Olympics an 'Unequivocal Business Success Story': Pro

The global economic downturn is taking its toll on businesses across the globe, but the organization behind the Olympics — the International Olympic Committee (IOC) — seems to be recession-proof.

Tower Bridge and City of London financial district
Source: Dominic Burke | Getty Images
Tower Bridge and City of London financial district

The IOC has seen its revenue grow steadily. This week it announced its reserves now total $558 million, up over $400 million from the reserves reported in 2001 when it was at just $105 million.

“The Olympics is an unequivocal business success story, unharmed by global recession, sovereign debt woes, and the other economic problems of the moment,” Nicholas Colas from Convergex Group told CNBC.

Broadcasters and advertisers spent $4.9 billion to associate themselves with the London 2012 Olympics as well as the 2010 Vancouver Winter Games, and future commitments to the IOC for upcoming games are already well beyond these results, according to Convergex Group.

“As it turns out, the five-circle logo of the IOC is essentially one of the strongest brands on the planet,” Colas said.

The reason for this success boils down to two fundamental drivers: in the developed economies of the world, the Games represent an opportunity to reach a large audience that has grown fragmented and hard to reach due to everything from the social media to DVR devices. In emerging markets, ever-larger middle classes represent excellent growth opportunities for global brands, Colas explained.

“The Olympics may prove to be the last piece of media content that remains relevant and interesting to the majority of the world’s consumers,” Colas said. He expects TV rights to become more valuable in the future as the consumer base in emerging markets is continuously developing.

Advanced bookings for upcoming games — Winter 2014 in Japan and Summer 2016 in Brazil — already stand at $3.6 billion and the target is to raise over $4 billion. Corporate sponsor revenue for these two events is already at $1 billion, up from the $957 million for London/Vancouver, according to reports from the IOC.

This year’s corporate sponsors, which include Coca Cola , McDonalds , Samsung , Proctor & Gamble , Panasonic and Visa, haveshelled out more than ever, paying the IOC about $1 billion to be able to align their brands with the summer and winter Olympics. In the Olympic cycle of 2005-2008 this number stood at $866 million, and in the 1980s it was $100 million, according to Convergex.

All the money the IOC receives from corporate sponsorships and media rights sales tends to be paid out to national Olympic committees and to the particular city that is sponsoring the Olympics. Of the $4 billion the IOC has received over the last 4 years, London received just over $1.1 billion from the IOC, which is less than 20 percent of what the Olympics will cost, according to Convergex.

Over the last decade the growth of how much it costs to transmit the Olympics has roughly doubled which has been primarly led by the U.S.