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Hosting the Olympic Games: Is it Worth the Hassle?

July 27, 2012 at 12:00 AM EDT
For Britain, money, reputation and national pride all hang upon the success of the 2012 London Olympics. But in the end, will it all be worth it? Ray Suarez speaks with Andrew Zimbalist of Smith College and University of Colorado's John MacAloon about whether investments pay off for host countries of Olympic Games.
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MARGARET WARNER: And Ray Suarez takes the story from there.

RAY SUAREZ: For London, clearly, there is huge money, reputation, and national pride at stake over the next two weeks. When all is said and done, will hosting the Games have been worth it?

It’s a question host cities often find themselves asking, with many different considerations. We will look at some of them with Olympic historian John MacAloon. He’s a professor of social sciences at the University of Chicago who has written widely on the modern games.

And Andrew Zimbalist, an economist at Smith College who has done extensive research on the business of sports.

And, Professor Zimbalist, every four years, cities roll up, line up with their elaborate Olympic proposals and say they are ready to host the Games. Can recent Olympic host cities point to an Olympic plan that worked?

ANDREW ZIMBALIST, Smith College: Well, I think that they work operationally, in the sense that the games happen with few hitches most of the time.

But in terms of working economically, I think probably the last true success story we can point to is 1992 in Barcelona.

RAY SUAREZ: And why is that?

ANDREW ZIMBALIST: Well, basically what happens is that there is an international competition amongst dozens of cities to host the games.

And the cities bid. They offer elaborate plans with fancy, spectacular stadiums and transportation, communication infrastructure investments, security proposals. And at the end of all of the bidding, the cities basically bid away any profit they might have.

And in fact, it’s even worse than that, because the city’s interests are generally hijacked by private interests that will benefit if a city hosts the games. Construction companies, construction unions, architectural firms, investment bankers, lawyers who work for the investment bankers, they form a coalition of private interests that mostly can only gain from the Olympics.

And they push the bidding too far.

Then, once of course the Olympics happens, it’s 17 days of festivals and spectaculars, and then it’s over. You are left generally with a dozen or so permanent venues that have to be kept up and maintained. It might cost $10 million, $20 million a year for that.

And very often, it’s not properly planned. So the Olympic venues are not used or they’re used very infrequently afterwards. The Bird’s Nest in Beijing, was the Olympic Stadium in 2008, is scarcely used right now, even though it cost close to a billion dollars to build.

RAY SUAREZ: Professor MacAloon, with everything Andrew Zimbalist just mentioned, we have been using the phrase too big to fail to refer to big banks. Have the Olympics become too big to stage?

JOHN MACALOON, University of Colorado: Well, that is certainly the main issue on the plate of the International Olympic Committee these days and the debate in backstage international circles.

Putting on a games, quite aside from the legacy economic issues that Professor Zimbalist raised, such an operational challenge and has become exceedingly more so. We forget about Beijing as a model because there you have got complete state control and an unlimited budget, and as a consequence organizational issues were almost nonexistent.

There were other political issues, of course. But for a city like London and for other upcoming cities, things have gotten extremely difficult just to manage.

We actually — in contrast to something that Andrew said earlier, there are only three bidding cities now for the 2020 Games. And two of those, Madrid and Tokyo, have their own serious issues.

So the IOC is very worried that the games are have gotten too big, even for the world’s greatest global cities like London, to easily stage.

RAY SUAREZ: Professor MacAloon, are there intangibles, things on the balance sheet that are a little harder to count, but are definitely a plus for the host city?

JOHN MACALOON: Well, absolutely.

I think the mistake of seeing just the bottom line as kind of a profit and loss sheet — and, incidentally, all recent Olympic Games have at least broken even on the operational side — as was said earlier, the issue is how much do you build.

Cities will take the opportunity to build the political capital to advance infrastructural work, not only building venues — and, increasingly, venues are temporary. Increasingly, they are pre-purposed. Increasingly, the white elephant issue is being handled — but also to move forward ongoing and permanent improvements to infrastructure.

So, London, of its 14 billion or 15 billion pound budget, eight billion to nine billion of that is in permanent improvements to the London transportation system. Arguably, you couldn’t get that political capital, particularly in a time of such austerity, without this large project accelerating it.

So, there is also the issue of political capital to be considered, as there is of moral capital. Do you inspire your citizens? Do you give them a sense of solidarity in tough times that perhaps makes it a little bit easier to go forward? Those are hard things to quantify, but they are everywhere discussed in any place that has held the Olympic Games.

No city known to me that has had the Olympic Games has ever in a post facto poll had a majority declare they were sorry the games had come.

RAY SUAREZ: Andrew Zimbalist, how about NBC? They have paid a huge amount of money to broadcast these Games, but they are doing it in quite a different way.

Instead of shuttling all their viewers and their eyeballs to weekly prime-time programming, nights of Olympic programming, edited, digested, you are able to watch Olympics around the clock on everything from your phone to a theater-sized screen.

ANDREW ZIMBALIST: It’s a very interesting model.

They are spending about $1.44 billion for the rights fees connected to all of that. They have 25 reporters, they have 450 people staff people working the Olympics. They are making an enormous investment.

It’s also the case that the “NBC Nightly News” and various other shows are highlighting the Olympic events. So, it’s kind of taken over the whole channel, the whole network, for a period of several weeks.

At the end of the day, they are going to sell more than a $1 billion in advertising. They are going to be able to promote their fall shows. They will do something for the NBC brand. And, of course, Brian Roberts at Comcast is hoping that it all pays off.

RAY SUAREZ: Professor MacAloon, London is probably one of the best known and most visited cities on the planet.

Is there something different at stake for the next venue, Rio?

JOHN MACALOON: Well, of course there are also cultural differences, but remember that Rio with Carnival is used to large volumes of tourists and visitors and media attention as well.

Basically, I think the problems are shared. The Games have become so huge not because of an increase in athletes or sports events or officials, but because of the extraordinary growth in the member of accredited and non-accredited journalists, 40,000, 50,000 journalists, same 10,000 athletes, and the gigantic entourages that corporate sponsors, world VIPs and the 120 heads of state who will be in London tonight are bringing with them.

This is taxing any city’s, even the most global city’s ability to cope.

RAY SUAREZ: A gargantuan undertaking, to be sure.

John MacAloon, Andrew Zimbalist, gentlemen, thank you both.