TOKYO 2020 - DELAY IMPACT
Updated: Apr 1
Topic: Japanese Prime Minister Shinzo Abe announced after coming to an agreement with IOC that the Summer Olympics, initially scheduled to begin July 24, will be postponed to 2021 due to the COVID-19 pandemic
Background: It’s the first time in their 124-year modern history that the Olympics have been moved or delayed during peacetime.It has been canceled three times before — in 1916, 1940, and 1944 — and the Winter Games have been canceled twice, in 1940 and 1944, during the world wars. The 2016 Summer Olympics were held in Rio de Janeiro, Brazil, despite the outbreak of the mosquito borne Zika virus. Unlike the Zika virus, however, the coronavirus that causes COVID-19 can be easily transmitted between humans.
Reasons: The IOC's decision comes after weeks of mounting pressure from around the world (Athletes & Countries). Canada and Australia both announced they would not field a delegation for Tokyo this year. the U.S, Norway, Brazil Olympic committee requested the postponement of the competition
Some analysts say that it could be “a huge blow” to the Japan economy, others say the impact may be “modest.”
Oxford Economics’ Stefan Angrick told CNBC in an email:
“The games raise economic activity by triggering construction in the years leading up to the event, and by boosting inbound tourism and associated consumption at the time the Games take place,” Angrick said. “As construction is complete, that impact is already reflected in past GDP data and won’t change. The question then is how a postponement would impact inbound tourism and consumption”
Kathy Matsui, chief Japan strategist (in an interview to CNBC’s Street Signs) agreed that the coronavirus could be a bigger threat than the delay of the Olympic games.
“The Olympics’ impact was only meant to boost GDP by about 0.2 percentage points. “So, in the grand scheme of things, relative to Japan’s overall economy, the impact is not that large,” Matsui explained
In another hand, according to “The Economist Corporate Network 2019”, The direct economic benefits of this iconic event are forecast to range from ¥30trn (US$282bn) to ¥32trn or around 0.6% of real GDP.
With COVID-19 sweeping the globe, Japan is already facing the prospect of recession in 2020. The pre-virus period saw Japan's economy weakened by a global trade slowdown, a major typhoon and a consumption tax hike.
The delay in the Olympic Games and the spread of the COVID-19 pandemic in key markets overseas increases the likelihood that government spending will be on the higher end of estimates, and that a consumption tax suspension or cut may be in the works.
2. Major international events
Postponing the Games until 2021, for instance, risks scheduling clashes with:
· The world championship events of two of the biggest Olympic sports, track and field (August 2021 in Eugene, Oregon, United States)
· and swimming (July 2021 in Fukuoka, Japan)
· In Football, Euro 2020, postponed to the summer of 2021 (June 2021)
3. Financial implications
A one-year delay would trigger about 641 billion yen ($5.8 billion) in economic losses, according to an estimate by Katsuhiro Miyamoto, an honorary professor at Japan’s Kansai University and Nikkei Asian Review.
Japan has spent more than $26 billion to ready Tokyo for the games (Around US$9bn on infrastructure) and the Olympics were supposed to reinvigorate the economy, which shrank an annualized 7.1% from the previous quarter in the three months through December
b. International Olympic Committee (I.O.C)
The I.O.C. could face some financial costs. The Summer Olympics are the I.O.C.’s most significant source of income, money that it distributes to dozens of sports federations and more than 200 national Olympic bodies. A year’s delay could put those payments in doubt.
The I.O.C has insurance to guard against potential disruptions to the Games, and about $2 billion in reserve to keep itself (and its membership) afloat until its next big payday.
The I.O.C. derives roughly half of its revenues from its media partners, and about 75 percent of those come from NBC which in 2014 agreed to pay $7.7 Billion for all the U.S. media rights to the Olympics through 2032.
Brian Roberts, the chief executive of Comcast, which owns NBC:
“The company had insurance to guarantee it would incur “no losses” should the Games be postponed this year”
Neal Pilson, the former president of CBS Sports and I.O.C consultant:
“many deals are set up so that the broadcaster partners do not have to pay the bulk of the fees for each Olympics until just before the Games actually begin”
The IOC takes out around $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%, giving a bill of up to $24 million to insure the Tokyo event.
