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Media to sponsors: What's at stake if Tokyo Olympics succumb to coronavirus

Tokyo 2020's budget is split between the organising committee and local and national governments; the IOC contributed more than $800 million

BS Web Team & agencies 

2020 Tokyo Olympics
Japan’s Olympics Minister Seiko Hashimoto on Tuesday hinted that the Tokyo Games could be postponed due to the coronavirus outbreak

Concerns are rife that the outbreak may sour Japan's dream of hosting the 2020 Tokyo Olympics, jolting organisers, sponsors, and media firms which have spent billions of dollars in the run-up to the event.

However, the "is fully committed to a successful Olympic Games in Tokyo starting July 24", Thomas Bach told Japanese media in a conference call on February 27.

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Japan’s Minister Seiko Hashimoto on Tuesday hinted that the Tokyo Games could be postponed due to the outbreak. While answering a question in the Japanese Parliament, Hashimoto, however, said Tokyo's contract with the (IOC) "calls for the Games to be held within 2020".

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The comments come at a time when the outbreak across Japan and dozens of other countries has fuelled concerns about the Summer Games, with a number of other sports events postponed or cancelled.

Here is a list of what is at risk:

Olympic cost

Organisers said in December the Games were expected to cost some 1.35 trillion yen ($12.35 billion), but that figure did not include an estimated 3 billion yen for moving the marathon and walking events from Tokyo to the northern city of Sapporo to avoid summer heat.

Tokyo 2020's budget is split between the organising committee and local and national governments; the IOC contributed more than $800 million.

Organisers say the national government will pay some 150 billion yen - mainly for funding a new National Stadium.

Japan's Board of Audit, however, put government spending between the bid in 2013 and 2018 at 1.06 trillion yen ($9.81 billion), a discrepancy organisers attributed to differences in the definition of "Games-related" spending.

Sponsors

The Tokyo 2020 have generated record domestic sponsorship revenues of more than $3 billion.

That does not include partnerships with Japanese companies Toyota, Bridgestone and Panasonic, and others like South Korea's Samsung, which through a TOP sponsors programme, have separate deals with the IOC worth hundreds of millions of dollars.

Insurance

Global insurers face a hefty bill if the forces the cancellation of the Games, with estimates of the cost of insuring the showpiece running into billions of dollars.

The IOC takes out about $800 million of protection for each Summer Games, which covers most of the roughly $1 billion investment it makes in each host city. Insurance sources estimated it would pay a premium of about 2-3 per cent, giving a bill of up to $24 million to insure the Tokyo event.

Analysts with the financial services firm Jefferies estimate the insured cost of the 2020 at $2 billion, including TV rights and sponsorship, plus $600 million for hospitality.

Media rights

NBCUniversal in December announced it had already sold more than $1 billion in advertising commitments in its planned US roadcasts of the Games and was on track to surpass $1.2 billion, Variety reported. The company's parent, Comcast, agreed to pay $4.38 billion for US media rights to four Olympics from 2014 to 2020, Variety said.

Discovery Communications, the parent of television channel Eurosport, has agreed to pay 1.3 billion euros ($1.4 billion) to screen the Olympics from 2018 to 2024 across Europe.

During a recent call with investors, Gunnar Wiedenfels, Discovery's chief financial officer, suggested a cancelled Olympics was "not going to have any adverse impact on our financials", Variety reported, adding executives said the company had insurance to safeguard its investment.

Hit to Japan’s economy

Most of the domestic spending on the Olympics has been done, so a cancellation would have minimal impact in that regard, economists said.

A Bank of Japan study in 2016 estimated Games-related spending would peak at 0.6% of gross domestic product (GDP) in 2018 and be less than 0.2% of GDP in 2020, research consultancy Capital Economics noted.

Tourism, a major contributor to recent Japanese growth, could take a hit, although economists said the greater threat was from the coronavirus spread itself.

Last year, Japan hosted 31.9 million foreign visitors, who spent nearly 4.81 trillion yen ($43.1 billion).

Nomura Securities had forecast consumption of 240 billion yen from event-related tourism in 2020, which it said would evaporate if the Olympics were cancelled.

Citigroup Global Markets Japan economist Kiichi Murashima said a loss of events-related tourism alone would chip 0.2 percentage points off GDP growth in the July-September quarter against the previous quarter.

But he said the chilling impact of the virus on an already struggling Japanese economy, and on global growth if the spread did not peak, meant Japan's GDP could show zero or even negative growth in the July-September quarter.

A failure to contain the global spread of the virus, would scupper a scenario that sees Japan's economy posting a V-shaped recovery after two quarters of negative growth through March, said Jesper Koll, a senior adviser at US asset manager WisdomTree.

First Published: Thu, March 05 2020. 14:28 IST