CHAPTER 2

The MBA’s Guide to the Olympics

Learning From the Very Best

Building a ten billion dollar enterprise requires hard work, talent, ­dedication, and a long-term vision. The Olympics has moved forward with this approach and a foundation of two pillars of athletic success—cross-training and knowledge sharing. Olympic traditions have created good opportunities to learn new practices and adopt best practices.

Successful practices at individual editions of the Olympic Games demonstrated their value and became both enduring institutions and models for the rest of the sports industry:

• Marathon races made their debut at the first modern Olympics in 1896, stood out as a signature event, and have continued to win global audiences as the iconic closing event of the Summer Olympic Games ever since.
• The Olympic torch relay starting in Olympia, Greece, and concluding the official opening of each Games was introduced at the 1936 Summer Games. Afterwards, the torch relay became more than the commencement event of the Olympics. The relay became a model for international public relations countdown campaigns.
• The 1964 Tokyo Olympics introduced pictograms to visually distinguish sports and sports disciplines with memorable images which symbolized key elements of each sport. The 1968 Mexico City Olympics’ design team built on this knowledge base to create pictograms which incorporated local artistic traditions and became global trendsetters. Pictograms from the 1972 Munich Olympics employed uniform design rules and became the model for universally understood pictograms used at international airports worldwide.
• The 1972 Munich Olympics launched the tradition of Olympic mascots. This helped to engage more spectators and provide a simple, inexpensive way to participate in the Olympic experience. Subsequent Olympics have followed this tradition as part of sophisticated branding strategies.
• The 1984 Los Angeles Olympics demonstrated alternatives for financing Olympic host city programs from private sources. The strategic approaches of guaranteeing category exclusivity for corporate sponsors and organizing VIP and hospitality packages expanded at future Olympics and became mainstays of sports marketing as the industry matured.

The Olympic traditions of promoting excellence and adopting best practices have built a good foundation for positive feedback loops, epitomizing the popular saying “Nothing succeeds like success.” Broadcasters value the Olympics as a showcase for leading edge technologies and formats. Live radio commentary of sports events began at the 1924 Summer Olympic Games in Paris, introduced by local broadcaster Radio Paris. The 1936 Summer Olympics was the first sports event broadcast on television and a testing ground for mobile and aerial cameras that helped to shape the future of sports coverage. The 1960 Summer Olympics inaugurated global sports broadcasting with jet delivery of videotaped coverage. The 1964 Summer Olympics marked major breakthroughs—transmission of color broadcasts and the first live international broadcasts using satellites. High-definition television (HDTV) made its debut at the 1984 Summer Olympic Games. More recently, the 2018 Pyeongchang Winter Olympics featured the latest 4K HDTV technology. This leadership has been rewarded with substantial premiums paid for broadcast rights and good sponsor relationships with technology companies Panasonic, Samsung, Alibaba, and Intel.

Similar positive feedback loops benefit the sportswear industry, a major source of sponsorship revenue for national Olympic teams and individual athletes. Good examples abound to show how benefits are ­leveraged as product innovations support high performance and good publicity. For example:

• Preparing for the 2010 Winter Olympics, Spyder Active Sports used wind tunnel testing to reduce the aerodynamic drag of ski suits by 15 to 20 percent. The company sponsored the U.S. Ski Team and outfitted downhill skiers with its most advanced high-performance wear. The team earned eight medals at Vancouver 2010, compared to only two medals at Torino 2006.
• 2016 Olympic women’s triathlon champion Gwen Jorgensen and women’s volleyball bronze medalist Kerri Walsh Jennings used Prizm Field sports sunglasses custom manufactured by Oakley. They credited improved depth perception with their excellent results.
• The Australian and New Zealand national sailing teams employed technological innovations from their sponsor Zhik. Its “Avlare” water repellent textiles weigh 75 percent less than wet spandex and improve sailors’ comfort and range of movement. The Australian National Team tied with New Zealand for the most sailing medals won at the 2016 Summer Olympics, four each.
• Olympic TOP sponsor Samsung showed one more way that sponsors can add value by developing a training tool for Dutch speed skaters competing in the 2018 Winter Olympics. Uniforms embedded with electronic sensors transmit physical measurements of the skaters to coaches’ smartphones during training for systematic analysis that helps optimize training regimens for each competition.

In addition, essential tasks of managing the Olympics have built ­specialized expertise:

• Coordinating Olympic qualifying events in many countries
• Working with National Olympic Committees (NOCs) and international sports federations
• Adding new sports and new medal events to Olympic programs
• Moving the Olympic program to different host cities
• Managing lists and databases of relevant resources

Olympic institutions are not perfect. On a recurring basis there are Olympic athletes who break rules and need to be disciplined and Olympic projects that exceed budgets and need to source supplemental funding. But these recurring challenges are matched by problem solving skills and resilience. These two traits are often important for athletic success and also build confidence that the Olympic Games will achieve its goals.

The modern Olympics exercises its core strength every day leading up to the games themselves. That strength is to develop human resources. Different Olympic sports require different talents and only a few dozen Olympians compete in medal events for different sports. But all ­Olympic sports share a common foundation of shared values and systematically train individuals to improve results and learn from high performers. That specific strength—learning agility—has established an impressive track record of success. The success is reinforced by scale. The 2016 Summer Olympics featured 11,384 athletes, and 2,952 competed at the 2018 Winter Olympics. That community of high achievers is large enough to find relevant case examples for most management challenges.

