Analyzing the commercial contracts of the 2016 Olympics: Who are the winners?
This year, the Olympics are being held in Brazil’s second-most populous city, Rio de Janeiro. The Games celebrate the 31st Olympiad of the modern era - 206 countries with a total 11,239 athletes taking part. All these athletes bring with them entourages of coaches, family, and other support crew and the Olympic events all draw large crowds. So it’s easy to imagine that logistically to provide for all the needs of this mass of people is no easy feat. They all need food to eat, a place to sleep, access to sanitation and clothing. As well as for providing these basic necessities to those present at the Olympic Games a lot of planning also has to go into building appropriate venues for sports and ensuring there will be adequate transportation to and from their locations.
The right to host the Olympic Games is granted to host countries based on various criteria including whether their vision fits within the parameters of that of the International Olympic Committee (IOC), the logistical and financial ability to realize the vision and the legacy hosting will bring - including an assessment of the overall sustainability practices incorporated into the project. Traditionally the host nation is responsible for building and preparing all the venues and arranging security at event facilities, although the IOC does share some percentage of its revenue with the host nation.
The IOC gets most of its revenue from the rights it sells to broadcasters to cover the Olympic Games and contributions from organizations chosen to be official sponsors. There is a tender process by which companies can bid to be chosen as an “Olympic partner” to either broadcast or sponsor the Games. The bidding process for broadcast rights requires submissions on and is assessed on criteria including:
- The ability to meet the highest standards of broadcast quality;
- Capacity to reach the broadest audience on different media platforms;
- Commitment to promoting the values of the Olympic Movement;
- The financial offer.
Similar criteria are considered for deciding who will become official sponsors. You can find a list of some of the current Olympic sponsors here.
In order to ensure the host country fulfills its obligations in hosting the games to the IOC, similar criteria is used by the organizing committees of the host countries in determining which companies are to be awarded contracts for providing services and sponsorship partnerships. A list of those companies that were fortunate enough to secure a place for the Rio 2016 Olympics can be found here.
The IOC also contracts some suppliers directly. These currently include Audi (official car supplier), Nike (official uniform supplier) and Getty Images (official imagery provider).
In addition to companies who contract directly with the IOC and host country Olympic committee, there are many companies who contract with companies who hold these “primary contracts” with the Olympic Games’ committees and with the Olympic teams from individual countries. For example, Behind the Scenes Catering, a San Diego based company has been hired through NBC to serve the international broadcast media along with nine centers that provide hospitality for athletes and sponsors. John Crisafulli, the owner of Behind the Scenes Catering, said that he is expecting to serve 16,000 people daily and will serve staples like hamburgers, pizza, salad, and baked goods, but will also be incorporating the Brazilian culture by providing local dishes such as shrimp bobo, farofa, and feijoada. Similarly, Staples, more commonly known for being one of the most popular office supply chain stores, has provided a lot of the clothing the USA athletes have been wearing in commercials leading up to the main event. They also have provided a lot of other gear such as water bottles, hats and tote bags.
So as you can see with the Olympics there are a lot of contracts, a lot of goods and services being provided for consideration and due to this a lot of “winners” who are not athletes competing in the Games. However, despite the amount of business that the Olympic Games generates, the host nation more often than not runs the event at a loss. Greece, when it hosted the Summer Games in 2004 in Athens, registered a loss of $14-15 billion. Similarly, Italy in hosting the Winter Games in 2006 made an overall loss of $3.2 million. The large cost of hosting the Games and risk of incurring large losses that will never be recouped has led several host countries bidding to host the Games to withdraw their applications. Boston withdrew their bid for the 2024 Olympic Games for this reason as did Oslo, Krakow and Stockholm for the 2022 Winter Olympics.
The issue of cost has led the IOC in recent times to review their master plan to make hosting more desirable prospective host cities and nations. Some examples of the cost reduction suggestions from the plan include promoting the use of existing facilities rather than the creation of new ones, the IOC reviewing the level of services, Games preparation and delivery for cost efficiencies and that the IOC should pay for the logistical costs of bidding. It’s yet to be seen whether this new plan will mean that future host countries come out on top as winners. Let’s hope it prevents the Games from being discontinued.
So what are your thoughts? Do you work with a company who has a contract that is linked to the Olympic Games? How has it impacted your business?
ContractRoom is an online negotiation and contract lifecycle management platform that can assist you in negotiating and managing any type contract, whether it be related to the Olympics, another large-scale event, buying/selling of media rights or anything else related commercial agreement-building. To find out more about ContractRoom visit www.contractroom.com or book a free demo here: .
This article was written with the assistance of Jennifer Tran who is interning with ContractRoom over the summer.