Cancelling the Olympics? Huge consequences and a financial quagmire

PTI, May 20, 2021, 10:11 AM IST

Lausanne: Cancelling the Tokyo Olympics in response to mounting public opposition in Japan to holding the Games during the Covid-19 pandemic would be an unparalleled act in peacetime.

It would represent a bombshell for the sporting world and have far-reaching and complex financial consequences.

While the Japanese government and the International Olympic Committee (IOC) say they are confident they can stage a safe Games, opinion polls in Japan show more than 80 percent of residents are opposed just over two months before the opening ceremony.

Formally, the host city’s contract signed by Japanese organisers puts that responsibility on the shoulders of the IOC should there be war or civil disorder, or if it deems that participants’ safety is “seriously threatened or jeopardised for any reason whatsoever”.

The IOC, however, has no intention of cancelling, convinced that a safe and secure Olympics can be held for the 11,000 expected athletes in the Japanese capital.

But calls for a cancellation have been ramping up in Japan, where concern has been expressed at stretched medical facilities and polls show overwhelming support from the local population for a scrapping the Games. The vaccination roll-out in Japan has been slow to get off the ground, and national and local elections are also coming into view.

“The closer we get to the Games, the less control the IOC has: it wants to maintain the fiction that the IOC is the boss, but it will not impose the Games on the Japanese authorities,” says Jean-Loup Chappelet, emeritus professor at the University of Lausanne whose research is focused on the governance of international sport organisations and events.

Entirely “political”, the decision therefore depends on both the Japanese state and the Tokyo Metropolitan Government, even if all parties agree “to a joint announcement with the IOC, as was the case for the postponement decided in March 2020”, Chappelet told AFP.

A large part of the Games budget has already been spent. Re-evaluated at the end of 2020 at $15.4 billion (13 billion euros), more than half of this expenditure is made up of public investments in permanent sites around Tokyo.

A cancellation would reduce operating costs linked to the Games themselves: catering, transport, energy and the rehabilitation of the Olympic Village before it is turned into apartments. But it would also, above all, slash revenues.

Japan has already bitten the bullet on missing out on ticket sales estimated at $800 million (673 million euros) due to the ban on foreign fans. A decision is yet to be taken on whether to allow limited numbers of local fans into venues.

Organisers would also be stuck with an enormous bill: a partial reimbursement for local sponsors to the tune of $3.3 billion, while they would probably have to pay back the IOC’s contribution of $1.3 billion.

The IOC has never divulged what revenues it expects from the Tokyo Games, the reason being the body only publishes its revenues on a four-year cycle. Revenues in the 2013-16 cycle covering the Sochi Winter Games and the 2016 Rio Summer Games touched $5.7 billion.

Three-quarters of those revenues come from broadcasting rights, with insiders estimating that the IOC will receive at least $1.5 billion for Tokyo, a sum it would have to pay back should the Games be cancelled.

The remaining revenues comes from international sponsors and a cancellation would involve detailed negotiations with each partner on how much they could recoup.

There is no doubt the IOC, which only keeps 10 percent of its revenues and has reserves of more than $1 billion, would be hit hard should it be deprived of this financial windfall.

Also in danger would be the entire sports movement since the IOC finances both National Olympic Committees and international federations — and they are already under the financial cosh because of the coronavirus pandemic.

This remains the principal mystery: since the 2006 Winter Games in Turin, the IOC has been insured against the risk of cancellation, “but it is not known whether the policy remained at the original amount, around $900m, or was lowered” as the Lausanne-based body’s reserves swelled, according to Patrick Vajda, head of XAW Sports which specialises in risk management and insurance solutions for sports events.

In any case, indemnity would only cover a part of the potential losses, and there is nothing to say that the Japanese organisers would recoup anything from their side: they have never confirmed that there are covered against a cancellation.

Vajda told AFP that some broadcasters such as NBC in the United States are insured, for amounts not publicly revealed, and some international federations have also been able “to sign up to the IOC’s cancellation policy”.