The Tokyo Olympics is scheduled for July 23, and all indications signal the controversial Summer Games are finally on track to take place after a yearlong delay.
Though there are some groups opposed to proceeding with the Olympics due to the COVID situation in Japan, the International Olympics Committee (IOC) has said it expects the event to go on as planned, which is good news for not only for the athletes that have trained their entire lives to compete but the host country, companies that broadcast the event and countless advertisers and sponsors.
However, with all the challenges caused by the global pandemic over the past year, costs are mounting, and the Tokyo Olympics is estimated to be the most expensive Olympics on record.
According to the most recent budget estimate released in December by the Tokyo Organizing Committee of the Olympic and Paralympic Games, the official cost of the event was up 22%, to $15.4 billion from $12.6 billion. The $2.8 billion increase was due to negotiating contracts and other necessary changes caused by the pandemic. The original budget for the event in 2013 was $7.5 billion.
Before the postponement, the organizing committee of the Olympic Games estimated the Tokyo Olympics would generate approximately $5.9 billion in revenue, with roughly $3.8 billion poised set to come from domestic and international sponsors.
Despite the high price tag for hosting the Games amid the ongoing COVID crisis, a canceled Olympics could be detrimental to Japan and its economy. Economists project economic losses of $16.4 billion if the Games were to be canceled. Not only would that dent an economy already struggling to find its footing in a global health crisis, but it could also deliver a blow to overall sentiment in the country.
And Japan isn’t the only one that invested heavily in the Olympics. NBCUniversal parent company Comcast paid $4.4 billion for rights to cover the Olympics in the U.S. through 2020 and have agreed to pay $7.75 billion to extend its rights deal between 2021 and 2032.
According to NBCUniversal Chief Jeff Shell, depending on how ratings are, it could be the most profitable Olympics in the history of the company. “We’re pretty optimistic about both the ratings and the economics of the Olympics, and advertisers have embraced it,” Shell said June 14 at a conference.
Meanwhile, Discovery-owned Eurosport paid $1.45 billion for rights to broadcast the Olympics in Europe through 2024.
NBCUniversal plans to air 7,000 hours of Olympics coverage across its TV networks and streaming service Peacock. Before the COVID pandemic pushed the Olympics back one year, NBCUniversal had secured about $1.25 billion in advertising commitments.
For context on how big of a moneymaker the Olympics can be, NBCUniversal logged $250 million in profit from the 2016 Rio Olympics and made $1.2 billion in ad sales, a 20% increase from the 2012 London Olympics.
Advertising demand is looking strong so far, at least in the U.S. Data firm Magna estimates Olympic ad sales are poised to grow 10% to $1 billion. Of that total, linear TV will grow by 8%, to $930 million, and digital ad sales will account for the rest, with 80% growth.
NBCUniversal’s top line will certainly benefit from advertising related to the Olympics, but perhaps the more important contribution from the Olympics will be for Peacock. The company timed the launche of the streaming service around the Tokyo Olympics last year before the event was ultimately delayed. Despite the setback, NBCUniversal pushed ahead with the launch of Peacock in July of 2020.
With the tough competition in the streaming space, exclusive U.S. rights to the Olympics would be a much-needed boost for Peacock. The service has been waiting a year to reap those benefits, and the back-to-back Olympics in Tokyo and Beijing will likely drive a healthy number of viewers to the platform in the months ahead.
The same goes for Discovery and its streaming service Discovery+. The Olympics could play an important role in leveraging additional subscriptions to the nascent streaming platform, especially ahead of its planned merger with WarnerMedia.
“Discovery’s unrivaled scale, coupled with Eurosport’s deep sports expertise, will engage the biggest aggregated audience across Europe during the Games and will be the only places to watch every unmissable moment, every medal and every hero as part of the most comprehensive Olympic Games experience ever,” Eurosport president Andrew Georgiou said.
Numerous companies involved in broadcasting, advertising and sponsoring have a lot on the line with the Tokyo Olympics just around the corner; however, the main concern is whether those economic benefits will outweigh the massive health risk that could come along with it.