The learning agility promoted throughout the Olympic community has had a powerful impact on the world of business. Most people do not attend college. And many college students never receive any formal training in business administration. Often their relevant training in business management starts with sports for subjects like team organization and leadership, marketing and sales, statistics, and logistics. This makes the slogan of the Olympic Channel Podcast “Why not learn from the very best?” a management education mantra for millions of people.

The Gold Medal Brand

The Olympics’ brand is the most widely admired in the world. It is also the oldest global brand in the world. The Olympic Games have been a symbol of aspiration and excellence since the first Olympic Games in 776 BC. Anthologies of Olympic history translated into Latin and other languages immortalized inspiring legends from the ancient Olympic Games. The signature symbol of the ancient Games, the victor’s olive leaf crown, and other iconic images were widely replicated in coins, artwork, and texts which circulated through modern times and are displayed today in Olympic museums and prestigious ancient art collections.

The founders of the modern Olympics systematically enhanced the legacy and value of the Olympic brand with appealing imagery and sophisticated communications. The first Olympic Congress in 1894 introduced the iconic motto of the modern Olympic Games, “Citius, Altius, Fortius.” This Latin phrase means “Faster, Higher, Stronger” in English and has been replicated as a popular saying in hundreds of languages as an inspirational call to action. Few iconic mottos can compete with the 125-year legacy of “Citius, Altius, Fortius.” Three years after the first Olympic Congress, The New York Times began using its “All the News That’s Fit to Print” motto, still used and still widely emulated today. DuPont’s “Better Living through Chemistry” slogan remained in use for 65 years.

More recently, individual Olympics created inspirational mottos as cornerstones of their global communications efforts. The 2000 ­Sydney Olympics used the phrase “Share the Spirit” and the Beijing 2008 ­Olympics chose “One World, One Dream.”

Three iconic institutions—the Olympic anthem, custom designed medals for each Olympiad, and ceremonies for opening and closing events—began at the first modern Olympics in 1896 in Athens. The 1896 Marathon race became an icon on its own and the signature final contest of each Summer Olympic Games.

Gold, silver, and bronze medals were introduced at the 1908 ­Olympics in St. Louis. Now other international multisport competitions use the same practice and iconic three tier podium stages, reinforcing the ­Olympic brand and the Olympics’ status as a pacesetter. The choice of gold, silver, and bronze medals was subsequently adopted to distinguish high performance throughout the marketing communications profession. The International Business Awards, Advertising Age Magazine’s awards for marketing campaigns, and, of course, the Sports Business Awards have all followed this standard.

Starting in 1912, custom designed posters for each Olympiad built anticipation for the Games and contributed to inspirational imagery. From the beginning, uniform images were replicated with texts in many different local languages. This made the modern Olympics a forerunner of global marketing campaigns.

The Olympic flag debuted in 1913 and launched the interlocked five rings of the Olympic logo on its course to become the world’s best recognized design. Designed by Pierre de Coubertin himself, it represents the five continents of the world joined together in the unity of the Olympic Games. The color version uses five bold colors that project strength and vitality. The five rings imagery also graces Olympic medals, coins, stamps, sculptures, and engravings.

The many ways in which the motifs of the Olympic five rings have been customized for targeted communications goals underscore the symbol’s power and endurance. The famous rings have been incorporated in signature logos of the individual Olympiads. The 1932 Los Angeles Olympics superimposed the rings over a stylized badge featuring the “Stars and Stripes” of the U.S. flag. Sydney 2000 placed the five rings below an image of an athlete racing in front of Sydney’s iconic Opera House. Teams of dancers replicate the rings in ceremonies, pyrotechnic engineers project them with fireworks, neon artists illuminate landmarks with the rings, drone light shows project the rings in the sky, and over a hundred postal agencies have incorporated the rings in stamps.

The introduction of the first Winter Olympics in 1924 demonstrated the ability of the modern Olympics to extend its activities, and correspondingly, to extend its brand. The foundations of the same Olympic values and same icons as the Summer Olympics strengthened this effort. At the same time, the modern Olympics took care not to overextend its brand or mission and remained focused on producing the Summer and Winter Olympics during its first century.

Steps to Success

Inspiration from the ancient Olympics—and its endurance over a ­thousand years—has given the modern Olympics a good foundation. Adapting and enriching the program have strengthened that foundation. Many key success factors of the modern Olympics have helped to make it a resilient and resourceful institution.

Collaboration skills have played a key role. Over time, the modern Olympics has built collaborative expertise that supports completion of very large projects. Collaboration leverages the capabilities of other organizations and partners. Managing many projects such as the Youth Olympic Games and the Olympic Solidarity scholarship program while interfacing with over 200 NOCs, plus international sports federations, broadcasters, labor unions, and many other groups, requires sophisticated persuasion and negotiation skills.

Not all leaders in the Olympic movement are former Olympic athletes. The IOC actively seeks experts in medicine, media, and other fields to work collaboratively in commissions and other initiatives. But 45 of the 115 IOC delegates with voting rights are recruited from Olympic sports, the NOCs, and International Sports Federations. And many of the 70 other voting delegates have had distinguished sporting careers.

