SBJ/June 18-24, 2012/Opinion

Deighton balances economic realities with legacy expectations

If you were offered the opportunity to serve as CEO for a Summer Olympic Games and could choose any six-year period in the past century to fundraise for those Games, it’s quite possible 2006-12 would sit squarely at the bottom of your list. Maybe then and during the Great Depression of 1929-35.

Unfortunately for London 2012 CEO Paul Deighton, that luxury of choice wasn’t available. London won the right to host the ’12 Olympic Games in July 2005, and less than a year later, Deighton made the decision to leave his post as Goldman Sachs’ European COO to tackle Europe’s third Olympiad in eight years (following Athens in 2004 and Turin in 2006).

Flash forward six years. London’s Games start next month, and while the North American economy is gaining traction, the past half-decade has been characterized by a global recession with many European countries and businesses hit hard.

Despite these conditions, London (with the 2012 Games, The Queen’s Diamond Jubilee and the English Premier League) might be Europe’s shining star. In fact, a July 2011 research study by Visa Europe
suggested London should see an extra $3.3 billion worth of economic activity from the Games, drawn from direct consumer spending, associated activities meeting demands created by that spending and increased residential income.

Still, a few financial and legacy concerns, most notably a skyrocketing security tab of more than $1.5 billion, have been steadily arising in advance of the opening ceremony on July 27.

Deighton concedes to challenges of the recession but is confident London’s Games will succeed.
Photo by: GETTY IMAGES
“Taking into account costs outside the package, the full cost to the public of the Games and legacy projects is already heading for around £11 billion [$17 billion],” said Margaret Hodge, chair of Britain’s Public Accounts Committee, in March. “The venues and infrastructure of the London Olympic Games are on track to be delivered on time and within budget. However, the £9.3 billion [$14.4 billion] public sector funding package is close to being used up, and we’re concerned whether the running of the Games will be held within budget.”

For Deighton, pre-Games announcements by government officials showing the Games are, for the moment, financially under control is gratifying. But constant hinting that doom awaits or security spending is out of control probably weighs heavily on his mind.

“We are exactly where we want to be,” Deighton said while praising his team’s ability to raise almost $3 billion in sponsorships. “We’re in a great place. That’s not to say there haven’t been challenges along the way and not to say there isn’t much still to be done.”

Deighton emphasized it was not just corporate support that was holding up, but ticket buying as well. Revenue in that space has exceeded expectations on most fronts, and with less than 45 days to go, tickets for 25 of the 26 sports had sold out in the first wave of ticket sales (although new release ticket purchases this month have reportedly been sluggish). Further, merchandise guarantees have been in place with more than 50 licensees since just after the Games were awarded.

On the labor front, the London Organizing Committee for the Olympic Games has more than 6,000 employees on staff and more than 70,000 volunteers getting ready, all 76,000 of them presumably pumping revenue into London’s various pubs and shops. Even better, Deighton suggested all of the Olympic Park venues and other new infrastructure investments have been delivered on time, meeting all requirements for a successful Olympic and Paralympic Games.

That’s impressive, but what about the legacies the London bidders promised the International Olympic Committee when they won the right to host the Games? Could a sluggish economy and tighter government budgets curtail the Games’ final legacy?

In a February report by the House of Commons reviewing preparations to date, numerous elements related to the Games and the British government’s management of taxpayer investments were raised. With an investment from government approaching $17 billion for legacies and the facilities promised, projecting overages (which the government guaranteed to cover) already feels like a full-contact sport.

Most obvious target? Security costs are skyrocketing and seemingly costing new millions each day. In light of London’s 2011 riots, Deighton has been forced to address not only international terrorism but also domestic order. “There are a number of different threats that you get with any event of this scale and prominence,” he said. “Our plan is very comprehensive, very detailed and has components, for example, that were already very focused on any potential public-order threats — though, consistent with any security plan, you’re focused on making it risk-based.”

Parliament’s report also makes clear that only 109,000 British citizens are new regular sport participants, well below the original goal of 1 million new sport participants (by March 2013) — this despite a nearly $700 million investment in participation legacy via the national governing bodies.

It also discusses issues related to legacy (e.g., socio-economic regeneration of East London) and notes clearly “this rings alarm bells about the effective integration of the various legacy plans and about clear accountability to us [Parliament] and the taxpayer. When we return to the examination of the Olympic legacy we expect clarity over precisely who will be accountable to Parliament for delivering the benefits to taxpayers from their significant spending on this program.”

When we asked Deighton about this concept of legacy, he noted the most important driver was to have staged a great Olympiad. In his mind, delivering great Games becomes the catalyst for opportunity. He also emphasized non-sport legacies, like new skills gained, and sustainable jobs in particular are already emerging with strong results. In addition, the plan, which includes breaking even financially, is to keep facility construction to a minimum while maximizing temporary facilities.

Deighton already knows London’s sporting legacy will take longer to ascertain and U.K. residents may bring their traditional skepticism to bear. But at a time when many nearby countries are struggling, London 2012 should deliver one of the most basic Olympian quests: hope for a brighter tomorrow.n

Rick Burton (rhburton@syr.edu) is the David B. Falk Professor of Sport Management at Syracuse University and was chief marketing officer of the U.S. Olympic Committee for the Beijing 2008 Olympics. Norm O’Reilly (norman.oreilly@uottawa.ca) is an associate professor of sport business at the University of Ottawa.


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