New, flexible era for IOC?
New, flexible era for IOC?Published August 7, 2017
Los Angeles has won the 2028 Olympics, and the International Olympic Committee will never be the same again because of it.
By offering the L.A. bid group several key concessions in exchange for giving up its fight for the 2024 Games, the IOC signaled that it’s entered — perhaps by necessity — a new era of flexible, corporate-style dealmaking with potential host cities. Olympic leaders hope the changes will enlist more reliable Olympic hosts, but they undoubtedly increase the power of the IOC executive board at the expense of rank-and-file members, and empower strong cities to demand better financial terms.
|L.A. Mayor Eric Garcetti and LA 2028 Chair Casey Wasserman (left) celebrate being awarded the '28 Games.
“They recognize their bargaining leverage and their market power has diminished, really over the last 15 years but most demonstrably since the 2015 Winter Olympic bids,” said Smith College economist Andrew Zimbalist, an expert in the economics of Olympic bidding and hosting. “They recognize they’re in a difficult position. I don’t think anybody questions there’s going to be changes in the model. The question is how profound and extensive the change will be.”
In 2015, the IOC was forced to choose between Beijing and Almaty, Kazakhstan, for 2022 Winter hosting rights after four viable European cities backed out. Another four cities short-circuited bids for 2024, leaving Paris and L.A. as the only contenders, as word continued to bubble up from elsewhere that future bids would be politically difficult.
The message from Olympic circles last week was “win-win-win.” They say all three parties — Los Angeles, rival Paris and the IOC — got what they wanted out of the deal. That appears to be largely true, even if Paris ’24 spokesman Raphael Leclerc strayed off message with a since-deleted tweet crowing about L.A.’s concession, saying: “When your last opponent resolves to throw the sponge, conscious that he could no longer win.”
L.A. failed to win the prize it started out pursuing, but it won a package praised by critics such as Zimbalist and veteran journalist Jens Weinreich, who called it “The best Olympic deal of a host city in history.” L.A. won a $180 million cash advance, a guarantee of at least $200 million in sponsorship revenue growth beyond current estimates, and permission to spend up to $160 million of the IOC’s money on local youth sports initiatives, along with other waived fees.
It didn’t require hardball, bid Chair Casey Wasserman said. “This was never about leverage, or who needs who more,” he said. “Those conversations never came up. That discussion never happened. No one ever threatened that, nobody ever said that. It was about how do we work together to realize an opportunity for both sides.”
Nevertheless, the fact that the IOC negotiated in the first place is notable.
The IOC has never before been concerned about creating multiple winners in the bid process, designed as an all-or-nothing beauty pageant decided by secret vote at arm’s length. The IOC has long insisted the host city contract is not negotiable. Just weeks before the deal was done, IOC President Thomas Bach suggested he felt extra incentives weren’t necessary.
But the simple fact is, the IOC couldn’t risk not making Los Angeles and the U.S. Olympic Committee happy. This also would have been the second Olympics race in a row to have just two finalists, and few cities have declared serious intentions to vie for either the 2026 Winter or 2028 Summer Games. With operational problems, cost overruns and white elephants dominating the legacies of Rio and Sochi, the IOC decided it can’t leave bids to chance and needs to take extraordinary efforts to ensure high-quality options.
For the IOC, the ideal future would be that Paris and L.A. both execute the Games so well they inspire fresh Olympic enthusiasm among global cities, just as L.A. ’84 and Barcelona ’92 did. But that remains to be seen, said Richard Peterkin, an outspoken IOC member from St. Lucia, because the factors aren’t strictly about the Olympics.
“What we really need is a little more stability in the world, a little more growth in the countries that clearly have cities capable of staging the Games, a little more certainty about the ways to avoid bad legacies,” Peterkin said. “We may go back to the old bidding system, but that’s a big if. Because right now the world is still uncertain, unstable, and a lot of cities are vulnerable. The issues that led to what we just did are still present.”
Along with this evolution comes the neutering of the IOC rank-and-file membership. When Bach first floated a trial balloon about a joint award, many IOC members initially objected. But ultimately, they unanimously directed the executive board to begin negotiations with L.A. and Paris, and were prepared to both work with Los Angeles and give up some control.
“I think basically we bought into the double award knowing that there would be some cost in keeping the second balloon afloat an extra four years,” said Canadian IOC member Dick Pound. “You don’t do negotiations of that nature with 100 people participating.”
Securing the “win-win-win” involved some creative messaging designed to address the politics of the changing era. For instance, the IOC’s press release said it would contribute $1.8 billion to the Los Angeles effort in 2028, a conservative estimate of what broadcast and sponsorship revenue would bring in under a standard formula. Using that number, it appears as if the IOC plans to give L.A. just $100 million more than Paris will get, an increase barely above the rate of inflation.
But L.A.’28 says it’ll get at least $2 billion from the IOC, because the $1.8 figure does not include a guaranteed $200 million gain from the mobility sponsorship category also secured in the deal, Wasserman said. It’s an unusual way of framing the numbers — after all, the figures are just estimates of future revenue — but it allows the IOC to tell members and future bid cities that it didn’t change the underlying formula, reserving the right to return to the status quo.
“What has always been important to them, and we understood that before we even started negotiating, is they don’t want to change the paradigm of the way they operate so it sets a precedent for every future bid,” Wasserman said.
“They’ve done this in a way that allows them not to do that, and to not change their fundamental principles.”
But whatever the details of the L.A. arrangement, the momentum inside of the IOC is clearly on the side of more negotiating and handcrafted deals in the future.
Under a separate package of changes agreed to by the IOC in July, the 2026 Winter bid process will also put more authority in the hands of IOC executives. The new process allows for the IOC to advise potential bid cities on feasibility and strategy, solicit bids from cities and even reject bids — all before the cities make any formal commitment to a bid.
Ideally, the result will be that IOC members still have a true vote among multiple high-quality candidates after the consultation. But it’s clear that for the foreseeable future, Bach and his closest allies play the primary role in deciding who gets the Games.