Sports experience makes a difference. It is common in many sports for erstwhile competitors to become teammates and collaborate together. At Rio 2016, men’s Olympic golf medalist Justin Rose of Team Great ­Britain defeated Henrik Stenson of Sweden by two strokes. But the two had been teammates together in the 2014 Ryder Cup and teamed up again after the Rio 2016 competition for the next Ryder Cup in ­September 2016 and once again in 2018. Roger Federer and Stan Wawrinka compete intensely at international men’s singles tennis events. But together they won doubles competitions at the 2008 Beijing Olympics and the 2014 Davis Cup. And, of course, athletes of Olympic soccer, basketball, and ice hockey teams frequently play together with Olympic rivals on professional sports teams. Collaborative experience strengthens Olympic organizations when they move forward with large team projects.

In the Olympics, collaborative efforts typically start with relatively formal procedures for official recognition as an Olympic affiliated organization or sponsor. License arrangements are added when necessary. Ongoing management of team efforts also involves careful scheduling of conferences, selective invitations, extensive media promotion, grant programs, award programs, and other classic stakeholder management practices. Teamwork skills are a good foundation for these efforts. The efforts required for 60 officially recognized affiliate organizations and 14 first tier sponsors are substantial.

The ways that Olympians learn to communicate also strengthen activities important for producing the Olympic Games. The international multilingual talent pool from which Olympic athletes are selected helps Olympians communicate more effectively with athletes and officials from other countries. Sometimes this involves gaining expert assistance, rather than acquiring multilingual skills individually. Eight-time Olympic medalist Kosuke Kitajima of Japan prefers his native language, but he has engaged translators and publicists to reach a global audience and build a social media following. This kind of experience is a valuable skill of its own.

In a 2018 interview, Pieter van den Hoogenband, a swimmer who won seven Olympic medals in the previous decade, explained how Olympic experience had developed his management skills. He described his experience preparing for international swimming competitions as comparable to being the manager of his own company, coordinating the efforts of many specialists, refining his management style, and building a team to support him. His perspective provided a useful reminder that there are typically seven to eight specialists working behind the scenes to master the details of participating in Olympic competitions—coaches, physiotherapists, dieticians, translators, and other talented individuals.

Olympic experience is particularly well suited to management challenges in the 21st century. Olympic athletes become accustomed to appearing on camera in settings that are often much more challenging than typical studios of routine radio and television productions. Many master interviewing skills as teenagers and leverage this experience to become interviewers and commentators after their athletic careers. Olympic athletes can attract social media followers and turn this into a platform for roles as social media influencers. And Olympic athletes are highly sought after as motivational speakers for good reason—they are admired for high achievement that required tough decisions and sacrifices.

A Robust Ecosystem

Many successful enterprises like Microsoft and Daimler-Benz have improved collaboration with ecosystems of services, research, training, and professional associations that provide more access to specialized skills and contacts. Over time, the Olympics has benefitted from an ecosystem of sports management expertise clustered around its headquarters in Lausanne, Switzerland, and strengthened by cooperation between Olympic host cities. And like Microsoft and Daimler-Benz, the Olympics also engages global networks of related organizations.

Fifty-five international sports federations anchor the local sports ­ecosystem near the IOC’s own headquarters. The federations interact with specialized professional associations—the Global Association of International Sports Federations, Association of National Olympic ­Committees, Association of Olympic Sports Federations, and International Sports Chamber of Commerce, as well as headquarters and representative offices for international multisport events. WADA, the World Anti-Doping Agency, is headquartered in Montreal, but manages a state-of-the art ­testing facility in Lausanne.

The scale of having so many key players in the international sports field in one area has motivated dozens of other sports related businesses to locate offices nearby. Leading news agencies and sports specialty publications maintain branches for access to sports leaders and newsmakers. Public relations agencies operate nearby to facilitate media relations. Technology businesses and auditors assign their sports specialists to the area. In addition, nine area educational institutions have formed a consortium called the “Academic Network for Sports.”

The proximity of so many sports leaders in one area has also made the region around IOC headquarters a global center of competence for sports legal and arbitration activities. The International Court for Arbitration of Sports and specialized law practices are located nearby.

The scale of having hundreds of sports industry leaders plus their staffs in one location also supports a wide range of sports industry events and continuing education programs. Each year, there are typically a dozen major international conferences meriting media coverage and several dozen specialized conferences which facilitate production of international sports events. These events keep participants well informed and project a professional image for the sports industry. This ecosystem also sustains a talent pool for special projects such as sports event bid evaluation and fundraising drives.

The highly structured relationship of the International Olympic Committee (IOC) with the over 200 NOCs has built a global extension of the sports management ecosystem. The NOCs have an exclusive right to select and manage teams of athletes from their respective countries for competition in each Olympic Games. The NOCs also oversee entourages of competent experts in health care, exercise, media relations, and other specialties to enhance team performance. The International Sports Federations that organize events in designated Olympic sports have an exclusive right to organize Olympic qualifying events. The value of these exclusive rights combines with the strength of the Olympics’ brand and global scale to build unique, sustainable competitive advantages.

The Olympic ecosystem has tangible advantages. It helps to keep participants and experts well informed. It also helps many different sports organizations to reach agreements and harmonize positions on important issues like the introduction of new technologies for training or terms for category exclusivity in sponsor contracts. In turn, good agreements and quality communications in the ecosystem strengthen implementation when sports industry decision makers move forward with their plans.

The Olympic ecosystem has become stronger as classic competence centers emerged and aided acquisition of top tier skills by Olympic athletes. Eastern Canada emerged as a global center of competence for figure skaters. The 2018 men’s individual gold medalist Yuzuru Hanyu of Japan and bronze medalist Xavier Fernandez of Spain both trained with Canadian Coach Brian Orser, an Olympic silver medalist.

