the games has been an economic sinkhole. Go back and look at the results, and you won’t find any gold medals here. More than half of the 11 Games since 2000, in fact, lost money—often billions of dollars—or barely broke even. “The balance sheets are usually in the red when it’s over,” says Konstantinos Venetis, director of global macro at TS Lombard. As it turns out, you don’t have to be an economic genius to understand why. By their nature, the Games face immense cost overruns—and have for for every Games since 1960. The average host city ran 172 percent over budget in inflation-adjusted terms, as a 2020 study revealed. In large part, the budget-busting is hard to avoid, says Pete Earle, a senior economist at the American Institute for Economic Research. After all, the scale and complexity of construction for many competition venues is hard to avoid. Then there are unmovable deadlines, changes in building specifications, and transport and telecommun-ications challenges. In addition, there are now counterterrorism-security costs, foreign labor laws, and economic changes, Earle says. “Recession or not, the Games go on,” he says. Costs are just one side of the equation. Revenue is vital. “The commercial TV rights are really where a lot of money is made,” says Marc Chandler, managing director of Bannockburn Global Forex. For instance, the 2016 Summer Games in Rio raised a record-breaking $2.9 billion from TV rights. It hasn’t always been that way. The rights to the 1960 Rome Games were purchased for just $1.2 million, according to the Council on Foreign Relations. Other revenue comes from the sale of exclusive sponsorships. Yet not every edition of the Games has been a financial bust, and as we look ahead to the 2028 Summer Games in Los Angeles, optimists point to the last time the games were held there. That was in 1984, when businessman Peter Ueberroth ran the show. Experts say that his radically different approach is still a model for financial success.

The (Tough) Economics of the Games

View Contents

Profit (loss) in millions of dollars

Image of dollar sign with digital elements

Read more about Closing Ceremonies

The Competitive Spirit

Winning It All— After Hours

2000-Sydney (s) $(1,500)

At the time, the Games were in bad shape. In recent years, it had seen the terror attack in 1972 in Munich, a $1.5 billion loss for the 1976 Games in Montreal, and the US-led boycott of the 1980 Games in Moscow after the Soviet Union invaded Afghanistan. All of this made hosting the Games an unappealing prospect; only two cities, Tehran and Los Angeles, pitched themselves to host in 1984. After Tehran withdrew its bid, LA became host by default. But Ueberroth decided to run a lean operation, with plenty of volunteers but few actual employees. He avoided building costly new stadiums, instead aiming to use what was available via leases. Ultimately, only two new buildings were needed. In addition, Ueberroth made use of an idea that was relatively novel at the time: offering exclusive sponsorships that would authorize individual companies to designate themselves as the Games’ official providers of a product or service. But perhaps most importantly, he focused on getting TV networks to pay what the rights were truly worth. He closed a then-record $225 million deal for US rights alone, plus $123 million more in sponsorships. The result was a surplus of $223 million. To recognize Ueberroth’s success, Time magazine made him Man of the Year in 1984. But given Ueberroth’s business savvy, his success isn’t too surprising. Businesspeople tend to understand markets better: Though the Games are traditionally an amateur event, they are still driven by markets, says Robert Wright, an economics lecturer at Central Michigan University. “Business executives are used to making things run in a way that has a chance of being profitable,” he says. “It’s about cutting waste and maximizing revenue.” Still, not every host nation prioritizes profits. For many, it’s about showcasing their city on the world stage. “TV means we can see how China and Russia are doing,” Chandler says. “Governments have other goals than short-run profitability.”