The 2028 Olympics: The Devil Is In The Detail

Confirming one of the worst-kept secrets in sport, LA bid officials and the IOC revealed the framework for a host city contract for 2028 on Monday. The deal is being hailed as a win for both parties, and for Paris, but the devil is in the detail.

Bid officials in Los Angeles have officially confirmed their intention to host the Olympic and Paralympic Games in the summer of 2028. The city’s bid committee, which had been vying to stage the 2024 Games alongside Paris, will now turn its attentions to hosting the subsequent edition with support from the International Olympic Committee (IOC).

What’s the deal?

The arrangement is predicated on the promise that the IOC will make a US$1.8 billion advance payment to a newly established LA organising committee, which will be tasked with putting all the necessary plans in place for the 2028 Games.

Those funds will be paid ‘in view of the longer planning period and to increase participation and access to youth sports programmes in the City of Los Angeles in the years leading up to the Games’, according to a statement. The figure could, however, rise above US$2 billion when ‘the estimated value of existing sponsor agreements to be renewed and potential new marketing deals’ are taken into account.

Terms of the deal will be considered for approval by the LA City Council and the United States Olympic Committee (USOC) Board of Directors in August. If approved, a three-way agreement between the IOC, LA and Paris will be a formality, paving the way for the IOC membership to award the 2024 and 2028 Games in September.

Fourth time lucky for Paris

If the race started out, two years ago, as a contest to land the 2024 Olympic and Paralympic Games, Paris can certainly consider itself the victor. The French capital, which failed in its bids for the 1992, 2008 and 2012 Games, can now look forward to staging its third Olympics on the 100th anniversary of its second, having previously hosted the 1900 and 1924 editions.

For France and its new president, Emmanuel Macron, not to mention Paris mayor Anne Hidalgo, winning 2024 is an unmitigated political triumph. Many observers acknowledge LA had the more financially sound bid but the difficult political situation in the US, characterised by the ongoing tumult in the White House, led many in the IOC to favour the Paris proposal.

There are surely significant challenges to come for a Paris plan that relies on substantial public funding, possesses financial uncertainty and carries the risk of a sometimes precarious security situation in France. But, for now, the French can revel in their victory.

Los Angeles gets its Games – and notable concessions

Much has been made of the fact that the host of 2028 will get at least US$1.8 billion in funding from the IOC, a figure that could rise above US$2 billion. That commitment is not insubstantial, but it is also not particularly unusual and certainly not a handout.

LA already stood to receive around US$1.7 billion from the IOC had it won the 2024 Games. As has been noted, the organisers of Tokyo 2020 will receive at least US$1.125 billion, while the IOC recently trumpeted the fact that it contributed a ‘record’ US$1.53 billion to last year’s troubled Olympics in Rio. The incremental per-cycle rise therefore only seems natural.

As ever, then, the devil is in the detail. More significant to the 2028 hosts is not the IOC’s headline contribution, but the opportunities to earn and save millions of additional dollars as a result of the concessions being made by the Olympic committee.

Under the terms of the proposed 2028 host city contract, LA’s local organising committee will receive an estimated US$437 million from commercial rights and benefits – although that figure is projected to rise by US$200 million through the IOC’s new global sponsorship deals and renewals with existing partners.

LA will also be able to sell domestic sponsorships in categories not filled by IOC global sponsors – a concession that is likely to prove significant given the commercial strength of the US market. Indeed, if LA 1984 was a commercial success, LA 2028 is sure to be hugely lucrative.

Notably, LA’s bid for 2024 included a $487.6 million contingency – money that would have become surplus had the Games come in under their US$5.3 billion budget. For the city’s 2028 proposal, which is sure to be a replica of its ‘low-risk, no-surprises’ 2024 plan, the IOC has waived its right to a 20 per cent cut of any surplus revenue, meaning LA could potentially earn US$100 million-plus in extra revenue.

Meanwhile LA 2028 will get US$898 million from the IOC’s central pot of broadcast income, US$180 million of which will be paid over a five-year period in quarterly instalments of US$9 million. Those payments are intended to cover operational costs during the organising committee’s extended planning period of 11 years instead of the customary seven, and will begin within ten days of its establishment, or on 1st January 2018, whichever comes first.

Additionally – and perhaps most importantly – LA 2028 will also get up to US$160 million in the form of an interest-free loan to support ‘youth and sport-oriented’ projects in the host city prior to the Games. Going into negotiations, which began in April, LA mayor Eric Garcetti publicly identified financial support for community initiatives as one of his top priorities, so achieving that aim will be seen as a sizeable personal coup – even if hosting the 2028 Games is viewed, at least by those outside the US, as the consolation prize.

“This deal was too good to pass up,” said Garcetti, who personally thanked IOC president Thomas Bach and the committee’s members during a news conference at the StubHub Center in Carson, California on Monday. “The entire IOC has truly been a partner. This wasn’t a tough negotiation.”

Garcetti added that the “hundreds of millions of dollars” secured as part of the deal will provide access to sport for “every kid in every zip code” in Los Angeles leading up to the 2028 Games, which will occur after a string of failed US attempts to land sport’s biggest and most prestigious showpiece through the traditional bidding process.

A boon for the IOC

Tying down two wealthy, willing global cities with relatively frugal proposals at the same time is undoubtedly good news for the IOC, which has seen public trust and interest in staging its costly showpiece dwindle in recent times, particularly in its traditional stronghold of western Europe. That prerogative was, of course, the chief reason for why Monday’s announcement was in the works in the first place, and now its assured the committee can plan with greater certainty for the coming 11 years.

Commercially speaking, having Paris go first is a undoubted boon for the IOC – and not merely due to the logistical advantages of a venue within easy reach of the many Swiss-based international federations. LA’s concession satisfies Discovery Communications, the parent company of Eurosport which holds the live rights across Europe to Olympics held between 2018 and 2024 as part of a €1.3 billion deal it signed in 2015. This June Paris-based Eurosport became an official supporter of that city’s bid.

The order of the 2024 and 2028 hosts was also the IOC’s preference partly because the prospect of LA going second should help drive up interest in, and the value of, global Olympic sponsorships, especially among US companies. The IOC would ordinarily sign firms to eight-year deals without knowing which city will host the second summer Games during that cycle, but now they can say with certainty they will be held within the second-largest market in the world’s largest economy.

In 2020, the IOC’s key deals with global sponsors Visa, General Electric and Procter & Gamble are up for renewal. Given that Omega and Alibaba are the only IOC TOP sponsors with deals in place through 2028, Monday’s announcement opens the door for yet more lucrative agreements.

All told, this is the outcome that makes most sense for Bach and the IOC, not least since they knew they couldn’t continue to rebuff American advances whilst enriching themselves off US stakeholders such as NBC, whose US$7.65 billion deal for the US broadcast rights to the Games until 2032 remains the most important contract in the Olympic movement.

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