Orser’s coaching credentials also include 2018 Olympics double silver medalist Evgenia Medvedeva of Russia and decorated Olympic figure skater Yuna Kim of Korea. Orser’s experience has demonstrated how elite athletes from different countries meet high standards and create a community. He has seen how they push each other and support each other, even though they are rivals.

Both the 2018 gold medalists and silver medalists in ice dance pairs also trained in Eastern Canada with the coaching team of Marie-France Dubreuil and Patrice Lauzon. Gold medalists Virtue and Moir are also Canadian and were joined by silver medalists Papadakis and Cizeron of France and 15 other figure skating pairs at this global center of excellence.

Similar athletic centers of excellence have emerged around the world and made world class training facilities economically viable. Ski jumpers train in Berchtesgaden, Germany, water polo players train in Hungary, and dozens of Olympic swimming competitors from around the globe have competed in USA Swimming’s Grand Prix series. Aggregating talent and experience at a center of excellence promotes high performance and reduces training costs.

The Olympic ecosystem and Olympic talent pool also enable scalability. In the past decade, the Olympics has steadily added new programs that promote the Olympic movement and support Olympic athletes’ professional development. The first Summer Youth Olympics took place in Singapore in 2010, followed by the first Winter Youth Olympics in Innsbruck in 2012. In 2014, the IOC launched an online Athlete Learning Gateway, followed by other initiatives to benefit athletes. The Olympic Channel began broadcasting in 2016. The first Olympic eSports Forum followed an Intel sponsored demonstration series at the 2018 Winter Olympic Games.

As Intel’s expertise in organizing international eSports tournaments demonstrated, Olympic sponsors have a good track record of adding value. Cash contributions are essential to cover the costs of these large multisport events. But sponsor expertise, sponsor business contacts, and sponsor products offered as part of in-kind contributions strengthen Olympic sponsorship programs. Dedicated account management teams at the IOC and local host city organizers work to maximize this added value.

Multiple Streams of Income

The IOC is on course to average $1.5 billion in annual funding for its activities over the next several years. The individual sports events such as the 2018 Summer Youth Olympics and 2020 Summer Olympics manage separate budgets which fund activities on a much larger scale. The very large scale of global multisport events requires multiple sources of funding. While this necessitates additional effort and coordination, it also makes funding more stable and less reliant on the local economy or the profitability of an individual sponsor.

Fourteen prominent global brands support the first tier of commercial partners with the Olympic organizations in a program called “TOP: The Olympic Partners.” The combination of business expertise they add gives the Olympics unique advantages:

• Alibaba, an e-commerce, online banking, cloud computing, and digital media conglomerate, based in China
• Allianz, an insurance and financial asset management institution, based in Germany
• Atos, an information technology solutions company, based in France
• Bridgestone, a tire and automotive components manufacturer, based in Japan
• Coca-Cola, the global leader in beverages for consumer markets with a growing franchise in sports drinks, based in the United States
• Dow Chemical, a manufacturer of sophisticated materials, based in the United States
• General Electric, a conglomerate with extensive health care diagnostic equipment operations, based in the United States
• Intel, the world’s largest manufacturer of semiconductors and source of advanced technologies for the communications and broadcast industries, based in the United States
• Omega, a luxury timepiece and precision measurement equipment manufacturer, based in Switzerland
• P&G, a personal care and household products manufacturer, based in the United States
• Panasonic, a consumer and industrial electronics manufacturer, based in Japan
• Samsung, a cellphone and digital media producer, based in South Korea
• Toyota, the world’s second largest automaker, based in Japan
• VISA, the world’s largest consumer payment processing network, based in the United States

All of these commercial partners are well positioned for global leadership on their own in their product categories. Their collective support reinforces an image of global leadership for both the corporate partners and the Olympic organizations, a classic “win–win” outcome.

Many longtime sponsors accumulate expertise for key projects, making these commercial partnerships more effective. Coca-Cola has been lead sponsor of the Olympic torch relay a dozen times, starting at the 1992 Barcelona Summer Olympic Games, and signed up for an encore at Tokyo 2020. Its professionals are prepared to apply their past experience, test new features, communicate effectively with media channels, and help train local participants. And Coca-Cola’s marketing professionals have learned more ways to integrate the torch relay into their global promotion of the Olympics. They also build lasting relationships with different communities from Olympic torchbearers to Olympic volunteers to Olympic memorabilia collectors.

The TOP sponsorship program is one of several ways that private enterprises help to finance the substantial costs of producing the Olympics. Sponsorships of NOCs, the Local Organizing Committee for each edition of the Olympic Games, and the Olympic qualifying tournaments organized by International Sports Federations add more resources.

Since there are over 200 NOCs, sponsorship programs range widely in scale and objective. Many global brands such as BMW, Adidas, Puma, and Nike sponsor multiple national Olympic teams and customize local campaigns to promote the Olympics. This frequently promotes internal knowledge sharing to optimize sponsorships. Nike engages product-savvy account managers who keep retail partners and the staff of Nike owned stores up to date about the features and benefits of their products and share knowledge for maximizing attention and sales potential from its different Olympic campaigns. Other NOC sponsorship programs give local sports business firms an opportunity for more global visibility. For example, Speedo, an Australian swimwear company, sponsors the Australian Olympic team, as well as individual athletes.

