Profitability of the 2020 Tokyo Olympics: A Financial Analysis

The official price tag for the Tokyo 2020 Olympics, as of the time of the game, was USD 15.4 billion. A comprehensive study by the University of Oxford determined that this figure was the most expensive on record. This staggering expenditure raises the question of how this money could have been better utilized elsewhere.

Alternative Uses of Funds

The funds spent on the Olympics could have drastically transformed infrastructure in Japan. According to estimates, a 300-bed hospital would cost approximately USD 55 million. Twelve hundred elementary schools, each costing about USD 13 million, could be built for the same amount. Additionally, 38 Boeing 747s could be purchased for the same sum. This highlights the incredible costs associated with the Olympics and the potential value of these funds in alternative public or private uses.

Public vs. Private Funding

Remarkably, only about USD 6.7 billion of the total cost was funded through public money from Japanese taxpayers. The International Olympic Committee (IOC) contributed USD 1.3 billion, and it subsequently added several hundred million more in response to the pandemic. The University of Oxford's study revealed that all Olympic Games since 1960 have had cost overruns, averaging 172%. The Tokyo 2020 Games, in particular, had an overestimate of 111% to 244%, depending on the cost figure chosen.

Cost Overruns and IOC's Financial Interests

Beyond the initial budget, significant cost overruns were incurred, particularly when the Olympics were postponed. The delay added an extra USD 2.8 billion to the final tally. Moreover, the subsequent ban on fans during the pandemic rendered nearly USD 800 million in ticket sales income virtually non-existent. To offset these losses, the shortfall will likely need to be absorbed by Japanese government entities, such as the Tokyo Metropolitan Government.

Impact on Sponsors and Broadcast Rights

Domestic sponsors, such as Toyota, which is one of the IOC's top 15 sponsors, faced criticism for their investment, particularly since the Games were held during a pandemic. Toyota removed its Games-related advertising from Japanese television due to public dissatisfaction. In contrast, the International Olympic Committee (IOC) emerged relatively unscathed, ensuring broadcast rights income of between USD 3 billion and USD 4 billion. Over 75% of the IOC's income comes from selling broadcast rights, while another 18% comes from sponsors. The IOC's terms in the Host City Agreement favor the organization's financial interests more than those of the local hosts.

Conclusion

The question of whether the 2020 Tokyo Olympics were profitable is multifaceted. While the IOC secured significant financial gains through broadcast rights, the cost overruns and the economic impact on local stakeholders, particularly taxpayers and sponsors, raise significant concerns. The financial interests of the IOC stand in stark contrast to the local economic and social implications of hosting such a monumental event.