Olympics teach excellence in making money

Olympics teach excellence in making money

Some say the Olympics, now under way, are all about politics, a coming-out party for China’s ruling regime, eager to show that its rise to world-power status is no threat to anyone — except for the Taiwanese, Tibetans, domestic Christians and a few million people who might behave in ways the regime finds unacceptable. Others, including the president of the United States, say it is all about sport and the athletes who compete — except for the athletes from China, who know it is all about accumulating more medals than America (the original crowns of wild olives will no longer do), and Zhou Yongkang, the Communist party’s security chief who sees the games as giving “full play to the superiority of the socialist system”. Still others say the games are about business — the grubby art of turning a worldwide attraction into hard cash.

All of these observers are probably correct, but this economist, no geopolitician and with an interest in Olympic sports limited to the efforts of the American basketball team to re-establish its rightful hegemony, tends to see dollar signs where others see political jockeying and the glory of athletic competition.

With reason. The International Olympic Committee (IOC) will take in $1.5 billion from the sale of broadcasting rights (no small sum, but still less than half what broadcasters pay for rights to a National Football League season), $1.2 billion from the right to use the logo and other sponsorships, $240m from ticket sales, and $60m from miscellaneous sources. Some 8% of that $3 billion total will go to the care and feeding of IOC staff, the same people who initially barred some Iraqi athletes from participating because their government was too heavily involved in athletics — unlike the Chinese hosts of the games.

The Olympics experience teaches, first of all, that great sporting events are one of the few occasions that can attract a mass audience — in this case four billion people — in a media world in which hundreds of channels and multiple delivery platforms fragment audiences. There are two reasons for this.

First, like the much-maligned reality television shows that so offend the elite of the chattering classes, the end-game is unpredictable. We more or less know that in sitcoms the good guys will get the girls, and that in shoot-’em-ups the last man standing will be our favourite star. There is little real suspense. Sports are different: the contest isn’t over until the fat man tosses his hammer.

Second, as David Hill, Fox Sports’ brilliant chairman and chief executive, once explained to me, sports are tribal.

It is rare for groups of friends to come together to watch some sitcom or film. But put a sporting event on the screen — the Super Bowl, the World Cup — and the only question is to whose home do we go for the best snacks, probably the product of a sponsor such as Coca-Cola or McDonald’s.

Then there are the sponsors. In a year in which advertising dollars are hard to come by, sponsors line up to shell out for advertising time. There are 12 main global sponsors of the IOC; each pays $100m for the right to partner the IOC in each games cycle (winter, summer) and use Olympics logos. In addition, 10 to 15 sponsors are selected by each host city (London has so far chosen Lloyds TSB, BP, EDF, British Airways and Nortel for 2012) and given the privilege of inking multi-million-dollar national sponsorship contracts. Coca-Cola has been a global sponsor since 1928, and the current list includes McDonald’s, Panasonic, Samsung, Visa, General Electric (owner of NBC), Kodak and Lenovo (producer of what once was the IBM ThinkPad PC).

The Olympics also teach that any media company that plans to bid for an event on the scale of the Beijing games had better have multiple platforms available to distribute pictures, text, commentary and, of course, commercials. NBC, which has the American rights, is offering 2,000 hours of live video coverage and 3,000 hours of on-demand video on its website.

It plans to show its advertisers, who pay some $750,000 for a 30-second spot, that the old system of merely counting those who watch on NBC and its other channels (CNBC, MSNBC and Oxygen) is as obsolete as a black-and-white set. With reason: by that method American Idol and Grey’s Anatomy outdrew the 2006 winter games. NBC will issue a daily total audience measurement index (Tami) that adds to the usual Nielsen television ratings all those who have accessed its websites by computers, Blackberrys and other mobile devices.

Abe Novick, an executive with Euro RSCG, a global ad agency, told The Baltimore Sun newspaper: “It’s an attempt to show Olympic advertisers all the eyeballs that are watching the ads for which they paid such a hefty price. And if they can do it with the Olympics, why not for the new [autumn] TV season and beyond?” That, of course, would be a great leap forward for television networks, since most of the newly measured audience is likely to be the young viewers that advertisers lust after.

The final lesson of the Olympics is an unexpected one — all the fuss about stopping global warming is itself a game. Using totalitarian muscle, the Chinese regime has made the air quality of Beijing a bit less threatening to the health of the athletes. Democratic countries cannot order people out of the city and into the country, close down roads and factories, and take other steps to clean the air, if only temporarily.

When the games end, it will be business as usual in China. That includes constructing 500 coal-fired power stations to fuel the growth the regime needs if it is to provide the millions of jobs it must create in order to avoid social unrest. That will offset most of the steps being taken in the West to reduce carbon-dioxide emissions, and support President Bush’s insistence that any deal to cut emissions must include China or it won’t be worth the (probably recycled) paper it is printed on.

But that’s for later. Meanwhile, enjoy the games or highlights on everything from your HDTV to BBC’s iPlayer.

- Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute