Rob Minto

Sport, data, ideas

Category: Sport finance

The Olympics needs a new hosting blueprint. Here’s one.

Paris Olympics, earlier

The latest round of Olympic bidding has highlighted what has been known for ages: that hosting the Games is a BAD IDEA.

Paris and LA have been awarded the 2024 and 2028 events. No other cities were in the running, after several, including Rome, Boston and Hamburg dropped out.

The Winter Games bidding for 2022 was a similarly feeble contest, with Almaty and Beijing the last two standing. Beijing – a city with no snow – won.

Why has the Olympics become so toxic?

The main reason is cost. Who can sell the idea of spending anything from $10bn – $50bn to a population that is feeling the pinch? Even populist dictators might baulk at the expense.

But costs are OK if there are benefits. Clearly, the benefits have been exposed as a bit of a con. Soft power? There are cheaper ways. Tourism? It actually drops. Infrastructure boost? Do it anyway, if it’s worth it. Happy population? Not necessarily.

So what would be a better way of hosting the Games? Here are a few ideas that are frequently put forward, and my thoughts on their strengths.

Idea #1: pare it down

The Olympics is too big as it is. If you want to make hosting affordable, get rid of sports that don’t need to be there. Football, tennis, golf – there are bigger prizes in those sports. Politically tricky, but doable.

Problem is, that still leaves a lot of events, and in any case, the main costs always seems to be the centrepiece athletics stadium, the athletes village, and the infrastructure. Cutting out a few events won’t help here.

Idea #2: joint cities

This has a certain appeal. Joint city hosting would spread the cost, surely? Not quite. The only example of joint hosting of a recent major event is the World Cup of 2002 between Korea and Japan. That was not a great success, with both countries building expensive stadiums and infrastructure. Rather than splitting the cost, it merely added to it.

For the Olympics, it would present a tricky branding challenge – every Games is “City year” eg London 2012. I guess you could have Rome-Madrid 2036 or whatever, but it’s less appealing. The city backdrop is part of the experience – think Rio’s beach or Sydney harbour. While the World Cup hops from stadium to stadium, an Olympics has a ‘village’ and a base. Two bases would be odd.

Further, where do you have the opening and closing ceremonies? The 100m final? It would be fine to divvy up some events, but the location of the showpiece athletics would naturally make the Games forever associated with that host, not the other.

Idea #3: spread far and wide

An Olympics with events around the globe sounds inclusive and idealistic, but it would have all the problems of idea #2 and more. One of the main ideas is that spectators can visit the city and see a range of sports, not just one. There would be no cohesive experience which would annoy lots of fans. Broadcasters would hate it – it would be far more expensive and hard to cover.

The experience of the Euro 2020 will be interesting in this regard – it’s taking part in 12 cities. If it somehow works (big if), spreading the Olympics *might* become an idea that takes off. Unlikely.

Idea #4: permanent hosts

Some have suggested a single permanent Summer and Winter host. I think that’s a bad idea, for several reasons. One, monotony. Two – it places quite a burden on the host city. Instead, the IOC should pick five cities that rotate the Games. Each would represent their continent, and the IOC would be have the extra incentive to invest some of the broadcast revenue in keeping the infrastructure maintained.

This has a lot of appeal – theoretically no more white elephant stadiums, crumbling facilities or overspending.

There are downsides: with a gap of 20 years, it’s possible that things fall apart anyway. The Olympic roster changes, which means new facilities would always be needed; stadiums will still be unused (or underused) for two decades.

However, picking the right hosts would mitigate those downsides. Cities that are big enough to cope with the set-aside of facilities could easily be found – London, Tokyo, LA would be great candidates.

The downside is regional jealousy. China would want to be a permanent host, for sure. As would the US. That might annoy Canada or Japan. But given that there is a dearth of cities with the current system, it might be a better plan.

The other positives to a permanent city plan is that it would kill off the expensive bidding process, which also would stop the bribery and backhanders. The IOC would have to reform from a princely tour of spoilt delegates to a proper administrative commission – a far better outcome. Cities would have far longer to plan, meaning cost overruns should be a thing of the past, or at least less likely. Hosts wouldn’t have to cut corners to get the Games ready. In any case, it would be a question of upgrading facilities, not a rush job of building from scratch in 7 years.

