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Tokyo offers safe, financially lucrative choice
September 7, 2013 05:15 PM
In choosing Tokyo, the IOC opted to hand the Olympics off to the only city that has hosted the Games before. The 1964 host city offered stability and guaranteed on-time delivery at a time when the IOC has expressed uneasiness about preparations in Rio, which is already behind schedule on many developments for the 2016 Games.
As Tokyo 2020 Bid Committee leader Tsunekazu Takeda said, “Tokyo can be trusted to be (the IOC’s) safe pair of hands and much more.”
The bid’s presenters, which ranged from Crown Princess Masako to Olympic fencer Yuki Ota, emphasized the city’s dependability repeatedly before IOC members. They underscored the business opportunity its city offered, noting that it would deliver the biggest live TV audience, biggest ticket market and $1 billion in local sponsorship. They also highlighted the $4.5 billion they’ve already set aside to cover the costs of 10 venues and other developments necessary to host the Games.
They also tackled the issue of recent nuclear leaks from Japan’s Fukushima power plant, which suffered several meltdowns after the 2011 earthquake. Japan Prime Minister Shinzo Abe assured the IOC that radiation levels in water and food were a hundredth the level that the World Health Organization specified as safe.
“I shall take responsibility to implement programs to render this situation completely problem free,” Abe said.
That seemed to be enough for IOC members. In the end, they opted to roll the dice on the issue of radiation rather than take the Olympics to Istanbul, which had violently put down protests over the summer and recently had 31 athletes test positive for peformance-enhancing drugs, and Madrid, which remains mired in a recession and had a recent doping scandal of its own.
From a business perspective, Tokyo offered the biggest opportunity to drive local revenue. Bid organizers expect to deliver $931 million in local sponsorship, $776 million in ticket sales and $140 million in licensing sales. The organizing committee will retain those revenues.
Sead Dizdarevic, chairman and co-CEO of Olympic hospitality company Jet Set Sports, expects high demand for tickets to a Tokyo Games.
“Core demand for Olympic tickets has been increasing for some time now, and with the election of one of Asia’s most interesting cities, I would anticipate demand to be quite strong,” Dizdarevic said. “Asian interest in attending the Games will be naturally high, and people from other regions will see this as the chance to visit both Japan and the Olympic Games, all in one trip.”
When it comes to the IOC’s business partners, Tokyo had the least to offer. The city’s top hotel rooms cost three times as much as Madrid’s and Istanbul’s comparable rooms, which will make hospitality programs very expensive, and the market is well developed, which means it will be difficult to convert Olympic marketing efforts into gains in market share.
“For those interested in growing their brand, there are great opportunities to develop new brands and products in a developed country, but for existing brands, Tokyo is hard because it’s not a big growth opportunity,” said Davis Butler, a former IOC executive and the founder of the sports marketing agency Encompass International. “Everyone already has market share and it’s hard to move the ticker in a market like that.”
Though multi-national sponsors may not activate as aggressively in Tokyo, U.S. and elite global athletes stand to benefit from the amount of sponsorship spending by Japanese companies, said Olympic athlete representative Evan Morgenstein, who represents swimmer Dara Torres and beach volleyball player Phil Dalhausser.
“Obviously there’s a love affair between the Japanese and American athletes,” Morgenstein said. “They’re treated like royalty over there. I’ve had athletes that have had their best experience in Japan. It’s a place that they love going, and companies that execute over there execute significant programs.”
Of the three options, Japan poses the biggest challenge for NBC. The city is 13 hours ahead of the East coast. That means live events will take place while many viewers sleep, and marquee events will be done as they awake in the morning, which could make it tough to draw viewers to prime-time broadcasts.
To get around that, NBC could push the IOC to schedule some marquee events in the morning as it did during the Beijing Games when swimming was moved to the morning so that it could be shown live in prime time in the U.S.
In a statement, NBC Chairman Mark Lazarus expressed only excitement that the Olympics were returning to Tokyo.
“Tokyo is one of the world’s most fascinating cities, and will provide a spectacular setting for the 2020 Olympic Games,” Larazus said. “Tokyo is particularly special to NBC as our rich Olympic heritage began there with the 1964 Olympic Games.”
The decision also creates an issue for the USOC, which is contemplating a bid for the 2024 Olympics.
Heading into the 2020 selection, Berlin and Paris were mentioned as potential candidates for the 2024 Games. Tokyo’s selection over Madrid ensures that there will be at least one viable European competitor for those Summer Game and creates tough competition for a U.S. city looking to woo votes from the European-dominated IOC.
“You could argue on each case as either good or bad for a U.S. bid, but I believe the USA is in the best position for 2024,” said Harvey Schiller, the USOC’s former executive director.
For additional coverage of the 125th IOC Session, see: SBJ's IOC presidential vote preview, a breakdown of the candidates and a preview of Sunday's Olympic sports vote.