The 2024 Paris Olympics have a jaw-dropping budget of EUR 8.8 billion. But wait, there’s more – they’ve also thrown in an additional EUR 1.4 billion to give the River Seine a much-needed cleanse and another EUR 3.5 billion to extend Metro Line 14.
It’s a far cry from the modest games during the earlier days of the Olympics, which originated in Greece around 776 BC and were primarily religious festivals.
While historical documentation of costs is scarce, we know that city-states would send athletes and spectators at their own expense, with the host city, Olympia, providing the venue.
Fast-forward to today and the Olympic Games have transformed into a multi-billion dollar affair involving athletes, governments, and corporations on a global scale. The modern Olympics have become increasingly grand and costly.
In fact, the 2012 London Games spent around USD 17 billion, Tokyo spent around USD 28 billion, and Rio de Janeiro spent USD 24 billion in 2016—the three most expensive Summer Games in history.
So, while I started with the excitement of reading about the achievements of Indian athletes and medal tallies, the sheer scale of the Olympic Games led me to plunge into the economics behind this grand spectacle.
Ready to follow the money? Let’s dive right in.
What goes into organising the Olympic Games?
The Olympic Games are managed by the International Olympic Committee (IOC), a non-profit organisation based in Lausanne, Switzerland. Despite its non-profit status, the IOC operates with significant private funding and financial clout.
Sustainability and the potential legacy of the Games are crucial in the host country, as is gaining political and public support. Additionally, the host country must have the necessary infrastructure, experience, capacity, and expertise to manage the event successfully.
Addressing these aspects inevitably incurs billions of dollars. Cities frequently commit substantial sums – ranging from USD 50 million to USD 100 million – to evaluate, prepare, and submit their bids to the IOC. For example, Tokyo invested up to USD 150 million for its 2016 bid and about half that amount for its successful 2020 bid. In contrast, Toronto decided against pursuing a 2024 bid due to the USD 60 million required.
Where does that kind of money come from?
The budget for the Olympic Games has naturally changed over time and varies with each edition, depending on the unique circumstances of the host city. It can be categorised into two distinct budgets – the Organising Committee for the Olympic Games (OCOG) budget and the broader public budget.
Organising the Olympics is no mere feat. It involves a complex interplay of government support, private investment, and global cooperation.
Funding the Olympic Games – How is it done?
Nearly all (96%) of the budget for organising the Paris 2024 Olympic Games is funded by the private sector. This includes contributions from the IOC, partner companies, ticket sales, and licensing. Let’s break down how the Olympics are funded:
Source: Olympics.com
1. IOC contribution
This support is primarily privately funded, with a significant contribution from the IOC’s various revenue streams, including The Olympic Partner (TOP) programme and the sale of broadcast rights for the Olympic Games:
- Broadcasting rights – As part of its contribution, the IOC pays for the host broadcast operation – Olympic Broadcast Services (OBS), generating billions of dollars and accounting for the lion’s share of the IOC’s revenue.
- TOP sponsorship program – TOP, initiated by the IOC in 1985, offers an exclusive opportunity for global companies to become key partner sponsors for the Olympic Games. It includes 14 sponsors, each investing approximately hundreds of millions of dollars to achieve the highest tier of Olympic sponsorship.
TOP deals are generally valued at around USD 200 million per four-year cycle, but the amount can significantly increase based on various factors, such as the range of categories covered and the level of competition for those categories. Sponsors typically commit to contracts lasting eight to ten years, covering 2 to 3 Olympic Games. For example, when Toyota signed on in 2015, Japanese media reported the deal as worth USD 835 million.
Fun fact – The IOC allocation for the 2024 Paris Olympics is EUR 1.2 billion, including TV rights (EUR 750 million) and TOP partnerships (EUR 470 million)
2. Domestic sponsors
Local companies in the host country contribute significantly. For example –
- Tokyo 2020 raised a record USD 3.3 billion from domestic sponsors, more than three times the previous record set by London 2012 (USD 1.1 billion).
- Paris 2024 has secured over EUR 1.2 billion in domestic sponsorships.
3. Ticketing
Revenue from ticket sales forms a crucial part of the revenue –
- London 2012 generated USD 988 million from ticket sales.
- Rio 2016 brought in USD 321 million from ticketing.
Fun fact – Tokyo 2020, despite the absence of international spectators due to COVID-19, still managed to sell 4.45 million tickets domestically before the decision to hold the Games without spectators.
4. Licensing
Official Olympic merchandise generates additional income –
- Beijing 2008 generated USD 163 million in licensing revenue.
- London 2012 raised USD 119 million from licensing.
Fun fact – Ticketing, hospitality and licensing are expected to fetch a total of EUR 1.4 billion during the Paris Olympic Games 2024 – ticketing (EUR 1.1 billion), hospitality (EUR 170 million), and licensing (EUR 127 million).
Economic impact of the Olympic Games
Hosting the Olympics involves not just organising costs but also substantial capital investment in infrastructure. And these investments can translate into significant economic benefits.
Source: Olympics.com
Case study – Paris 2024 Olympics
With a total budget of EUR 8.8 billion (EUR 4.38 billion from the IOC budget), the ongoing Paris Olympic and Paralympic Games present an exciting case study. The city plans to use 95% of existing or temporary venues, demonstrating a new approach to Olympic hosting that prioritises long-term urban development alongside the event itself.
Economic forecasts for the Paris 2024 Olympics are truly interesting –
- We’re looking at potential net economic benefits for the Paris region ranging from EUR 6.7 billion to EUR 11.1 billion. A middle-of-the-road projection suggests a net economic impact of EUR 8.9 billion, expecting each Euro of public spending to generate a threefold economic impact.