The benefit of putting on an Olympics is pretty small. Tourism suffers, rather than getting a boost. Countries that want to boost their profile have any other number of ways to do it – host a world championships, finance a Grand Prix, host an expo or something. The Olympics is too big to be used as a political tool anyway.

The other upside of permanent hosts is that it is also closer to the original Olympic ethos, which was to have the Games in the same location each time. Evolving that into five Olympic hosts – one for each of the rings, which could be a nice marketing touch – makes sense.

Anyway. Don’t hold your breath.

 

Sport Geek #57: the death of sport? Not quite…

What happens when the money runs out?

Many industries have been through profound change; some have completely died. Modern sport has changed, but it has never truly suffered.

Yes, it has suffered from scandal. But not from financial crisis. Even while the world adapted to the crash of 2008-09 it ploughed on, oblivious, a distraction in which even greater sums of money were poured into the bank accounts of young men, generated by billionaire owners, TV networks and pliant fans who put up with ever-increasing costs. Modern sport, which you could argue emerged in the early 1990s with pay TV, the evolution of stats and the emergence of more stringent drug-testing, has only gone one way: bigger.

Is that all about to change? Three recent articles are worth examining. Continue reading

Winter Olympics: it’s the cost, not the climate

Generated by  IJG JPEG Library

Generated by IJG JPEG Library

It is tempting to bemoan the Winter Olympics going to Beijing as another example of unsuitable regimes being awarded the big sporting jamborees. Russia and Qatar are the next two World Cup hosts. After lots of European countries pulled out, Beijing was left with Alamaty of Kazakhstan to bid for the 2020 Winter Games. Urgh, all these dictators.

But it was ever thus. Continue reading

3 reasons why the Premier League deal should be no surprise

It looks huge – a $5.1 deal, 70 per cent up on the previous one. The English Premier League certainly knows how to sell itself.

But amid all the mutterings of how the money won’t filter down to the grass roots and smaller clubs, or Alan Sugar’s lovely image of “prune juice”, here are three reasons why we shouldn’t be surprised.

1) Sky

Sky paid £4.2bn for their match packages. Sounds a lot, until you realise that in 2014, Sky made £7.6bn in revenue, and a profit before tax of £1.1bn. Also, this is a three-year deal, so for Sky it works out as £1.4bn per year. In short – the company can clearly afford it. Assuming that the advertisers are still keen, and the public keep subscribing, it could be a great deal.

Of course, the extra money won’t be squandered, from Sky’s point of view. Every big money transfer to the Premier League adds to the allure, so they aren’t just spending money on a fixed asset – they are spending on future improvements too. If English clubs can outspend Spanish rivals, it’s basically free marketing for Sky.

2) BT

BT have become a serious football broadcast player. They snapped up the Champion’s League TV rights, and have again bid up for the Premier League. Increased competition over a fixed supply means higher prices, as any economist will tell you.

3) Lessons of the NFL

It has a bigger domestic audience, obviously, but the NFL has done a very good job of squeezing the broadcasters for cash, with an annualised $5bn-plus deal with several broadcasters over eight years. While this is about double what the British broadcasters are paying (after converting dollars into sterling), there is a remarkable similarity in the increase from the previous deal.

The NFL secured a total $3.1bn TV rights deal for the 2006-13 seasons. That then went up to over $5bn for 2014-21. The Premier League had a £3bn deal for 2013-16, and now £5.1bn for 2016-19. It’s a highly similar increase: 62-plus per cent for the NFL, 70 per cent for the Premier League.

Is it such a surprise that sports broadcasters (albeit in different countries for different sports) have upped their valuation of TV rights by the same amount at a similar time?

It would be nice to see more money going to places other than players’ salaries and agents. But in a commercial world, the Premier League deal is less surprising than the wide-eyed coverage from the media who run every news snippet about football that they possibly can.

