Financing Olympic Games - Essay Example

?Financing Olympic Games. London was awarded the honor of hosting the Olympic Games and Paralympics games by the International Olympic committeein Singapore in 2005. The 2012 Olympics is scheduled to take place from July 27 to august 12th. And the Paralympics stars on august 29 till September 9. The government Olympic executive which is part of the department of culture media and sport is responsible to run the show and also to look after the overall finances of the games. The public sector non funding package required for the games has increased from 2.375 billion pounds to 3.05 billion pounds. This allocation is mainly to meet the cost of the games preparation. When the central funded elements are included, the total cost to the public purse is estimated to be 9.3 billion pounds. The total budget of the London Olympic organizing committee who is directly responsible for staging the games is estimated to be 2 billion pounds. This is for covering all operational costs. These operational costs are will be met from revenue coming from sale of broadcast rights and ticket sales. The London committee will not finance any sort of capital expenditure. The international Olympic committee requirements necessitate an undertaking that the government is the ultimate guarantor for funding the Olympic Games. The Olympic delivery authority which has been established for ensuring the physical infrastructure has an overall budget of 8.1 billion pounds. However it has been anticipated that the final costs will be around 7.3 billion pounds only. All these budgets are financed by the national lottery which amounts to 2.2 billion, the GLA Olympic council tax percept amounting to 0.6 billion. Other London 0.3 billion and the central government 6.2 billion pounds. The Olympic village which was to be built using public finance is to be sold off after the games. By June 2010 almost three quarters of the required finance was collected by the committees (Berman). . The Olympic movement of the world consists of large global multifaceted organizations with the IOC as its head. The IOC is not a governmental or United Nations organization. Initially the IOC which was run by wealthy people funded the games from its own pocket. But the growth and popularity and increase in the value of broadcasting rights created independent sources to run the games. One of the significant revenues consists of broadcasting rights sale which has grown rapidly during the century. It was around a million dollars in the Rome Games of 1960 and touched 1700 million dollars during the 2008 Beijing games. The growth has been dramatic since the 1960 games. The key element to the increase was the advent of satellite broadcasting which enabled to beam the television signals to homes instantly. It is to be noted that the broadcasting rights for the Olympic Games are totally owned by the IOC and not by the games organizers. Normally a portion of the proceeds probably half is handed over to the organizers. The remaining is distributed to the NOC’s through the Olympic solidarity programmes that is retained by the IOC. Another interesting point here is that out of the total broadcasting rights sold, almost eighty percent is derived through American television companies. The broadcasting companies which pay these huge sums of money are predominantly commercial organizations engaged in generating audiences necessary to attract large advertisers in their networks. This is necessary to recoup their investment on games. But the actual picture states that the broadcasters do not always make the necessary profit from their outlay. Even though there is a large amount of risk in financing the Olympic Games; the broadcasters still pay large amounts of money to the IOC for getting their broadcasting rights (Toohhey&. Veal). Over the years the size of the games has grown up to a considerable extent. Due to this it has been ultimately necessary for the IOC to obtain necessary financial guarantees from the games organizers. In this regard the IOC takes necessary steps. The main among them are; the games are awarded only to a city. It is not awarded to private parties. Demands are put up on the city which hosts the games by the IOC. The Olympic charter is adjusted to meet the rising costs of the Olympic Games. When a city is elected to run the Olympic Games, a contract is signed between the host city and the IOC. This contract stipulates the financial relations between the IOC and the host. All financial responsibilities during the games are to be borne by the host city and the Olympic city organizing committee without prejudice to any kind of liability to the other party. Another important financial decision taken by the IOC over the years was that no bid is to be finalized without obtaining a governmental guarantee regarding finances. This decision was taken by the IOC after the Atlanta Olympics. IOC was against financing the games by private bodies. The IOC apart from stricter financial regulations also demands financial guarantees to prevent a financial failure during the games. However the responsibility of the guarantee is solely restricted in case of fames deficit only. The direct role played by IOC in financial matters is out of question. The IOC is exempted from any kinds of financial obligations during the games. The IOC is just like a franchiser it awards rights and pays attention to the corporate designs and participates in the incomes up to a certain level. However the organizer to the games bears all types of financial risks. If there is profit, IOC usually gets twenty percent (Preuss). Conclusion: Olympics are the only great mega sports event of the entire sporting world. No other games have ever matched its charisma. Its preparation and running requires huge financing. Although the games are controlled by the IOC, it is run by the organizers. Therefore the IOC has made strict regulations in respect to finance with the intention that the games should go on for ever and there should not be any financial irregularity. In the London Olympics of 2012 a new challenge in the history of finances is going to open. If it succeeds, it will show the world new arenas of financial management. Works cited: Berman,Gavin. 2010. Financing the London 2012 Olympic Games Preuss,Holdger. The economics of staging the Olympics: a comparison of the Games. Cheltenham: Edward Elgar publishing. 2004. p12-15  Toohhey,Kristene& Veal Antony James. The Olympic Games: a social science perspective.Oxfordshire: CABI 2007. Read More