ACOG President Billy Payne's construction of a $1.7B company
to put on the Atlanta Games is profiled by David Greising of
BUSINESS WEEK. Greising asks, "How did a man who never attended
an Olympics create a nearly $2 billion corporation out of thin
air?" Payne was "inexperienced [but] he wasn't naive. He knew
... he would have to create a virtual corporation ... Olympics
Inc. -- from scratch."
BABY STEPS: Payne first recruited consultants McKinsey & Co.
to help structure ACOG and prepare a budget. ACOG would have no
government money and "unlike Montreal, Seoul and Barcelona --
where governments underwrote the games -- the nonprofit ACOG
would bear the risk." If problems arose, ACOG creditors "would
be on the hook." But Payne pledged the Games would cost
taxpayers nothing. He initially received an $8M line of credit
from Atlanta banks, but since ACOG "had no assets, banks were
leery" to loan more. But ACOG's COO A.D. Frazier secured ACOG a
$300M line of credit from NationsBank, his former employer, in
part by buying a "custom 'games-cancellation' insurance policy
from a group anchored by Lloyd's of London." With the financing,
Payne looked to revenue, including $540M in corporate
sponsorship, $560M in broadcast rights, $422M from ticket sales,
and $184M from merchandising and other items.
SNAGS: Initially, Payne approved every expenditure, and the
building of several structures made the "need for cash even more
astute." That forced Payne to sell off domestic TV rights to NBC
for $456M, "far below" the $600M he once predicted. The IOC's
Dick Pound says ACOG could have earned "far more" if it waited
until '96. Pound says the IOC will "never again award the games
to a city with no government backing, citing ACOG's financial
high-wire act."
TO THE WIRE: As the Games approach, ACOG's "financial
cushion is wearing worrisomely thin: around $30M, down from $50M
last year. Price Waterhouse predicts a "slim" $13M profit, as
ticketing and merchandising won't hit targets -- "partly due to
the marketing flop of Olympic mascot Izzy and the slower than
expected ticket sales of nonmarquee events." Some sponsors feel
ACOG's "lack of a financial safety net has made it too short term
oriented." David D'Alessandro, VP/Hancock Life Insurance:
"They're worried about being heralded as successful at pulling
off the games. They could care less about the Olympic movement"
(BUSINESS WEEK, 4/29).