One group that might absorb the greatest loss from postponement of the games are the insurance companies that sold policies to the IOC, Int. Paralympic Committee, local organizers and other affected businesses. Those companies might end up having to foot much of the bill. Whether a policy will cover a postponement, rather than a cancellation, of the 2020 Tokyo Summer Olympics, and whether a pandemic-caused postponement is contemplated by insurance policies are unknowns.
e. Local & International Sponsors
IOC President Thomas Bach: “All sponsors will retain their sponsorship rights despite the postponement”.
Most affected will be the 66 local Japanese sponsors. Most global Olympic partners are locked into long-term deals that span many Olympic cycles, but the Tokyo organizers leaned on national pride to score an unprecedented level of support from domestic brands such as Asahi beer and Asics sneakers.
“In total, Japanese businesses paid more than $3.3 billion to sponsor the games, triple the previous record for an Olympics”
Toyota Motor Corp. paid 200 billion yen ($1.8 billion) for a 10-year top-tier Olympics sponsorship, according to Japanese media, and is pouring an enormous amount of money and effort on top of that to boost its presence at the games.
Swatch group AG-owned Omega’s Worldwide Olympic Partnership extends through 2032; the watchmaker has been the official timekeeper of the Olympic Games on 28 occasions since 1932.
Swatch Chief Executive Officer Nick Hayek:
“Ironically, Omega’s special “Tokyo 2020” limited-edition timepieces could now become collector’s items. Such pieces can become historical artifacts that seduce collectors”
While many those sponsors plans will remain intact -- even with a delay -- it won’t assuage all the marketers’ concerns. Companies will probably release the products they planned to unveil at the games to much less fanfare.
f. Team sponsors
At a much lower price point are the hundreds of sponsors for each national Olympic team. Team USA, for example has 20; Great Britain has 13.
All these companies are also losing out on the exposure they paid for by investing in the games set to take place this northern summer
There are other entities that rely on payments from the Olympics to finance their operations, including the United States Olympic and Paralympic Committee. The U.S.O.P.C. has a revenue-sharing arrangement with the I.O.C. that gives it about 12 percent of the fees from NBC and roughly 20 percent of the I.O.C.’s sponsorship revenue. A delay could cause a serious financial shortfall for the organization
“The broadcast payments alone account for about half of the U.S.O.P.C.’s revenues”
7.8 million ticket holders at venues, as well as 4 billion-plus television and online viewers. Now, their promotional plans are facing disarray. With the virus slashing into sales and profits, there’s also a very real risk that some companies may pull out altogether -- or no longer be operating.
According to the Japan National Tourism Organization, foreign tourist arrivals declined 58% to 1.08 million in February from the same month last year.
A major worry for hotels and travel agencies is the extent to which they will have to cover cancellation costs.
Conclusion: The world is dealing with a much worst threat than the Olympic games postponement. In the end, the lives of people are far more important than anything else. 472,030 cases are affected by this invisible enemy around the world and 1,307 in Japan only. The latter is experiencing a "super-aging" society. People aged 65 and older in Japan make up a quarter of its total population. These statistics put the country at risk, especially with the virus causing more deaths in this category-age of people.
Moreover, People are locked down in their homes and organizing the Olympic Games in this period will not benefit anyone of them. The Games will keep the name Olympic and Paralympic Games Tokyo 2020 but will be held in 2021. This competition may be next year, a symbol of hope and glory following the cure from this Virus.
- Ricker, T. (2020). The 2020 Tokyo Olympics have been postponed [Online]. www.theverge.com.
- https://www.2020games. metro.tokyo.lg.jp/ 9e1525ac4c454d171c82338 c5a9b4c8a_1.pdf
- www.Newyorktimes.com By Andrew Keh, Matt Futterman, Tariq Panja and Motoko Rich
- https://asia.nikkei.com - RURIKA IMAHASHI, Nikkei staff writer
- www.bloomberg.com by Lisa Due Eben Novy Williams — With assistance by Takashi
- Nakamichi, Corinne Gretler, Takashi Mochizuki, Deena Shanker, and Rick Clough
- www.telegraph.co.uk › Sport › Olympics
- https://www.reuters.com by Noor Zainab Hussain, Carolyn Cohn