The Tokyo 2020 Olympics staff has achieved a remarkable sponsorship success story. Beijing 2008 and London 2012 both met targets for $1.2 billion in private sponsorships. Rio 2016 overcame a weak local economy to also raise over $1.2 billion in private financial support, thanks to a successful merchandising and licensing program that earned almost $400 million. Tokyo 2020 is taking private support to the next level. Two years before the scheduled start of the 2020 Summer Olympics, Tokyo 2020 had already recorded sponsorship commitments of $3 billion.

Most Tokyo 2020 private support is from first-time Olympic sponsors. Good results from their 2020 campaigns and sophisticated implementation of VIP packages could encourage them to extend their financial support at future games and add momentum to the Olympic movement.

Worldwide TOP sponsorship programs are well suited to global brands seeking high visibility worldwide. Sponsorship of individual local Olympics committees or NOCs offers a flexible alternative. The Adidas sponsorship strategy at London 2012 is a good example. Adidas invested UKL 100 million to sponsor and outfit London 2012 organizers as well as 11 national Olympic teams from important regional markets. This included outfits with the memorable Adidas three-stripe design for thousands of volunteers in addition to athletes.

Other sponsors find sponsorship of Olympic qualifying matches better for more targeted marketing communications objectives that also benefit from the gold medal brand status of the Olympics. For example, Longines has built a good marketing partnership with FEI, the international equestrian sports federation. This includes lead sponsorship of two prestigious Olympic qualifying events—the FEI World Cup and the FEI Nations Cup. Red Bull joined USA Basketball to sponsor Olympic qualifying contests for Tokyo 2020.

The phenomenon of “nothing succeeds like success” has made sports marketing the preeminent leader in the entire sponsorship category. Research by agency IEG showed that sports sponsorships accounted for 70 percent of all corporate sponsorship spending in North America in 2018. Another survey by the IMD Management School in Switzerland also showed sports attracting 70 percent of international sponsorship spending. The scale of the Olympics, Olympic qualifying events, and the 600 international multisport competitions modeled after the Olympics is an advantage that no other sponsorship category can match. Financially, this expertise is very important. The costs of promoting sponsorships and coordinating marketing campaigns are often three times the expenditures for each sponsorship.

Sponsorships and scholarships for individual Olympic athletes add another dimension to the Olympics financing formula. TOP sponsor Bridgestone also funds an athlete sponsorship program that reinforces its Olympic campaigns. It sponsored five athletes and one team at the 2018 Winter Olympics and celebrated a total of four medal wins. Sky Network, which broadcasts the Olympics only in New Zealand, manages an athletic scholarship program to cover top tier training and travel for 12 selected athletes competing in Olympic sports. Crowdfunding campaigns are becoming another financial resource for athletes. Crowdfunding site “GoFundMe” reported that 90 U.S. Olympic and Paralympic athletes raised a total of $400,000 before Rio 2016.

While the sources of financing available to the Olympics continue to increase, funding from broadcast rights and government investments in infrastructure have been essential. The IOC reported that broadcast rights accounted for 73 percent of total revenues for the four-year period from 2013 through 2016. The IOC contributed $1.374 billion to London 2012 to cover almost half of the local operating costs; the balance was funded by private sponsorships, merchandising, and event ticket sales. However, most bills for building infrastructure and security services were paid by the UK and London governments, which consolidated the expenditures with other government activities. Tokyo 2020 aims to reduce the dependence on government funds with the help of substantial private support and Los Angeles 2028 leaders plan private funding for all expenditures except security. This will make multiple streams of income all the more important.

Favorable Economics

Broadcasting industry dynamics have made the economic advantages of the Olympics more favorable by boosting revenues from broadcast rights contracts, the primary source of income for the IOC. When international television coverage of Olympic events began in the 1960s, broadcasters in many countries were government owned monopolies, while a small group of corporations licensed by government agencies dominated broadcasting in the United States, Japan, and a few other private enterprise economies. This limited the number of potential bidders for Olympic broadcast rights.

The growth of cable and satellite networks in the 1980s and 1990s brought about massive investments in privately owned broadcasting organizations and made it possible for sports networks to reach large numbers of households. Premium content, such as Olympic programming, enabled private broadcasters to acquire new viewers and cross-sell and upsell to existing customers. Premium sports content began commanding premium prices in broadcast rights negotiations.

By 2000, the increased number of channels supported by Internet communications and technical choices for archiving and rebroadcasting premium sports content worldwide made broadcast rights for premium content even more valuable. The revenues from the sale of broadcast rights reported by the IOC over the decades reflect this favorable development.

More recent advances in OTT (direct to viewer) systems facilitated the launch of the IOC managed “Olympic Channel” in 2016. This strategy is reinforcing the Olympics’ ability to command premium pricing for broadcast rights by converting occasional viewers into regular viewers and offering sponsors additional choices for marketing campaigns. Olympic Channel sponsor Bridgestone demonstrated this with its 2018 Olympic athlete sponsorships and promotion of its Blizzak winter tires, which performed in tough winter weather throughout the 2018 Winter Olympics.

Favorable economic fundamentals of the Olympics have been strengthened by the convergence of sports business with related industries. Growing recognition of the contribution that sports and fitness activities can make to improving health care and treating some chronic diseases is fundamentally changing the health care industry.

In 2007, the American College of Sports Medicine launched an initiative called “Exercise Is Medicine” which expanded globally. Many university sports management programs are now managed by faculties of applied health science or are joint degree programs. Sports education leader Loughborough University has established a dedicated School of Sport, Exercise and Health Sciences. The newest large-scale sports management education program, The Indian Institute of Sports Management, created a separate postgraduate degree program for sports and health care management. Convergence of sports and health science is producing so much leading-edge research that a specialized industry publication, the Journal of Sport and Health Science, is now published quarterly.