- The economic impact of the Paris 2024 Olympics is expected to be distributed across three main sectors – tourism (30%), construction (28%), and organisation (42%).
- Paris anticipates between 2.3 and 3.1 million unique visitors, 64% of whom will be French. The Paris Tourism Office projects tourist spending of EUR 2.6 billion during the Olympic Games, including both ticket holders and non-ticket holders.
- Paris 2024 and Solideo, the Olympic Delivery Authority, have launched an unprecedented array of initiatives for an event of this scale. These efforts aim to ensure that the EUR 5 billion in contracts benefit businesses of all sizes, with a particular focus on very small enterprises. It’s worth noting that 78% of Paris 2024’s suppliers are small and medium-sized businesses.
- The Olympic Games are also serving as a global exhibition for local businesses, with French companies accounting for 90% of the organising committee’s service providers. This presents a significant opportunity for domestic enterprises to gain international exposure.
- In terms of employment, nearly 181,000 individuals are currently working or slated to work in Olympics-related roles. The organisers have set an ambitious goal to transform these temporary positions into long-term, inclusive employment opportunities, potentially creating a lasting positive impact on the local job market.
Is hosting the Olympic Games too costly an affair?
When it comes to hosting the Olympic Games, the adage “go big or go home” seems to apply – but at what cost? The price tag for this mega event has ballooned over the years, with recent Summer Games costing upwards of USD 10 billion. While the potential benefits are significant – including increased tourism and infrastructure development – the financial risks are equally substantial.
History has shown us cautionary tales. The 1976 Olympic Games of Montreal left the city with a 30-year debt, while the 2004 Olympics of Athens are believed to have caused Greece’s economic downturn.
Even when executed well, like London 2012, the costs are staggering. It’s worth noting that every Summer Olympics since 1960 has experienced cost overruns, with 57% exceeding their budgets by more than 100%.
However, it’s not all doom and gloom. Cities like Los Angeles in 1984 and Barcelona in 1992 managed to turn a profit or create lasting positive impacts.
The key seems to lie in smart planning, utilising existing infrastructure, and focusing on long-term benefits, which Paris 2024 has just tried. Moving forward, potential host cities will have to balance the prestige of the Olympic Games with fiscal responsibility.
India and the Olympics – A rising possibility
India’s Olympic ambitions took a significant step forward in October 2023. During the inauguration of the 141st IOC session in Mumbai, Hon. Prime Minister Narendra Modi officially confirmed India’s bid to host the 2036 Summer Olympic Games.
This announcement marks a pivotal moment for the country’s sporting aspirations.
Hosting the Olympic Games is no small undertaking. It requires substantial investment in both sport-specific facilities and a broader supporting infrastructure, as I mentioned earlier.
To put this into perspective, the Oxford Olympic Study 2024 reports that the average cost of hosting an Olympics stands at USD 8 billion. This figure sheds light on the sheer scale of financial commitment required for such a monumental event.
At the same time, India’s engagement with the Olympics is evolving rapidly. India’s Olympic performance has been on an upward trajectory:
To propel the growth further, India’s corporate sector is making significant strides in the world of sports, particularly in Olympic development:
- Reliance Foundation, the philanthropic arm of billionaire Mukesh Ambani’s empire, initiated a partnership with the Odisha Government in 2019. Their collaboration established a high-performance athletics centre in Bhubaneswar, currently supporting nearly 250 athletes. The foundation’s ambitions extend beyond athlete development – they’re now setting their sights on bringing the Olympic Games to India in 2036.
- The Adani Group, another major player in India’s corporate landscape, has been championing athletes since 2016 through its GarvHai initiative. They’ve stepped up their commitment by becoming the Principal Sponsor for the upcoming Paris Olympics.
- JSW Group, led by Sajjan Jindal, is investing INR 300 crore in sports development. Half of this sum, INR 150 crore, has gone towards creating substantial sports infrastructure, including the Inspire Institute of Sports. Additionally, JSW is backing numerous athletes in their journey to the 2024 Olympics.
While the Olympic Games remain a unique blend of sporting excellence and economic complexity, these initiatives demonstrate how India’s leading corporations are playing a pivotal role in shaping the country’s sporting future and Olympic aspirations.
As we look ahead to the potential of an Indian Olympics, it’s clear that this endeavour would represent not just a sporting milestone but a significant economic undertaking for the nation.
In summary:
Let’s face it – the Olympic Games are a pertinent case study.
We’ve seen cities strike gold and others left reeling under a mountain of debt. It’s not just about medals and world records; it’s a high-stakes game of economic planning and long-term vision.
When done right, hosting the Games can breathe new life into a city, boost tourism, and leave a legacy that lasts for generations. Just look at Barcelona – it went from being Spain’s second fiddle to a top tourist destination.
On the flip side, Montreal started with a USD 124 million budget but ended up spending a whopping USD 1.5 billion on their 1976 Olympics! That’s ten times more than they expected, and it took them 30 years to pay it off, and the burden was borne by the taxpayers. Poor planning, some corruption, inflation, labour issues – it all snowballed.
India has the advantage of history and hindsight. So, while it’s a Herculean effort, effective planning and financial prudence can help us pull it off. The growing involvement of India’s corporate giants in Olympic development signals new opportunities in sports infrastructure, technology, and related sectors. So, we should be watching this space closely.
Disclaimer:
The information contained herein is for educational purposes only and should not be interpreted as soliciting, advertising, or providing any advice.