TV deals insulate Olympics from financial woes

Updated: October 17, 2008, 3:46 PM ET
Associated Press

ORLANDO, Fla. -- The Miracle on Ice in the midst of the Cold War. The police and firefighters parading the tattered World Trade Center flag through the stadium in Salt Lake City.

They are two indelible Olympic moments that show how the games can bring America together when things are at their worst -- the sporting equivalent of a warm blanket and a bowl of chicken soup when the nation is down.

With the uncertain economy bringing a sense of despair and anger throughout the United States, that's one of a handful of reasons that leaders in the Olympic movement aren't as worried about their future as some others in the sports world.

It doesn't hurt, either, that the U.S. Olympic Committee and Olympic sports aren't nearly as vulnerable as some to the whims of ticket-buying fans and cash-strapped sponsors as other sports, and that they have most of their key deals -- including the NBC television contract worth more than $2 billion -- secured through the 2010 and 2012 Games.

That makes them, in many ways, recession proof -- or at least recession resistant.

"The Olympic glow is great when you look back on what happened, not as great when you look forward," said Jim Scherr, the CEO of the USOC. "But in general, when you're looking at the future, it helps that we had the good TV numbers we had. That's an indicator of what the public likes. It helps to have a good performance on the U.S. team."

Led by Michael Phelps and his eight golds, the U.S. team won a record 110 medals in Beijing. TV ratings soared -- 214 million viewers over 17 days made it the most-watched event in U.S. television history -- as NBC appeared to get its money's worth from the $900 million it paid to broadcast the games.

All of that bodes well for upcoming negotiations for the 2014 and 2016 Games. Meanwhile, the USOC, as part of a deal with the IOC, will get about 13 percent of NBC's $2 billion in payments for the 2010 and 2012 Games.

The federation is in good financial shape, with revenues of $617 million for the four-year period ending this year, including a reserve that has $63 million more than it did in 2004. Still, Scherr made news last weekend when he said the USOC board was delaying review of its 2009 budget because of the economic uncertainty.

"We're not economists and we don't know how deep the economic recession might become and how it might affect our businesses and the businesses that support us," Scherr said. "What we do know is that we'll have to make some adjustments."

Earlier this year, General Motors announced it would not renew its USOC sponsorship past 2008, leaving a $16 million hole in the USOC budget that it still must replace. GM's decision was made last year, when the company was suffering but well before its stock price fell to the $4 range, the lowest in nearly 60 years.

But negotiations on renewals with AT&T, Home Depot and Bank of America are in the works.

And one sponsor, Anheuser-Busch, has already renewed its deal through 2012.

"You'd almost say the Olympics is an event beyond sports," said the company's marketing executive, Tony Ponturo.

Top Olympic sports also have some key sponsorship deals wrapped up through 2012.

USA Gymnastics makes about $3 million a year in sponsorship and has renewed its biggest contract, with Visa. Other deals with AT&T, Tyson Foods and Adidas are being negotiated.

Though he isn't expecting problems, USAG president Steve Penny rearranged an overseas trip last weekend to be available for any questions, especially those from sponsors, at the USOC's annual Olympic Assembly.

"It's all very good feedback," Penny said. "My way of looking at it is there might be shifts in what each party wants to do and how they want to activate, but we'll be OK."

Doug Logan, the new CEO at USA Track and Field, is optimistic in part because the federation's main sponsor, Nike, has a natural tie-in to his sport and also may not be as vulnerable to shifts in the economy as, say, a bank or a big-ticket item producer.

"If I were selling $750 Zegna suit sponsorships, I'd be concerned about it, but I'm not doing that," Logan said. "The apparel business is getting someone to buy a Dri-fit shirt for $35 and that's still going to be there."

Logan is bullish enough on his sport that he has plans, still in the early stages, to create a regular season and playoffs for American track. He wants to replace the balkanized system of non-Olympic years -- lots of unrelated events strewn across the globe, few of which gather all the top athletes in one place -- with a schedule that fans can follow to build interest leading to the Olympics.

USATF gets about half its $17 million budget from sponsors. Logan thinks that number might grow if names and faces were more recognizable.

"When the Olympics roll around, everyone knows who the hurdler is, but then they hit the mental delete button and forget about it," Logan said. "That's the challenge."

Not all Olympic sports are created equal, however. While track, gymnastics, swimming and skating have lots of sponsorship options, almost all the rest look at other areas for their biggest revenues.

For example, USA Volleyball receives only about 10 percent of its revenue from sponsors. Meanwhile, events like boys and girls championships and high-performance championships account for about 50 percent of the revenue. Another 10 percent to 12 percent comes from club involvement -- things like youth travel teams.

The federation has annual revenues of about $11 million and is looking at a 2009 budget without much growth, after double-digit upticks over the last four years -- a reality of the economic times.

"The concern to us is just generally, the willingness of the American public and the average family to spend discretionary income on out-of-school sports programming and club involvement," said CEO Doug Beal. "It's travel, participation in weekend events and things like that. It's a big part of our membership."

Meanwhile, beach volleyball, one of the five most popular sports on the Olympic program, does not offer much financial benefit to USA Volleyball. That's because almost all the high-level, non-Olympic action is played on a professional tour and, because of USOC rules, the bulk of the money from almost all the apparel deals goes directly to the athletes.

"We've never realized a significant upside to the beach side of the sport from marketing, revenue side," Beal said.

USA Volleyball is similar to all Olympic sports in America in that it gets a decent-sized chunk of its funding from the USOC, which sent a record $38.5 million in direct support to national governing bodies this year.

It means all sports have an interest in the financial health of the USOC.

While the federation considers itself to be in good shape, it is also creating contingency plans in its 2009 budget that include possible cuts in administrative costs. A worst-case scenario could mean job cuts, though in the past, the USOC has pared positions that were funded but not filled.

Scherr said any CEO who wasn't wary about tough economic times would be foolish right now. Still, he thinks the Olympics offer something that no other sports product does.

"Our push is, we're a great value during any time," Scherr said. "The Olympic public cares about our team but cares more deeply in difficult times than in boom times. The values we represent for the value we deliver is significantly higher than other properties. And I think we deliver it better."


Copyright 2008 by The Associated Press

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