Hosting the Olympics

Podcast Transcript

In July 2017, the International Olympic Committee did something unprecedented. It awarded not one, but two cities Olympic games at the same time.

The 2024 games to Paris and the 2028 games to Los Angeles.

However, this decision wasn’t a stroke of genius. It was an act of desperation.

That is because no one really wants to host an Olympics anymore.

Learn more about the economics and politics of hosting the Olympic games and how it has radically changed over time on this episode of Everything Everywhere Daily.

In a previous episode, I discussed the founding and growth of the modern Olympic games

To very summarize, the decision to revive the Olympic Games was spearheaded by Pierre de Coubertin, a French educator and historian who sought to promote international peace and the values of physical education.

Inspired by the ideals of ancient Greek Olympics, Coubertin believed that a modern Olympic Games could foster cultural exchange and camaraderie among nations.

At the 1894 Congress in Paris, he proposed the idea to re-establish the Olympics. This led to the formation of the International Olympic Committee or IOC.

In this episode, I’m not going to discuss the athletics or the competitors but rather the cities that have hosted the Olympics and the process that has gone into it. Due to time constraints, I’m going to focus on the summer Games simply because they are much larger than the Winter Games and better illustrate the problem with hosting the Olympics.

The reason why I want to focus on this process is because this is at the heart of what has made the Olympics a multi-billion dollar business.

For the first modern Olympics, the decision was decision was obvious. The IOC voted unanimously in 1894 to host the games in Greece, the home of the ancient Olympic games.

The only major construction was the Panathenaic Stadium, a historic venue reconstructed with marble, which hosted many of the competitions. It was built in the same location as an ancient stadium, which was built in the 4th century BC.

This was, in the big scheme of things, a very low-budget affair with only 241 athletes, 65% of which were from Greece.

The 1900 Olympics was likewise also an easy choice. Pierre de Coubertin originally wanted the first Olympics to be held alongside the 1900 World’s Fair in Paris, but the IOC didn’t want to wait six years and opted for the 1896 games in Athens and then awarded the 1900 games to Paris.

Again, it wasn’t a major affair as it was able to piggyback on the infrastructure for the World’s Fair.

The same was true with the 1904 Olympics, which was held alongside the 1904 World’s Fair in Saint Louis. If you haven’t year heard it, here I’ll reference you to my episode on the 1904 Olympic Marathon, the worst event ever held in Olympic history.

Chicago initially was awarded the Olympics, but the organizers of the Saint Louis World’s Fair threatened to host their own athletic competition, which would compete with the Olympics.

By the 1908 games, the Olympics had now become a thing. As such, more cities wanted to host the games, and there was no longer a perceived need to host the games alongside a world’s fair.

Four cities submitted bids to host the 1908 games: Rome, London, Berlin, and Milan. The first Olympics with a truly competitive bidding process. The games were awarded to Rome, but after an eruption of Mount Vesuvius in 1906, which destroyed much of the city of Naples, Italy needed the money for reconstruction efforts.

The games were then awarded to London. They managed to rapidly construct White City Stadium in time for the games, which could seat 93,000 people. It was torn down in 1984.

The Olympics were now a very desirable thing that cities wanted to host. It was something that offered international prestige to the host city. Immediately after the 1908 games, Sweden made a big push to make Stockholm the next host.

They had two members on the IOC, and they got all the relevant parties on board immediately, including the governing bodies for athletics and gymnastics and the King of Sweden.

They presented a budget of 415,000 kronor or $115,250, not adjusted for inflation.

The 1912 games were awarded to Stockholm, and immediately, the 1916 games were awarded to Berlin. While the Berlin Games never took place because of the First World War, there were already concerns about the mounting cost of hosting the Olympics.

In 1920, the games were awarded to Antwerp without any real competitive bid as a gesture of solidarity and recognition of Belgium’s suffering during the war.

In 1924, all of the pent up demand from the war and the uncompetitive bids resulted in six different cities submitting bids: Paris, Amsterdam, Barcelona, Los Angeles, Prague, and Rome.

The games were once again awarded to Paris, and the cost of the game had now increased to over $10 million dollars. However, the condition included the stipulation that Amsterdam get it in 1928.

Los Angeles won the games in 1932 because no one else submitted a bid, something which would repeat itself in the future.

