Money
Tokyo, March 3, 2020 (Reuters/NAN) Concerns are swirling that Japan’s dream of hosting the Tokyo 2020 Olympics could be a fatality of the spread of the new coronavirus.
This has jolted organisers, sponsors, and media firms who have spent billions of dollars in the run-up to the event.
International Olympic Committee (IOC) President Thomas Bach said late last month that the IOC was “fully committed” to holding the July 24 to Aug. 9 Games on schedule.
And a senior Japanese official told Reuters there was no “Plan B”.
Below are the financial and economic factors at risk.
OLYMPIC COSTS
Organisers said in December the Games were expected to cost some 1.35 trillion yen (9.67 billion pounds).
But that figure did not include an estimated three 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, with the IOC contributing more than 800 million dollars.
Organisers say the national government will have paid 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, a discrepancy organisers attributed to differences in the definition of “Games-related” spending.
SPONSORS
The Tokyo 2020 Olympics have generated record domestic sponsorship revenues of more than three billion dollars.
That does not include partnerships with Japanese companies Toyota, Bridgestone and Panasonic, and others such as South Korea’s Samsung.
They have, through a TOP sponsors programme, separate deals with the IOC worth hundreds of millions of dollars.
INSURANCE
Global insurers face a hefty bill if the coronavirus 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 dollars of protection for each Summer Games, which covers most of the roughly one billion dollars investment it makes in each host city.
Insurance sources estimated it would pay a premium of about two to three percent, giving a bill of up to 24 million dollars to insure the Tokyo event.
Analysts with the financial services firm Jefferies estimate the insured cost of the 2020 Olympics at two billion dollars, including TV rights and sponsorship, plus 600 million dollars for hospitality.
MEDIA
NBC Universal in December announced it had already sold more than one billion dollars in advertising commitments in its planned U.S. broadcasts of the Games.
It was on track to surpass 1.2 billion dollars, Variety reported.
The company’s parent, Comcast, agreed to pay 4.38 billion dollars for U.S. 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 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.
It added that 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 percent of gross domestic product (GDP) in 2018.
Research consultancy Capital Economics noted further that this will also be less than 0.2 percent of GDP in 2020.
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 dollars).
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 the chilling impact of the virus on an already struggling Japanese economy, and on global growth if the spread did not peak, means Japan’s GDP can show zero or even negative growth in the July-September quarter,’’ he said.
“A failure to contain the global spread of the virus will scupper a scenario that sees Japan’s economy posting a V-shaped recovery after two quarters of negative growth through March,’’ Jesper Koll, a senior adviser at U.S. asset manager WisdomTree, said.(Reuters/NAN)
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(Edited by Olawale Alabi)
