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An Olympics With Empty Stands Is One of Tokyo’s Bad Options

An Olympics With Empty Stands Is One of Tokyo’s Bad Options

(Bloomberg Businessweek) -- With a $5.9 billion budget and a decade of planning behind it, the 2020 Summer Olympics in Tokyo had been expected to draw 11,000 of the world’s elite athletes and more than 600,000 tourists when it starts in late July. But with the coronavirus spreading rapidly, and Japan having already closed schools and canceled public events, the International Olympic Committee is reportedly assessing its options—including a games with few, if any, spectators.

That prospect is becoming less unthinkable by the day. Some U.S. college basketball, European soccer, and Japanese baseball teams are competing in empty venues. The annual Formula One race in Bahrain on March 22 will be run without any fans. Even the Olympic torch-lighting ceremony, which usually takes place in Greece amid much fanfare, is scheduled to occur this week without spectators.

For organizers, an Olympics behind closed doors may be the best of a bunch of bad options. It would satisfy the athletes and, equally important, the media companies that pay the IOC billions to broadcast the events—but only if they happen.

An Olympics With Empty Stands Is One of Tokyo’s Bad Options

What’s more, in-person fans are a diminishing source of revenue. When Atlanta hosted the 1996 Summer Games, tickets accounted for 25% of the budget. In Tokyo, they are half that. In a sign of things to come, Japan’s bid for the 2022 World Cup included technology to broadcast the matches worldwide using holograms, meaning a packed stadium in Brazil could see the games unfold on the field much like those seeing the real event in Osaka.

• Are TV viewers more valuable?

“If it’s an issue of people physically being unable to go to the games, that’s not as big an issue as people [not] watching the games through broadcasts,” says Harvey Schiller, a longtime sports and media executive who ran the U.S. Olympic Committee from 1990 to 1994. Of the $5.7 billion the IOC earned in the last four-year Olympic cycle, almost three-quarters came from media companies. An additional 18% came from top-tier sponsors, most of which are locked into the Olympics far beyond 2020.

The loser in this scenario is Tokyo. Japanese organizers are on the hook for selling $840 million in tickets. And while the IOC’s partners sign on for multiple cycles, the host committee landed dozens of local sponsorships—worth a record $3.3 billion—specifically for these games.

Sponsors’ planned activities can be substantial. Bridgestone Corp., the only worldwide Olympic partner based in Tokyo, expects to host several hundred customers, partners, and employees during the three weeks of the games. It’s renting a fan experience location in Tokyo Waterfront City with product displays, games, and demos. The official Tokyo 2020 buses will have Bridgestone tires, two new sporting venues will be earthquake-proof thanks to supports made with Bridgestone rubber, and the company has sponsored 75 athletes who can appear in global ad campaigns. For Bridgestone and other big sponsors, those hospitality and promotional efforts lose a lot of their value if few fans turn out in Tokyo.

The local economy was also counting on the games. From 2015 to 2019, more than 80,000 hotel rooms opened in Japan, many in anticipation of the event. The 205-room Moxy Tokyo Kinshicho, a Marriott International hotel in east Tokyo, was entirely booked by a single party for the Olympics, says Seth Sulkin, whose real estate development firm Pacifica Capital developed the hotel. “We expect the prominence of the Olympics to boost Japan’s tourism for years to come,” he says. “That’s one of the reasons it’s critical that it happens—not for the short-term impact, but for the long-term impact.”

Goldman Sachs analysts predicted the Japanese economy would get a $7.6 billion (800 billion yen) lift from the games, including $1.4 billion from inbound visitors and an additional $3.8 billion in domestic spending. If the virus isn’t contained by the end of May and the Olympics are canceled, Goldman estimates the economy could face losses eight times that total not only by losing the direct boost but also from the lingering effect on tourism, domestic consumption, exports, and capital investment.

The number of foreign visitors tripled, to 32 million annually, in the five years after Tokyo won the bid, but it’s still shy of the 40 million target. “People are expecting the Olympics to complete Tokyo’s standing as an international tourism hub,” says Hideo Kumano, an economist at Dai-Ichi Life Research Institute. “Missing that goal would cause irreparable damage.”

The IOC, with a $900 million reserve fund for interrupted games, would likely help backstop the host committee if needed. Both groups have insurance, though both declined to offer coverage details. “We have never discussed canceling the Games,” the host committee wrote in an email. “Preparations for the Games are continuing as planned.”

Empty seats at sporting events are increasingly common. College football attendance has dropped in eight of the past nine years; MLB attendance is down 14% since 2007. But media money has bulked up budgets, and media companies hold evermore sway over decisions. That’s dangerous for the IOC, because empty stands would likely make it tougher to interest prospective host cities. As it is, fewer places want what’s become a dubious honor. Beijing was awarded the 2022 Winter Games over the only other bidder, Almaty, Kazakhstan. The 2026 games had no fully viable bidders six months before the IOC was set to announce a winner. It eventually went jointly to Milan and Cortina d’Ampezzo in Italy.

And there’s another reason that competing in a packed stadium might be critical, even in this broadcast-centric era. “Fans give the impression that the event is highly relevant,” says Rick Burton, former chief marketing officer for Team USA. That’s something money can’t buy. —With Yoshiaki Nohara, Ayai Tomisawa, and Lisa Du

To contact the editor responsible for this story: James Ellis at jellis27@bloomberg.net, Janet Paskin

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