Will the Tokyo Olympics be profitable despite the pandemic?

The Tokyo Summer Olympics that is underway is expected to cost more than all the previous Summer Games. When Tokyo won the bid to host the Games in 2013, reports stated that Tokyo said the Games would cost only $7.3 billion. This estimate climbed to $12.6 billion in December 2019 before the Games were postponed and was further revised to $15.4 billion last December, due to the delay caused by the Covid-19 pandemic, according to data on the Olympics website.

Of the $15.4 billion, the organising committee of the Olympic Games’ (OCOG) contribution is $6.7 billion, the Tokyo Metropolitan Government’s (TMG) is $6.6 billion and the Government of Japan’s is $2.1 billion. This expenditure includes transport, security, marketing, technology, energy, expenses around the venue, among others.

Yet, the final cost of hosting the Games is expected to be much higher than this estimate. News reports suggest that the final cost of hosting the Olympics could balloon up to $28 billion, as a result of which Tokyo 2020 would become the most expensive Summer Games in history.

According to data from a study by the University of Oxford titled ‘Regression to the Tail: Why the Olympics Blow Up’, most of the earlier editions of the Olympics, for which data is available, have had cost overruns. The highest was 720 per cent for Montreal 1976 and Rio 2016’s overrun was 352 per cent.

Expenses up

While the expenses have mounted in this Olympic, the revenue has taken a fall because of the pandemic as well. The revenue of the Games comes primarily from sponsorship, broadcasting, licensing and ticketing. And per the OCOG’s version of the budget, the revenue of the Tokyo Summer Games is estimated to be $6.7 billion. This includes the International Olympic Committee’s (IOC) contribution at $0.8 billion, $3.8 billion from sponsorship, $0.1 billion from licensing, $0.8 billion from ticket sales and other miscellaneous factors accounting for $1.1 billion, as per data from the Olympics website.

Bar on spectators

Now, with spectators being barred from the events due to the pandemic, the $0.8 billion revenue from ticketing will be lost. The earlier edition of the Games, Rio 2016, raked in $0.03 billion from licenses, $0.3 billion ticketing revenue and $0.8 billion from domestic sponsorship, but it brought in a whopping $2.9 billion as broadcasting revenue, data from IOC’s Olympic Marketing Fact File 2020 Edition showed. Given the spectatorship for this edition has gone completely online and the apps that are relaying events from the Games such as Peacock TV in the US and Sony LIV in India have been seeing a surge in downloads, it would be interesting to see how much moolah broadcasting and marketing bring in this time around.

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