In 1936, however, things changed. Fourteen cities announced their intention to host the games, and in the en,d it came down to Berlin and Barcelona and was awarded to Berlin.

The budget for the 1936 Berlin Olympics was approximately $30 million dollars, equivalent to around $600 million today when adjusted for inflation. The German government, under Adolf Hitler, heavily financed the Games, viewing them as an opportunity to showcase Nazi Germany’s power, efficiency, and cultural superiority to the world.

There was a 12 years hiatus on the summer games. They were supposed to be held in Tokyo in 1940 and London in 1944. They ended up being held in London in 1948, but they became known as the Austerity Games because of the economic problems every country faced after the war.

There were no new venues built, and athletes were housed in the community instead of an Olympic village.

In 1952, everyone assumed that the games would return to the United States. They came out of the war relatively unscathed, and their economy was great.

Five American cities split the vote, and the games were awarded to Helsinki, Finland.

Helsinki’s budget was roughly $14.5 million USD at the time, equivalent to about $160 million adjusted for inflation. Still not as expensive as the game 18 years earlier in Berlin.

However, something then happened that changed everything.

Television.

The 1956 Winter Olympics in Cortina d’Ampezzo, Italy, were the first Games where television rights were sold. It wasn’t a lot of money, and it was only limited to some European markets, but it was a start.

At the 1956 Summer Games in Melbourne, TV rights were sold, but given that it had to be watched live and Australia wasn’t a good location for live television viewing in Europe or North America, TV rights were small.

Satellites still didn’t exist and you couldn’t get live television footage to the other side of the world yet.

The Melbourne Games had a budget of about $50 million in inflation-adjusted dollars.

Rome won the games in 1960. The budget for the games ballooned to about $150 million inflation adjusted dollars, over triple the previous games, and CBS paid $394,000 for the American television rights.

In 1964, marked a major change. The Olympics were now becoming big business, and people all over the world were paying far more attention than they ever did because they could watch it on TV. The 1964 Tokyo Games cost approximately $3 billion in inflation-adjusted dollars, which was more than every other previous Olympics combined.

It included not just event venues but also the construction of infrastructure projects such as Japan’s first bullet train.

The 1968 games in Mexico City weren’t as expensive, at around $1.4 billion inflation-adjusted dollars, but the television revenues were now starting to explode. The IOC made $9.8 million in Mexico City, with the majority of this revenue coming from U.S. broadcasters.

In 1972, just four years later, in Munich, satellite TV was now firmly established, as was color television. People could watch the games live from anywhere in the world. Once again, television rights set new records.

1972 also was the first Olympics where the IOC sold a large number of corporate sponsorships. They had over 200 companies participating. However, the IOC lacked a centralized system for managing sponsorships, leading to inconsistencies, but it showed the potential for another source of revenue.

With the audience for the Olympics growing and revenue from TV and sponsorships climbing, the IOC was now making greater and greater demands from host cities.

The IOC was out to put on a good show, and please their sponsors who provided the revenue, and the host cities had to provide it.

This came to a head with the 1976 Olympics in Montreal. The games cost Montreal about $7 billion US dollars when adjusted for inflation. To pay for the games, Montreal incurred a debt of over $1 billion Canadian dollars, which took 30 years to pay off, and finally paid offin 2006 through a special tobacco tax.

Residents faced decades of higher taxes, and the Games became a symbol of governmental mismanagement and inefficiency.

Public skepticism about hosting large-scale international events grew in other countries.

However, TV rights for the 1976 games hit $25 million dollars.

After Montreal, hardly anyone wanted to host the Olympics anymore because they felt that the costs had now exceeded the benefits.

Only two cities bid for the 1980 games. Moscow and Los Angeles. The games were given to Moscow, which used it more as propaganda. It costs an estimated $4.5 billion dollars when adjusted for inflation.

Even though the United States and other Western nations boycotted the games, NBC spent $87 million dollars on the TV rights just for the US market.

When it came time to select a city for the 1984 games, the IOC had a major problem. The 1968 games in Mexico City had political controversies, the 1972 games in Munich had a terrorist attack, and the 1976 games in Montreal were a financial disaster.