Australia has significantly advanced the convergence of sports with health care. It supports Masters in Exercise Physiology educational programs at the University of Sydney, University of Queensland, University of Western Australia, Murdoch University, Deakin University, Victoria University, and other institutions. Graduates accredited as exercise physiologists are officially recognized as health care professionals. Public health insurance and many private health insurance plans pay for preventative medicine and physical rehabilitation by exercise physiologists. Internationally, other universities have added similar programs, including German Sport University and the University of Delaware.

In the past decade, sports nutrition has grown from a specialized niche to a premium growth category within the food industry. Sports nutrition sales grew from $7.3 billion in 2011 to $11.9 billion in 2016 and are projected to grow 8 percent annually, according to market research experts at Euromonitor.

Digital media trends are also adding value to the Olympics and its partners. Success as an Olympic athlete has become a good foundation for social media audience growth. After the 2018 Winter Olympics, five-time Olympic medalist Martin Fourcade of France reached 450,000 followers on Facebook, 375,000 on Instagram, and over 250,000 on Twitter. This visibility reinforces achievements at individual Olympics and keeps fans engaged.

Digital media technology and cost-effective alternatives for reaching target audiences are also building an asset for many international sports federations. The International Equestrian Federation, for example, charges $79 for an annual subscription to FEI.tv and receives additional revenues for pay-per-view options.

Favorable economic trends for Olympic sports have an additional benefit. The increasing choices for financing an athletic career help Olympic athletes extend their careers and leverage their experience and fan bases. U.S. swimmer Mark Spitz won acclaim for winning seven medals at the 1972 Munich Olympics, but he went on to a career in dentistry and did not compete in future Olympics. Fellow American swimmer Michael Phelps competed in four Olympics from 2004 to 2016 and secured generous sponsorship support and fees for personal appearances to fund this achievement.

Olympic Sized Budgets

Favorable economics which have supported steady growth for the IOC and its ecosystem have been accompanied by steady increases in expenditures. The total cost of organizing and presenting the 1964 Summer Olympics in Tokyo was $72 million. The forecast for Tokyo 2020 announced in December 2017 was $12 billion. That reflects a compound annual rate of growth over 14 percent before inflation—or 11 percent a year adjusted for inflation—over the same period.

The 1964 Tokyo Olympics hosted 5,151 athletes competing in 163 events. Tokyo 2020 plans 10,616 athletes competing in 339 events, effectively doubling the scale. The increase reflects growth in the total number of countries participating in the Olympics, as well as an increase in the number of Olympic sports. Expanding worldwide participation in sports is an important goal of the Olympic movement, so Olympic supporters can view large budget increases as the price of success.

Comparisons with leading research universities can help put multibillion dollar Olympic budgets in perspective. The total expenses of operations, research, and financial aid by the IOC in the 2015–2016 period focused on the 2016 Summer Games and Winter Youth Olympics was just under $3.3 billion. That figure was very close to the $3.5 billion in expenditures by Yale University to support 12,500 students during an academic year in this period. The total number of athletes participating in the 2016 Summer Games and Winter Youth Olympics—12,604—was also close to Yale’s enrollment. Both the IOC and Yale University spend about a quarter of a million dollars per participant in one-year programs and both are admired for quality education and research results.

Capital expenditures per participant in the Olympics and at Yale are also comparable. Total capital expenditure to construct an international campus for Yale at the National University of Singapore was $240 million for planned enrollment of 1,000 students. By this standard, capital expenditure of a quarter billion dollars per Olympic athlete looks competitive. The Tokyo 2020 capital expenditure budget of $3.2 billion is about $300,000 per athlete.

The long-term outlook for the Yale Singapore facilities and Tokyo 2020 facilities is somewhat different, but less different than a casual observer might think. The capital expenditures for the Yale University Singapore campus were planned for decades of future use. The 1964 Tokyo Olympic campus has been used for over five decades, and additional infrastructure for the 2020 Olympics will probably remain in use at least as long. In both cases, financial planners expect a “useful life” for these facilities of 40 to 50 years. After this period, the infrastructure will still be in place, but require substantial additional investments for modernization and continued use.

Both Yale and the IOC use subsidy programs to achieve their goals. In the 2015–2016 academic year, private foundations and corporations channeled about $200 million to support research and education at Yale. Private corporations and sponsors provide over $250 million a year in support of the IOC. In 2015 and 2016, the IOC awarded 1,547 scholarships for athletic training and equipment to Summer Olympics hopefuls, after awarding 440 scholarships through its Olympic solidarity program for winter sports athletes in the previous years. This total number of scholarships—1,987—is less than the 2,765 undergraduate scholarships which Yale awarded over the same period, but moving closer as funding increases.

Yale University and the Olympics share similarities in function and scope, as well as budgets. Both recruit and select talent globally for high achievement in competitive fields and foster learning agility. Both manage extensive portfolios of copyrights and licenses. And both stimulate innovations that improve commercial products and services and help advance public education and public health. Both the Olympics and Yale University have also encouraged partnerships of public sector and private sector institutions and provide training to work effectively in these kinds of partnerships.

Yale operates just over 100 different academic programs and three dozen departments. The Olympics manages over 100 different competition categories in 40 different sports and coordinates its activities with nearly three dozen different international sports federations. Both institutions reach out to experts and invest in conferences, publications, museums, libraries, and other communication platforms. This is expensive. And in both cases, many supporters have decided the investments are well worthwhile.

