SBJ/July 22-28, 2013/OpinionPrint All
Certainly, other host cities could have spent much more (Beijing’s $42 billion in 2008 comes to mind, although many believe the Chinese actually spent far more) and London 2012 probably could have “pounded it,” but it was appropriately restrained and reportedly stayed under $20 billion.
So when we size up Sochi’s spending, we’re forced to admit the Russians have not been shy … even if much of the investment has come from politically prodded private-sector money. It matters not. What was once a rural town near the Georgian border is well on its way to becoming a world-class beach/ski resort that will draw tourists and outdoor enthusiasts for generations to come.
But is this the right approach for the IOC and the Olympics? Should the staggering amounts spent by the host city-state matter? Will future regions simply cozy up to governmental or private industry underwrites to fill out this trend? It depends on someone’s true (or secret) agenda.
For $80 billion, Alaskan oil money could develop a ski hill and resort destination near Mount McKinley. Or maybe Newfoundland Hydro could do something with the World Heritage Site Gros Morne and turn an environmental jewel into a tourist destination. Think what the Australian mining companies could do with the Great Barrier Reef or Ayers Rock.
It’s not an easy question, particularly when pesky taxpayer dollars are concerned. Still, as usual, we have more than a few comments.
Construction continues on the Olympic stadium in Sochi, Russia, ahead of the 2014 Olympics.
Photo by:GETTY IMAGES
Secondly, and this is a little darker although far from rare, what are the geopolitical ramifications when a country uses the Olympics to make a statement about its wealth, politics or policies? Diplomatic columnists frequently suggested that Beijing 2008 was a “coming-out” party for China’s communist government and burgeoning economy. In short, one of the objectives of the 2008 Games was to show the world that China was truly a first-world country.
Well, mission accomplished. Others have done similar things, including St. Louis 1904, Berlin 1936, Tokyo 1964, Montreal 1976, Moscow 1984 and Sydney 2000. In the case of Berlin 1936, let’s not forget that what lay behind that big investment was the staging of the Games as a platform for German nationalism and a springboard for Adolf Hitler to war. Those efforts ultimately crippled the world for the next nine years (if not more) and forced the cancellation of the Olympics through 1948.
With respect to the U.S., in both 1984 and 1996, American planners made commercial statements in their staging of the Los Angeles and Atlanta Games. But where Los Angeles was praised for its distinctive (and creative) private financing, Atlanta was panned for its engagement of crass investors such as sponsors, merchandisers and licensees.
In retrospect, many in the Olympic movement begrudgingly acknowledged the U.S. helped push the IOC toward a fiscal orientation of profitability and sustainability. Canadian Dick Pound, as longtime IOC vice president of marketing, further modernized IOC strategies and helped steer the Olympic movement toward greater revenue performances.
And thirdly, let’s not forget tourism — key driver of recent mega-event investments — which has become one of the sought-after impacts of any Games. Sydney, Vancouver, Turin, Beijing and, now, Sochi, all focused on this key output throughout the prospecting, bidding and Games-winning phases. We know from our own academic research that Olympic Games do change country images in the minds of international tourists. They work, and Beijing 2008 absolutely changed how Americans and Canadians view China.
So what to make of Sochi’s expensive Games?
There are a few points of view. Financial investment aside, we see Sochi 2014 as a skilled blending of the third point, tourism, with a solid mix of the political. If we’re right, one might say the Russians are building a brilliant disguise. Yes, brilliant.
Russia will put its beaches, mountains, rugged beauty and ability to build a world-class resort in a few years on display. And not only will it host the Winter Olympics but it also will be getting the Formula One Russian Grand Prix and key games during the 2018 FIFA World Cup.
All of that will help the Russians move their image from the old, lingering perceptions of Cold War, vodka, KHL hockey and female tennis players, to that of an industrious country capable of high-level work in a spectacular sea-to-sky world. But is there more to it than meets the eye?
