Tokyo Olympics ready to start, but Covid overshadows the world's greatest sports spectacle

Key Points
  • The Tokyo Olympics is set to open Friday, but officials remain cautious due to Covid-19 concerns in Japan.
  • On Tuesday, Tokyo Olympics organizing committee official Toshiro Muto didn't rule out canceling the games at the last minute due to the pandemic.
A man wearing a face mask stands behind the Olympic symbols of the five interlaced rings pictured near the National Stadium in Tokyo.
James Matsumoto, SOPA Images | LightRocket | Getty Images

After a one-year delay, weeks of negative headlines and public backlash, the Tokyo Olympics are set to open Friday.

But that's still a maybe, as Covid-19 continues to cause a disturbance throughout Japan.

It's been quite the task for the International Olympic Committee to get to this point. The Tokyo Olympics was postponed in 2020 due to the pandemic. But following a vaccine, which created optimism about fans attending, the new delta variant of the virus created a setback.

The first positive case hit the athlete's village last weekend, and more than 70 cases have been linked to the Tokyo Games as Japan is under its fourth state of emergency until Aug. 22.

Still, the IOC and officials in Japan have made it clear: the event will go on for now. The budget has already jumped to an estimated $15.4 billion, according to Reuters. And more billions are at stake, mainly a media rights deal with CNBC's parent company, NBCUniversal.

In 2014, NBC and IOC agreed to a $7.75 billion media rights deal to extend their partnership. The current agreement runs through 2032. Add in that spectators are restricted -- a roughly $815 million loss -- officials want to avoid missing the media revenue

"The TV money and partnership money is just too large," said Patrick Rishe, a sports business professor at Washington University in St. Louis. "To use the word 'unprecedented' would underscore just how truly unique this Olympics is going to be."

The logo of Tokyo 2020 is displayed near Odaiba Seaside Park in Tokyo on July 7, 2021, as reports said the Japanese government plans to impose a virus state of emergency in Tokyo during the Olympics.
Kazuhiro Nogi | AFP | Getty Images

Bad headlines ruin the build-up 

Already, athletes who tested positive for Covid withdrew from the games. In addition, as cases in Japan rise, critics continue to suggest canceling the games. And the pressure could be starting to show.

On Tuesday, Tokyo Olympics organizing committee official Toshiro Muto didn't rule out canceling the games at the last minute due to the pandemic.

The IOC has its Covid "playbook," a series of guidelines designed to keep people safe in competition areas. Protocols include daily saliva testing for athletes, and should symptoms show, nasal swab testing will be required. Olympic winners will also receive medals on a tray to limit contact, and there will be no handshaking or hugs allowed during ceremonies. Those who break the rules could face permanent expulsion from the Olympics.

The virus issues aside, the Olympics have struggled against more negative headlines leading into the opener.

The lousy news cycle includes IOC president Thomas Bach's public gaffe on July 13 during his first appearance in Tokyo. On Monday, musician Keigo Oyamada resigned from his position as the composer for the Tokyo Olympics after his alleged past of bullying resurfaced. And this comes months after Yoshiro Mori, a top Tokyo Olympics official, resigned over sexist remarks in February.

Top sponsor Toyota said it would limit its Olympics presence, as public displeasure in Japan about holding the event intensified. The carmaker will still air ads in other markets but will not publicize the event in Japan. Marketing expert Ronald Goodstein called Toyota's decision a "good move." He added the timing to support the Tokyo Games might not be suitable.

Goodstein, an associate professor of marketing at Georgetown University's McDonough School of Business, added "companies that have a large Japanese presence and/or companies that rely on the Japanese market for their sales" could emulate Toyota's move.

"You could've developed a great series of ads for this, but the timing may not be right. It's a medical situation over there. People are going to be tuned into how many people get the virus, how fast it's spreading, and what's going on," Goodstein said. "Sports will still be the main story, but it will not be the only story, and that takes away from the events."

Goodstein's marketing advice to brands: utilize patience.

"Just because you create a series of ads doesn't mean you need to run them," Goodstein said. "See what the world's opinion is during the first week. If it's good, run your campaign. But if it's not there, my suggestion is to fall back and wait until another major event."

Rishe said the negative headlines produced an "abnormal build-up" around athletes participating in the Tokyo Games. And that could subtract from future endorsement opportunities.

Simone Biles competes on the uneven bars prior to the Senior Women's competition of the U.S. Gymnastics Championships at Dickies Arena on June 06, 2021 in Fort Worth, Texas.
Jamie Squire | Getty Images

Money losses at stake for athletes

U.S. Olympic athletes get roughly $37,500 per gold medal, $22,500 for silver and $15,000 for bronze finishes. But it's what happens following the games that's most impactful, as most athletes attract endorsement deals after winning competitions.

Athletes like Usain Bolt (with his $30 million in endorsements) and Michael Phelps have capitalized on the global exposure during their time winning competitions. And current Olympians like gymnastics star Simone Biles and swimmer Katie Ledecky should also do well if they succeed in Tokyo. But for lesser known athletes, Covid could hurt their exposure. 

If the virus continues to disturb, it could impact an athlete's "Q score," which is used to determine popularity and likability "because people won't know who they are," said Goodstein, adding newcomers attempting to build their brands would be the most impacted.

"I don't think we're going to get a huge amount of exposure and ad campaigns this year," Goodstein added.

The thing is, those Q metrics could be positive should viewers tune in.

The Olympics broadcasts remain 'beachfront property' 

Historically, the Summer Olympics has been a massive draw. In 2016, the two-week event in Rio attracted an average of 27.5 million viewers across all NBC platforms and delivered 3.3 billion minutes of streaming video. It brought in roughly $1.2 billion in ad sales for NBC.

For the Tokyo Games, the network is planning more than 7,000 hours of total content, which will feature 41 sporting events, including new competitions such as baseball, softball, skateboarding, surfing and karate. In media circles, some anticipate viewership will decline, especially with no fans in the stands. But experts also suggest NBC would still make money because it's still sports.  

"I still think they will be interest to watch," Rishe said. He added there's interest around USA basketball on both the men's and women's side, as both teams "don't look like shoe-ins [to win] as they have in the past."

Former CBS Sports president Neal Pilson labeled the Olympics, and other high-level sporting events, beachfront property. He said sporting content remains attractable to top paying advertisers, even if ratings decline. The reason: sports still command a large share of TV viewership overall.

"It isn't what it used to be, but sports events remain beachfront property," said Pilson. "NBC doesn't seem to be terribly concerned."

"They've increased the average unit price for the Olympics and Super Bowl," he added. "Audience levels may not be equal to the last summer Olympic games, but your share of the audience will be equal to or as good as the last event."

Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer and Winter Games through 2032