Olympics and Sporting Events Quiz

Economics of Sports Mega-Events

• Mega-events are characterized by several factors differentiating them from other sporting contests
  • They occur irregularly or infrequently.
  • They command a high level of public interest and media attention, especially at the national or international level.
  • They attract participants or spectators from outside the local region.
• Size is not the sole factor determining whether a sporting contest qualifies as a mega-event
  • The annual Honolulu Marathon attracts about 30,000 runners, roughly half traveling from Japan.
  • It's considered a mega-event despite being smaller than a typical NFL game.
• Some mega-events change locations regularly
  • Summer and Winter Olympic Games
  • World Cups in various sports, such as football, rugby, and cricket.
  • Champions League Final
  • American events (Super Bowl, All-Star games, the US Open golf tournament, and NCAA championships)

Brief History of Mega-Events

• Other mega-events include the World Series, Stanley Cup, and NBA Finals
  • These change locations based on the participating teams.
• Other mega-events always take place in the same location annually
  • Grand Slam tennis tournaments
  • College Bowl games (e.g., Rose Bowl)
  • Major marathons (e.g., Boston, New York, Chicago)
  • Auto races (e.g., Daytona 500, Monaco Grand Prix)
  • Horse races (e.g., Kentucky Derby)
• The Olympic Games were one of four sets of Greek athletic contests
  • The other three were the Pythian, Nemean, and Isthmian Games.
  • The Olympics were first held in 776 B.C. and continued every four years for over a millennium to honor the Greek god Zeus.
• The Modern Olympic Games
  • The first modern Olympic Games in Athens (1896) were small-scale, with only 14 nations and fewer than 250 athletes.
  • Winners were given silver medals, runners-up received copper medals.
  • In 2024 (Paris), over 10,000 athletes representing 204 countries participated in 329 individual events across 32 sports.
  • The Winter Olympics have been held since 1924
    • In Beijing (2022), nearly 3,000 athletes from 91 countries competed in 109 events, 15 disciplines, and 7 sports.
• Initially, only amateurs were allowed to participate
  • Jim Thorpe, a significant US athlete, was stripped of his gold medal in 1912 for playing semi-professional baseball before the Olympics.
• By the 1980s, professional leagues became prominent
  • Fans sought to watch talented professionals participate at the Olympics.
  • Russian hockey team's participation in the 1980 Winter Olympics highlighted the challenge of differentiating amateurs from professionals.

Location

• The IOC selects the host city through a six-year timeframe before the event
• Historically, the IOC favored large cities within the world's richer countries
  • Between 1896 and 1952, every Summer and Winter Games occurred in either Western Europe or the U.S.
  • From 1956 with Melbourne (Australia), the IOC expanded locations to communities within industrialized nations.
  • In 1968, Mexico City became the first developing-world IOC host.
  • Eastern European nations started hosting in the 1980s Summer Games (Moscow) and the 1984 Winter Games (Sarajevo, Yugoslavia).
  • Beijing hosted the 2008 Summer Games and the 2022 Winter Olympics.
  • 2016 Olympics - Rio de Janeiro, South America
• More recent bids have come from outside Western Europe, Japan, Australia, Canada, and the U.S.

FIFA and World Cup

• The FIFA World Cup is the world's other major international mega-sporting event
• Football's first governing body (English Football Association) was formed in 1863. International matches between Scotland and England began in 1872.
• 50 years past this, an international football organizing body (FIFA) was formed in 1904.

Short-Run Benefits of Hosting Mega-Events

• Expected revenue from the event and tourists
• Economic benefit studies claim large boosts for the host economy.
  • The consensus is that sporting events typically demonstrate little significant short-term effects,
    • Revenue streams are similar to teams' revenue (ticket sales, media rights, venue-related, and sponsorships).
    • Organizing bodies, (IOC, FIFA, NFL, etc.), typically retain the majority of revenues.
  • The 2015-2018 Olympics cycle (Rio and PyeongChang) showed IOC earnings of $4.1 billion from television rights and sponsorships.
• Host cities may retain ticket revenue, domestic sponsorships, and licensing money.
• This revenue, however, is often insufficient to cover hosting costs.

Problems with Ex Ante Economic Impact Studies

• Unrealistic projections for visitor numbers and spending lead to poor estimations.
• Examples, like the 2005 NBA All-Star Game in Denver or the 2014 Super Bowl outside New York City, demonstrate the gap between predicted and actual impacts.
• Short-term benefits may be lessened by substitution effects (shifting spending from other activities)
• Crowding out (displacing other activities) also diminishes benefits.
• Leakages reducing the overall multiplier impact

Substitution Effect

• Spending diverted to the mega-event from other local economic activities
• Mega-events generally draw fans from outside the region, thus having smaller substitution effects
• Super Bowl, only 5% of tickets were sold to the host team, and 70% to other teams in the league.

Crowding Out

• Congestion and high attendance numbers for mega-events may reduce the impact on other economic activities.
• Boston Marathon: Traffic and other economic activity limitations to spectators during the events.

Leakages

• Factors that reduce the economic benefits to the host community (e.g., using outside labor to meet demands during the event, that leaves the area after the event)
• These factors diminish the multiplier effect of the event.

Event Analyses

• Recent studies of the economic impact of mega-events use event analysis.
• Studies observe if stock market indexes rise upon announcing that a country will host the Olympics; if they rise, then it's assumed that hosting the Olympics has a positive effect on the economy.

Long-Run Benefits of Hosting Mega-Events

• Positive legacy of infrastructure improvements is a benefit from hosting major events
• Sports facilities and infrastructure development (i.e., new or remodelled stadiums) are usually a primary benefit.
• Hosting creates a demand for new infrastructure, this political will could aid in infrastructure development.
• The Olympics and associated events (e.g., facilities, transportation) may have limited long-term utility beyond the Games' duration.

Advertising and Branding

• Positive publicity could increase a city's profile as a top tourism destination.
• Hosting mega-events (e.g., Olympics, World Cup) can showcase a city/nation on a broader scale, with boosted local tourist numbers.
• Example of Barcelona (following 1992 Games), whose tourist numbers rose quickly.

Costs of Hosting Mega-Events

• Costs of mega-events tend to exceed initial budgets.
• Olympics events usually cost much more than initially predicted.
• Post-events, cities are left with costly infrastructure that may lack demand.
• The costs to host events (e.g., construction) may be higher than other comparable mega-events.
• Bidding process is commonly expensive making the event more costly.

Why Do Cities Continue to Bid?

• Despite the evident problems associated with event hosting, cities proceed with bidding, largely for the following reasons:
  • Institutional reasons (political and economic motivations) drive cities to bid, such as enhancing their image on a national or international scale (e.g., 2000 Olympics in Sydney, 2014 Games in Sochi, Russia).
  • The allure of hosting mega-events (eg. Olympics) can foster local pride and civic engagement, fostering positive connotations associated with the hosting city
• The "all-or-nothing" demand curve concept illustrates how the IOC sets prices and demanded quantities making bidding cities more sensitive to costs while also generating higher amounts of revenue from a given location.

Winner's Curse

• Cities in competitive bidding situations may overbid when they lack absolute certainty about the event's true value, which also means, they may overpay
• The likelihood of cities committing to a substantial expense overestimates their benefit.

Test your knowledge on the history of the Olympics and mega-events with this engaging quiz. Explore topics such as hosting rights, FIFA events, and economic impacts of sports. Challenge yourself to see how well you understand the world of international competitions.