Hard to say. But if you have $80 billion lying around, know that you can do the same for your favorite town.
Rick Burton (email@example.com) is the David B. Falk Professor of Sport Management at Syracuse University and former chief marketing officer for the U.S. Olympic Committee. Norm O’Reilly (firstname.lastname@example.org) is a professor of sport management at Ottawa University and senior adviser at TrojanOne.
10. THE FALLOUT FROM THE SCARLET KNIGHTS: On its own, the issues surrounding the Rutgers athletic department stemming from the behavior of basketball coach Mike Rice would not register on many lists. But the fallout from the story is profound. It, of course, led to the controversial resignation of Tim Pernetti, one of the young progressive athletic directors in collegiate sports, while resulting in the hiring of Julie Hermann from the University of Louisville. While having another woman join the rare club of Division I ADs was a positive step, Hermann’s hiring became mired in controversy and led to close scrutiny over the roles of executive search firms in the recruiting and vetting process of candidates. All of this came as Rutgers is in the delicate stage of going to the Big Ten. Add it all up and there were a number of lessons to all sports organizations.
9. USTA GOES WITH ESPN AFTER HALF-CENTURY WITH CBS: This deal, announced in mid-May, was one that I didn’t anticipate, largely because of the long history CBS had with the late-summer Grand Slam, currently more than 45 years. The 11-year deal worth more than a whopping $770 million proves again to never underestimate ESPN when it comes to its current strategy of locking up championship events. Bottom line: ESPN wanted it more and CBS couldn’t see where it made financial sense to match.
8. FIGHTING FOR THE KINGS IN SACRAMENTO: At its core, this was a tale of dogged persistence and plain old hard work. Most expected the Kings to relocate to Seattle under the ownership of the highly attractive group led by Chris Hansen and Microsoft’s Steve Ballmer. But Sacramento Mayor Kevin Johnson was indefatigable in working his NBA relationships and marshalling local support to meet demand after demand. The final piece was getting Vivek Ranadivé, one of the most interesting executives in team ownership, to leave the Warriors and give Sacramento’s ownership group the wherewithal it needed. Johnson’s skillful diplomacy will serve as the template for cities looking to maintain their professional sports franchises.
7. MAN CITY/YANKEES PARTNER ON MLS: In late May, MLS surprised the industry in announcing New York City FC, a partnership between Manchester City and the Yankees that will begin play in 2015. The franchise fee of approximately $100 million, a new high for MLS, is a figure I still marvel at. On paper, there are a lot of interesting points, and promise, to this deal. The Yankees stepping up to take a stake and put their marketing might behind the team indicates their bullishness about soccer’s potential. To have Man City and its owner, Sheikh Mansour bin Zayed Al Nahyan, serve as lead investor shows a rare confidence by an EPL club in MLS and its viability. Visions of another soccer-specific stadium in New York and a heated rivalry with the Red Bulls round out the potential and promise.
6. THE NFL’s GAME CHANGERS: It was a box-office bonanza for the NFL this spring, but setting aside the cash, two sponsorship deals could be precedent-setting in sports. In May, the league announced a five-year deal with Microsoft worth an estimated $400 million that will put tablets on the sideline for communications, play calling and photo viewing. Two weeks later, the league rolled out a four-year extension with Verizon in a deal valued at $1 billion that allows it to stream every NFL regular-season and playoff game to mobile phones. Both deals represent progressive steps — Microsoft on sidelines, while Verizon committed to improve fan connectivity in-venue. Other leagues will watch these deals and point to the value placed on the mobile rights associated with America’s most popular sports property.