While the total budgets of the IOC and Local Organizing Committees for individual editions of the games appear large, comparison with other prestigious international events can change that point of view. The reported total costs for producing the Venice Art Biennale exceed 60 million Euros. That is approximately 150 Euros or 180 dollars per viewer. Total expenditures for producing the Summer Olympics now typically range from $12 billion to $15 billion. That range corresponds to less than five dollars per viewer. Prestigious international events that command global attention are expensive. The Olympics is no exception.

Do Olympic budgets need to be as large as they have been in the past? Probably not. A comparison with Loughborough University, a leader in sports management education, demonstrates how funding at different levels could work if necessary. Ranked fourth in the United Kingdom, Loughborough University’s annual operating expenditures are just over UKL 250 million a year. That is about $350 million—$20,000 per ­student per academic year.

The $20,000 benchmark from Loughborough University resonates with the world of amateur sports; $20,000 a year is typically the minimum that amateur athletes need to budget to compete for a season in a wide range of popular sports from cycling to snowboarding that have modest equipment expenditures. Some other sports, however, are much more expensive. The budgets for medalists in shooting are often 150 times higher and winter biathlon costs are correspondingly high. So a substantial reduction in expenditures to produce the Olympics would probably require trimming expensive sports.

The feasibility of reducing Olympics expenditures could enhance confidence in the future. The 1948 London Olympics were often called the “Austerity Olympics” and managed to carry on the Olympic tradition with modest expenses. But from the perspective of business strategy, high expenditures help secure premium status. The Olympics needs to compete with other sports organizations for attention, talent, and financial support, just as leading research universities do. Olympic sized budgets have reinforced the preeminence of the Olympics and built unique, sustainable competitive advantages.

The Modern Olympics

The modern Olympics are just that, a modern event series. Inspiring traditions of the ancient Olympics and new traditions from the modern Olympics maintain audience loyalty. But the modern Olympics has had to master global trends to maintain its status as a premier program and sports industry trendsetter.

The 2018 Sports Analytics conference held at MIT’s Sloan School of Business highlighted key trends that are redefining sports business, including the Olympics. Most topics covered featured technologies that did not exist outside laboratories a generation earlier. The Olympics’ track record of incorporating relevant new technologies is good. But guiding future Olympics through today’s communications and technology management developments is becoming a race on its own.

Many innovative sports technologies present helpful benefits that make knowledge sharing easier. Sophisticated studies of how athletes sleep, what exercise and nutrition regimens help optimize sleep, and even what fabrics best aid muscle recovery have become part of the tool kit available to high-performance sports institutes.

Machine learning in performance analytics, a recurring theme in sports technology circles, may also contribute to the level playing field ideal. Current research to improve injury prevention has good potential to support the “Athletes First” mission of Olympic sports and also encourage greater participation in sports. IBM is making versions of its “Watson Analytics” programs widely available to athletes and coaches. Some straightforward comparisons, such as tennis player performance on clay, grass, and asphalt courts, help both athletes and coaches focus efforts to improve performance.

Technology applications and business innovations are presenting new choices for attracting and engaging fans with corresponding financial benefits. Some approaches apply time tested economics and pricing models. These use data analysis to fine tune ticket packages and identify the communications channels fans like best.

The 2018 MIT Sloan sports conference also spotlighted technologies that Olympic sports organizations will need to balance with their traditional goals and values. Wearable technology has quickly advanced from visible monitors used in training to performance enhancing equipment that sports federations need to evaluate individually and may have to prohibit. eSports, portrayed as a “Showdown” with traditional sports at the Sloan conference, may attract and engage more fans to support sports. But some eSports could prompt a classic case of “market cannibalization.” That is because eSports tickets and subscriptions may reduce personal budgets for traditional sports and some sponsors may reallocate their sponsorship dollars. And new ways that sports analytics can transform sports gambling will require all Olympic sports organizations to adapt.

As technology topics command attention in most of the sports community, Olympic decision makers will need to consider their implications and try to anticipate future trends. Emerging technologies present another challenge to the Olympic ideals of fair play and equality. They have the potential to transform many sports activities into expensive challenges in which wealthy players get a competitive edge. Grant programs like Olympic Solidarity may help level some playing fields, but it is not realistic to expect this funding to keep pace with the speed of technological change or with some cases of technology disruption.

Lead times for planning Olympic events are long—nine years between submission of bids, budgets, and business plans and subsequent presentation of the Olympic Games. And the trend has been for planning lead times to increase. In September 2018, Sapporo announced plans to prepare a bid to host the 2030 Winter Olympics. The short time frame in which many emerging sports technologies move from technical experiments to widespread practices is a game-changing challenge for Olympic organizations to maintain the integrity of the Olympic Games.

The Power to Inspire

Economics provides good reasons to be optimistic about the future of the Olympics. Growing sports audiences and participation gives the Olympics the added credibility of achieving important goals. Broader sports industry growth also benefits the Olympics by strengthening the financial foundation for infrastructure, education, product development, events, and institutions that support sports. Collectively, these support critical mass for a vibrant and self-sustaining business ecosystem, one of the most favorable competitive advantages any enterprise can achieve.

