Predicting How Much Revenue the Rio Olympics Will Bring In

Rio Olympics

The 2016 Summer Olympics will be held in Rio de Janeiro, which is one of the biggest cities in Brazil as well as one of that country’s leading tourist destinations, thus making it a natural choice for the occasion. However, the event has already been beset by scandal after scandal, partly because the Olympics are always surrounded by scandals and partly because Brazil is undergoing a serious political crisis at the moment between its leading politicians. (1) As a result, it seems reasonable to question whether the Rio Olympics will prove to be worth it or not in the end.

How Much Will the Rio Olympics Earn?

Generally speaking, the Olympics are expected to earn most of its money from TV broadcasting deals rather than the other possible sources of revenue. In short, TV broadcasting deals are expected to earn about 70 percent of all revenue, while sponsorship deals from both domestic and foreign sources make up about 20 percent of all revenue. In contrast, image rights licensing, ticketing, and hospitality make up no more than 5 percent and 3 percent, which make them relatively unimportant in the grand scheme of things. (2)

Assuming that these assumptions will continue to hold true for the Rio Olympics, it is possible to make some rough estimates, which are all that can be managed until better and more accurate information comes out once the event has come to a close. First, TV broadcasting revenues for both the Summer and the Winter Olympics are expected to earn $4.1 billion over the course of four years. Second, Brazil has already announced a number of major sponsorship deals that will add up to about $1 billion, while more are still on their way. Third, it expects that it will earn a domestic revenue of more than $1.5 billion, which is much more than what the 2012 London Olympics managed last time. Summed up, it is clear that the Rio Olympics is projected to earn more than $5 billion, though it remains to be seen whether its assumptions will hold true or not, considering the natural tendencies for exaggeration under such important circumstances as well as the genuine difficulties in predicting the outcomes of important global events such as the Olympics.

Rio

How Much Will the Rio Olympics Cost?

With that said, it is important to note that the Rio Olympics has already cost the country billions and billions of dollars. In fact, some people expect that Rio de Janeiro will have spent more than $25 billion by the time that it has completed all of the new infrastructure for the occasion. (3) Based on purely the Rio Olympics, it seems probable that this will result in a loss for the country, but it is important to note that the thinking is more long-term than that.

After all, many of the countries that choose to host the Olympics are doing so with the expectation that it will increase their future revenues as well as their current revenues, which makes the analysis of costs and benefits a bit more balanced out, but not by much. In a sense, it could be said that the Olympics are a way to convince potential tourists to make that critical first purchase, which will enable them to overcome their initial reluctance to visit a place that is unfamiliar to them and thus make it that much easier to convince them to come back again and again in the future to produce a constant revenue stream. Unfortunately, this is something that is much easier said than done, not least because the Olympics are an enormous draw on their own, meaning that the host cities may or may not be worth it for most of the Olympics visitors on their own. Evidence for this can be seen in the Olympics infrastructure that have gone to waste after the conclusion of the event, as shown by the case of Beijing as well as Athens, meaning that excessive spending on such infrastructure is probably not the best investment that can be made.

Furthermore, it is important to note what could have been done with the money as well as what was actually done with the money. This is the concept of opportunity costs, which is Brazil is missing out on by choosing to invest in the Rio Olympics rather than something else to its liking. This is because billions and billions of dollars are a lot of money, meaning that it could have done a lot of long-term good if it had been invested in other possibilities, assuming that the investment was done with a reasonable degree of competence. As a result, it seems clear that evaluating the Rio Olympics is neither simple nor straightforward because of the sheer number of factors involved in the decision, making it impossible to say whether it will have been worth it or not from a perspective in the long run. After all, opportunity costs are extremely difficult to predict on their own. For example, just because something could have done does not mean that it could have been actually done because while the political will might be there for something as prestigious as the Summer Olympics, chances are good that it would not have been there for less glamorous projects.

Will It Be Worth It?

In the end, it is difficult to say whether the Rio Olympics will have been worth it or not. From a financial perspective, this seems improbable, but it is important to remember that the Olympics encompasses more than just financial considerations. After all, a lot of countries compete for the chance to host the Olympics because they want to show the world that they have made it as a country, with Brazil being no exception to this rule. As a result, it is the Brazilians who will decide whether the Rio Olympics will be worth it or not, though chances are good that they will have a wide range of opinions depending on how it impacts them. Something that has been true of all Olympics.

References:

  1. http://time.com/4271376/brazil-corruption-scandal-olympics/
  2. http://www.totalsportek.com/money/rio-olympics-2016-total-revenue-4-billion/
  3. http://www.nytimes.com/2014/08/10/magazine/does-hosting-the-olympics-actually-pay-off.html

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