5. JAY-Z WRITING THE NEW RULES: On April 2, rapper and business executive Jay-Z outlined plans to launch Roc Nation Sports, and stunned the sports industry by signing Yankees second baseman Robinson Cano as its first client, to be co-represented by CAA Sports. Cano had been represented by Scott Boras. Ever since that move, Jay-Z’s entry into sports representation has dominated headlines, and he is seen as a threat to the status quo. As his longtime partner Steve Stoute told me, “There needs to be a new sheriff. Scott Boras and those guys, the agents of the past, they had a run.” Jay-Z said recently that his “bigger goal” is for artists “to get their just due, not to get half-ass agents or people who rob them or people don’t care about their finances.” Whether there is more smoke than fire remains to be seen, but this direct shot at the traditional agent-player relationship has many agents concerned that Jay-Z will attract top athletes looking to learn from his success.
4. THE NHL RETURNS AND LOOKS LONG-TERM: A 113-day lockout ended on the morning of Jan. 6, and so did months of ugly, rancor-filled negotiating that didn’t sour the regular season or affect fan avidity. Business metrics, outside of the lost games, were strong in a shortened season, as attendance and ratings were healthy. In the new deal, management touted an improved economic model and term limits on contracts, and players hyped the pension system. But key for me was the length: a 10-year agreement that will allow the league and players to focus on growing the game. That is clearly evident by the plan next year to have a total of six outdoor games, and the goal of bringing in an additional $1 billion of revenue over the next three seasons.
3. THE DODGERS’ $8 BILLION STUNNER: Under its new ownership, the Los Angeles Dodgers continue to rock the financial underpinnings of MLB. In late January, it announced a 25-year deal with Time Warner Cable valued at $8 billion that will lead to the creation of SportsNet LA by American Media Productions, a subsidiary of the team. The deal smashes the standard in local media rights and resets the marketplace, while it continues to be reviewed by MLB over the amount of revenue sharing. Angles to watch: The new channel will be the sixth RSN in the Los Angeles market — How many can a market support? And expect the mega-deal to affect Time Warner Cable’s RSN negotiations in other markets as programmers look for a similar affiliate fee.
2. NFL’S INSIDE ACCESS: Kicking off the World Congress of Sports in Naples, Fla., NFL executive Eric Grubman surprised the full house when he announced a new league mandate that teams install cameras in home locker rooms, with an option to use the video in-stadium during halftime and other breaks in play, as well as on team apps. This application, while not met with praise by teams, still is unsettled and uncertain going into the season, but it’s significant in that it showed the NFL is serious and aggressive in its effort to improve the fan experience. This effort will serve as a test case for other leagues and properties.
1. AEG OFF THE MARKET, AND TIM LEIWEKE LEAVES: The jaw-dropper hit on Thursday, March 14, and marked the end of an era for one of the most aggressive companies to come around sports in a long time. Both the company and the individual have made far fewer headlines since the split. Phil Anschutz’s decision to become more involved in AEG has, not surprisingly, led to a far lower profile for his company, and Leiweke’s move to Toronto to lead MLSE has resulted in a more muted public persona for the talkative and personable executive (last week’s interviews with the Toronto media were a start). Am I the only one who misses the old days when AEG was in the news constantly with business ideas and Leiweke would chime in on major sports stories with provocative perspective?
Stories I’m watching for the second half of 2013:
■ The sale of IMG, likely to accelerate this fall.
■ The launch of Fox Sports 1: I’ll be assessing the quality of its production and programming and how it’s received by the public and media.
■ The NBPA’s search for a leader: Basketball players need a strong, clear voice to lead them, especially with a new commissioner in Adam Silver in 2014. Like with the NHL, this represents an opportunity to grow the business together.
■ The next president of the IOC: I’ll be interested in the background and vision of who will lead the Olympic movement into the future. We’ll find out Sept. 10 in Argentina.
■ Two other stories that, technically, are for next year: The preparations and plans leading up to the Super Bowl in New York City. Finally, I watched the protests in Brazil during the Confederations Cup and will be following how the government looks to quell those before the World Cup.
Those are my highlights. What are yours? Let me know.
Abraham D. Madkour can be reached at email@example.com.