The crazy world of Wimbledon’s prize money

In a good but not great Wimbledon final, Novak Dkokovic beat Rafael Nadal today. I was supporting Nadal (actually I am quite a big Nadal fan). So I did what you might call an “emotional hedge” and put a bet on Djokovic to win.

Some people see this as heresy. I’m not sure why. For no moment did I stop supporting Nadal. But after the match had finished, I thought – hey ho, cheer up, you made a few bob.

So my mood was altered. Here’s the e-ticket from BlueSquare:

Selection 1 Novak Djokovic @ 5/4 To Win – Win
Market Match Winner
Event Wimbledon
Rafael Nadal v Novak Djokovic
14:05 03/07/2011
Bet Type Single
Unit Stake £40.00
Returns £90.00

Very nice. Not bad odds either, for a 2-horse race, where the outsider had only lost one match all year. So a £50 return improved my mood. Not a fortune, but a decent sum for a small wager.

And then I thought – what about Nadal? Is he happy? I doubt it. He has lost the title, and the number one ranking to Djokovic. I’m sure he’s not having a crisis, but he certainly won’t be happy. Yet he’s just earned £550,000 today as runner up.

That’s 11 thousand times my winnings today. He’s definitely not 11,000 times happier than me, that’s for sure. Yes, it’s all relative. But I think Nadal would be unhappy today if he got £2 million of even £20 million. His game is now measured in titles, not money. He’s already earned over $41m in prize money alone, let alone sponsorship, so he’s set for life.

Which leads me to two thoughts. Money doesn’t make us happy – we all knew that really, so let’s move on to… why are sportspeople paid so much? And so much more than inflation? Nadal as runner up has just won more money than Lleyton Hewitt did in 2002 – less than 10 years ago. (Hewitt got £525,000 for winning, Djokovic just got £1.1m today).

Wimbledon has increased prize money this year by 10 per cent for most stages of the tournament (including winner and runner up), and by 8.5 per cent overall. This is much higher than inflation. Why do they need to do it?

Is there a prize money race with other events? Does prize money equal prestige? Hardly. Other tournaments offer a lot, but you would have thought the grand slams – which have a joint committee – would conspire not to push up prize money too high.

It also seems horribly similar to the corporate world, where CEO pay is many multiples of average workers. The winner earns eight times a losing quarter-finalist. I see the logic in halving the money as you go down the field, but a quarter-finalist has won four matches, compared to the winner’s seven – more than half the entertainment and effort for 1/8th of the money.

Is this fair? No. Would the winner be happy with a fraction of the winnings? Yes, I’m sure. So why don’t we change? Why isn’t the money more evenly spread around. It would be interesting to see which players kicked up a fuss.

But then again, I’m quietly chuffed with my £50 winnings. It’s funny what a little money can do.

The FA cup: magic and economics

There are three things always said about the FA Cup. It’s the world’s oldest cup competition; it has a magic to it; and it isn’t what it once was. But few people actually manage to quantify how or why the cup’s importance is in decline.

The Guardian’s secret footballer promised to do so, citing Freakonomics as an inspiration, but then trotted non-economic analysis such as how the timing of the final (amongst normal Premiership games) and other factors such as Manchester United pulling out for the World Team Cup in 2002 had undermined it. There’s also the argument that the prestige of playing at Wembley is devalued by holding Cup semis there.

All true, but not really the point. Then, tucked away towards the end of the piece, the Secret Footballer hit the nail on the head:

Stoke City or Manchester City will pick up £1.8m for winning the FA Cup, which is the difference between finishing 15th and 17th in the Premier League.

And then in the next paragraph: “£30m is on offer to reach the Champions League [for finishing in the top four]”.

It’s a trophy, but not one financially worth winning if you take your eye off Europe or the league.

In a world where football is ALL about money, that tells you everything you need to know.

In the red, twice over

The Premiership football bubble has yet to completely pop, despite Portsmouth going into administration. But the situation at Liverpool, and the (financial) results of Manchester United make alarming reading.

For the best summary of ManU, David Bond crunches the numbers (dare I say he’s perhaps a better financial journalist than sports writer?).

And the peerless David Conn’s reporting on Liverpool was the best around.

© 2017 Rob Minto

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