When the choice was made in 1978 for the host of the 1984 games, literally only one city offered to do it: Los Angeles. They only agreed to do it if they didn’t have to build anything.

LA still had the Colosseum from the 1932 Olympics, plus many stadiums for professional and college sports teams in the region. They didn’t need an Olympic village because athletes could just stay in dormitories on college campuses.

The LA Games put Peter Uberoth in charge, and he totally changed how the Olympics were run. For the first time in history, the Los Angeles Olympics actually made a profit of a quarter billion dollars. US TV rights alone were $225 million.

The success of the LA games gave the Olympics a big boost. Instead of being a money-losing affair like they were in Montreal, the IOC held out the promise that it could now be a money-making affair.

The 1988 Olympics were awarded to Seoul, South Korea, before the LA games took place, but they still ended up spending $10 billion inflation-adjusted dollars on the games.

The 1992 games were the first ones awarded after 1984, and interest once again increased. Six cities were finalists and the games were awarded to Barcelona.

Barcelona spent about $19 billion dollars adjusted for inflation in what is considered one of the best-run Olympics in history.

The 1996 Olympics in Atlanta was unique for being privately funded, which didn’t leave the city with any long-term burden, and all of the major construction projects were designed to be repurposed from the get-go.

Likewise, the 2000 Olympics in Sydney had a budget of about $10 billion dollars, and it was considered to be an economic success.

Once again, after a run of successful games, the IOC kept upping the requirement for host cities.

In 2004, this came to a head in Athens.

The estimated cost of the Games was originally projected at around $4.6 billion USD, but the final expenses ballooned to approximately $11–$15 billion USD, contributing to Greece’s financial challenges in the years following.

Many of these facilities were underused or abandoned after the Games, leading to ongoing maintenance costs without generating significant revenue.

It was Montreal all over again.

Beijing hosted it in 2008, and it cost them $60 billion, making it the most expensive Games ever. As with Athens, many of the new venues went unused after the games.

London pulled off a slightly more affordable but still expensive games in 2012 with a budget of $17 billion.

In 2014, NBC signed a deal with the IOC to get exclusive TV rights to all Olympic games from 2022 to 2032 in the United States for US$7.65 billion.

The 2016 Rio de Janeiro Olympics faced significant financial problems both during and after the Games. The original bid estimated costs at $8.8 billion USD, but the final expenditure reached $13.2 billion dollars, an increase of nearly 50%.

Like with Athens, they ended up with venues that were never used again after they were built.

The budget for the 2020 Tokyo Olympics was approximately $15.4 billion USD, although some estimates suggest the total costs could have been as high as $20 billion USD when including all related expenses.

The out-of-control budgets and the increased demands by the IOC for hosts began leading to backlash from citizens in the cities that submitted bids. Many cities ended up withdrawing bids after uprisings by voters who didn’t want to pay to host the Olympics.

In 2017, when the time came to award the 2024 games, the IOC had a huge problem. There were only two cities interested in hosting, and there was literally no one who had even shown interest in hosting the games in 2028.

The Olympics had become a boondoggle, often doing more harm than good in the cities that hosted the games. Moreover, many economic studies have shown that the supposed benefits of hosting the Olympics simply didn’t exist.

To avoid the embarrassment of not having anyone interested in hosting the 2028 games, they awarded the games to Los Angeles at the same time the 2024 games were awarded to Paris.

For the third time, Los Angeles would host an Olympics when no one else wanted to do it. Also, once again, they are hosting it under the stipulation that they don’t have to build anything new.

In 2021, the IOC awarded the 2032 Olympics to Brisbane, Australia, which was the longest advance period they ever named a host city, and once again, they were the only city that wanted it.

Likewise, the 2034 Winter Olympics was awarded to Salt Lake City, which was a previous host and the only city that wanted it.

We very well might be reaching a day when no major city wants to host the olympics anymore.

One solution, which actually was first proposed in 1896, would be to create a permanent Olympic venue. A single Olympic city somewhere that would host the games every four years, just like Mount Olympus once did.

If not that, then three of four cities around the world would just rotate the Olympics between them without having to build new venues and infrastructure every time. Maybe adding a new city to the mix once every 20 years.

Whatever the solution, if the IOC doesn’t do something, there might come a time when there is a scheduled olympics and there is no one to host it.