The Olympics also benefits from many other competitive advantages:

• A worldwide talent pool of experienced athletes and sports managers
• Strategic partnerships with sponsors and broadcasters who share expertise
• Financial stability
• A top tier brand reinforced by iconic images
• Exclusive image rights and licensing authority
• Effective models of teamwork for planning and executing complex projects
• Media and communications expertise
• Leadership in the growing sports industry, now reaching to health care and media
• Universal appeal that moves easily from country to country and sport to sport
• Forward momentum from past success, an advantage of the ancient Olympics for 1,168 years

Putting these competitive advantages to work has required agility, adaptiveness, and substantial changes. Many changes keep the Olympics in the news and relevant to many communities. The economic fundamentals of the Olympics make it likely that the next decade will bring more changes. Tokyo 2020 chose a fitting motto, “Get Set!”

A Case in Point: The Olympic Torch Relay

The Olympic torch relay has reinforced the prominence of the Olympics as a public relations pacesetter. The torch relay has also become an effective way to motivate many more individuals to embrace physical fitness and participate in Olympic community activities.

The first Olympic torch relay took place 40 years after the first modern Olympic Games, heralding the start of the 1936 Summer Olympic Games in Berlin. The flame was lit in a classical ceremony at the site of the ancient Olympic Games in Greece, with modern Olympics founder Pierre de Coubertin in attendance and literally passing the torch in his last major ceremonial role.

A total of 3,330 runners transported the ceremonial flame along the route from Olympia to Berlin with separate individual torches that became symbols of the Olympic movement for both the runners and their communities. At its conclusion on August 1, the Olympic flame was used to light an Olympic cauldron in the Olympic stadium, an inspiring ceremony that has been repeated and refined in successive Olympic Games.

Recent Olympic torch relays have focused on uniting communities in each host country and encouraging broad participation. Special events often capture spectators’ imaginations with novel approaches such as submarine or scuba relays. Daily ceremonies build anticipation for the start of the Games and involve thousands of local supporters as performers and event volunteers. This foundation has also become a talent development resource for Olympic organizations, providing valuable experience to event and communications managers and training dedicated teams to works with sponsors, local communities, and the Local Organizing Committee which produces each individual Olympic Games.

Each edition of the Olympic Games features a customized design for the torch which attracts additional attention from spectators and the media. Tokyo 2020 selected a five-cylinder design inspired by the cherry blossom, a popular image in Japanese culture. The metallic finish also reflects the subtle tones of cherry blossom icons.

This single event series achieves many valuable goals:

• Linking the legacy of the ancient Olympics with the modern Olympics
• Promoting important social goals of the Olympic movement—inclusion, healthy physical activity, teamwork, and educating the world about the host country’s culture and customs
• Strengthening Olympic community ties by engaging former Olympians and sports officials as torchbearers and ceremony guests
• Building favorable relationships with government and community leaders by inviting their participation as torchbearers and ceremony officials
• Growing the size of the Olympic community by engaging more spectators, event volunteers, and community event organizers
• Serving as a daily countdown program to the Opening Ceremony with a steady stream of media coverage
• Creating an historic legacy of each individual games with a large set of relay torches custom designed for each edition of the Olympics which are cherished by their owners and exhibited widely in Olympic and sports museums
• Supporting the goals of Olympic leaders in education by providing interesting subjects for student involvement and subjects for student projects
• Reinforcing the Olympic brand and imagery with millions of spectators’ photos and videos shared across social media
• Building a talent pool that the sports community and sports media can recruit for future events
• Elevating the status of participation in Olympic events to an honor in the view of a large global audience

The success of the Olympic torch relay as a platform for strengthening a supporter community and building a large audience has been validated by frequent replications of this torch relay format at other important sporting events. The Asian Games, European Games, Pan American Games, and Special Olympics, as well as national sporting events such as the Canada Summer Games, have all incorporated similar torch relays and lighting ceremonies. The Commonwealth Games chose to add variety to the format with a baton relay. Each event aims to match the relay format to its own community. All benefit from the tried and tested approaches the Olympics pioneered by becoming the first organization to promote a torch relay to focus attention on a sporting event.

Illustration 2.1 Olympic traditions have created iconic images with universal worldwide appeal.

Key Sources and References

Fields, J. November 16, 2009, “Ski suit, designed by Boulder’s Spyder, to debut in 2010,” Colorado Daily

International Olympic Committee, 2017, IOC Annual Report 2016

Newcomb, T. July 20, 2016, “How Oakley’s Olympics Shades Could Help Athletes See Gold this Summer,” Wired

Olympic Channel Podcast, 2018, Season One, Interviews with Brian Orser, Pieter van den Hoogenband

Sail-World.com editors, August 29, 2016, “Zhik sailors win 17 sailing medals at 2016 Olympic Regatta” Sail-World.com, published online

ThinkSport, 2018, Lausanne Olympic Capital, pamphlet

Today’s Engineer Editors, August 2004 “Technological Innovations and the Summer Olympic Games,” Today’s Engineer

“Victoria University Master of Clinical Exercise Science and Rehabilitation curriculum,” published online: https://www.vu.edu.au/courses/master-of-clinical-exercise-science-and-rehabilitation-amep

Wenn S., September 29, 2014, Peter Ueberroth’s Legacy: How the 1984 Los Angeles Olympics Changed the Trajectory of the Olympic Movement, Taylor and Francis

Yale University Financial Report 2015-2016, published online: https://your.yale.edu/policies-procedures/other/financial-report-2015-2016

Yale University Financial Report 2016-2017, published online: https://your.yale.edu/policies-procedures/other/financial-report-2016-2017