Business of the Olympics

With this year’s Rio Olympics beginning, the big business opportunity that any Olympics presents comes to the forefront yet again.  The business of the Olympics is difficult to match when it comes to a global event that will take place over a short few weeks. Companies both large and small approach the Olympics seeking to boost their business in a variety of ways, including direct sales, endorsements, and sponsorship arrangements. This article will explore some of the different methods in which the big business that is the Olympics takes place.

Corporate Sponsorship
The business of the Olympics includes big corporate sponsorships from companies that want to capitalize on the opportunity to directly advertise their connection to the Olympics.  These include big internationals like The Coca-Cola Company (KO) and McDonald's (MCD) as well as local sponsors like Estacio and Latam Airlines, in the case of the Rio Olympics.  These companies pay substantial sums, as much as hundreds of millions of dollars in the case of Coca-Cola and McDonald's, to be able to use the Olympic brand in their advertising both before and during the Olympics.

Many of the athletes participating in the Olympics have an endorsement agreement of some form provided by a wide variety of companies.  These companies typically have a contract with the individual, or an entire team of athletes, to participate in advertising campaigns or to publicly support their product.

While these businesses do benefit from the Olympics, they are limited in terms of the direct advertising they can undertake.  The International Olympic Committee recognizes the value of their brand so they prohibit companies that don’t sponsor them specifically from even referring to ‘Olympics’ or “Games” in their advertising (at the risk of being sued).

Local Businesses
Local businesses in any city hosting an Olympics are uniquely positioned to see significant economic benefits from the Olympics.  For some businesses, this starts years in advance as they are involved in the construction and development of Olympic venues.
For other businesses, the sudden influx of hundreds of thousands of tourists and athletes that come for the games will generate a significant increase in revenues.  These businesses include everything from hotels and restaurants to street vendors and souvenir shops.

The Local Economy
The impact on the local economy is a hot topic in terms of how the business of the Olympics contributes to a host city or a host country. In general, the local economy will get a major boost both in the lead up before the Olympics and during the games based on the large influx of visitors. This benefits not only the local businesses but also their employees and the businesses that they interact with.  The net benefit to the local economy is a key reason why many cities will seek to host an Olympics.

In addition to the immediate dollars spent, many host cities and countries will benefit for years to come from the infrastructure built to host an Olympic Games.  This goes past the stadiums and event locations and often includes investment in public transport, or in the case of the Beijing Olympics, expansion of an airport.

Critics argue that the benefits locally do not outweigh the massive expenditure that takes place building up for an Olympics and the cost of actually hosting them.  This is becoming more of an issue as each Olympic Games seems to be grander and cost more than the one that preceded it.  However, since so much of the expenditure goes into things like stadiums and infrastructure, it’s arguable that the massive costs do come with long term benefits that are difficult to put a value on.

Overall the business of the Olympics is a very multi-faceted thing to consider, with a great deal of money being spent and earned by a wide variety of businesses.  Most businesses, however, who have the opportunity to be associated with or involved with the Olympics in any way are likely the biggest proponents of the games being hosted, even the street vendors nearby them.
Published on Aug 5, 2016
By Jeffrey Glen

Copyrighted 2020. Content published with author's permission.

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