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  • Op Ed: Olympic Immunity from Financial Crisis?


    10/04/08

    If you believe IOC President Jacques Rogge, the Olympics are immune to the turmoil in the financial markets. He told journalists in Geneva this week that he has every confidence that upcoming Olympics Games will not be affected by falling stock prices or tightened credit. And IOC Finance Commission chair Richard Carrion insists that TV rights talks for the 2014 and 2016 Olympics can be stalled until the market improves.

    Nonetheless, with a trillion dollars of losses this week in the stock markets of the world, how can the Olympics escape the deflation, even in minor ways?

    A bookmaker in London is taking odds that the 2012 Games could be affected in a major way -- with cancellation. We're not sure the situation is that dire, but developers of the Olympic Village now realize that hundreds of millions of dollars expected from the private sector to help finance the $2 billion project won't materialize. And that was before this week's global financial blowout.

    Already a sensitive subject in London, the government's spend on the Olympics and related projects is likely to grow if more public financing is used to cover the gap for the village. The influence of the opposition Conservatives also is likely to grow, especially with the election of new mayor Boris Johnson, who is likely to keep a spotlight shining on rising costs.

    The choice of a new chairman for the U.S. Olympic Committee this week would appear to reflect concern for the committee's financial health as it confronts a changing marketplace.

    Entirely funded by national sponsorships and a large share of the IOC's revenues from TV rights and worldwide sponsors, the USOC could catch more than a cold from the sneeze of the financial markets. The USOC is in negotiations with Bank of America to renew its sponsorship while banks are facing tough times. Another big pending renewal is Home Depot, whose sales are hurting. And the search is still underway to fill the yawning automotive sponsor category at a time when the auto industry is sagging.

    The sudden rise of Larry Probst to the chairmanship of the USOC may be well-timed for current market conditions. A respected executive in the video game industry, Probst had nothing to do with the Olympics until a phone call from outgoing chairman Peter Ueberroth earlier this year recruiting Probst to be his successor.

    As a purveyor of a high-tech product with strong youth appeal and sports connection, Probst is plugged-in to 21st Century commerce in a manner Ueberroth, by his own admission, is not.

    "He walks those halls far better than me," is how Ueberroth put it in his introduction to Probst.

    Probst will be the one to lead the USOC to the finish line for the long-developing Olympic Network, which will use an out of the box solution to creating a new TV channel. In his remarks to reporters following his selection as chairman, he indicated that the network probably would launch with Internet delivery, as opposed to a more complicated arrangement for cable TV that would unwisely put the USOC in competition with rights-holder NBC.

    The Vancouver Olympics could indeed be spared from worries over how a credit crunch will affect its construction program, with nearly all the work complete just over a year to the Games.

    But the more pressing economic implication for the 2010 Olympics may come at the consumer level. While TV rights negotiators may have the luxury to wait until the market allows broadcasters to pay more for the Olympics, ticket sales to the Games must begin date certain, as they did this week for the Vancouver Olympics.

    Canadians may be among the world's top fans for winter sports, but tickets for the 2010 Olympics go on sale as just as consumer confidence is ebbing, winter is approaching, and energy needed to stay warm is at record prices. Tickets or necessities of life? Vancouver 2010 will find out in the months ahead.

    Speaking of rising prices for petroleum, none of the economic assumptions that underlie the bids for Vancouver or London could have anticipated such dramatic climbs in the cost of oil. At $90 a barrel this week, oil prices are double what they were when London was awarded the Games in 2005, triple the price in 2003 when Vancouver was picked for 2010.

    One final note on the fickle nature of Olympic consumers comes from Canadian apparel licensee Hudson's Bay Company, which resorted to major markdowns to move its Beijing-themed clothing. Designs that did not appeal are blamed for the sales malaise, with HBC saying that it will need to step up its game with 2010-branded products.

    But if tickets to the Olympics are a discretionary buy for consumers, $20 coin purses and $50 sweatshirts -- no matter how smartly fashioned -- may fall even lower in spending priority in these uncertain times.

    Op Ed is a weekly column of opinion and ideas from Around the Rings. Comments, as well as guest columns are welcomed: comment@aroundtherings.com