John Coates - President, Australian Olympic Committee & IOC Executive Board Member
Dear Malcolm,
Your article “The Olympic monopoly and why it harms sport” SMH Business Day p.9 20 November 2009
Contrary to your above headline, I believe that the Olympic Games and the way the Olympic Movement is constituted worldwide not only benefits sport but contributes to building a peaceful and better world by educating youth through sport.
But yours is “an analysis from a business perspective” and I will respond accordingly.
In your article you cite Mr Crawford as estimating the “AOC contributed only about AUD33m in direct support to Olympic Teams, National Federations, medallists and their coaches”. Mr Crawford’s source is the AOC’s latest Financial Statements for the year ended 31 December 2008 which being the last year of the summer Olympic quad, includes the totals for the 2005-2008 quad. These and prior Financial Statements and those of the Australian Olympic Foundation (AOF), my President’s Addresses to the AOC
AGMs and Chairman’s Reports to the AOF members are available on the AOC’s website olympics.com.au.
Mr Crawford’s AUD33m figure clearly comprises the following:-The Crawford Report is flawed in that the Panel omitted the AUD2.8m funding the AOC provided to the Olympic Winter Institute of Australia (OWIA) (which employs the coaches and conducts the sports programmes in Australia and overseas for our athletes preparing for the Olympic Winter Games) over the quad in what has become a very successful joint venture with the Australian Institute of Sport, the NSW and Victorian Institutes of Sport and the Australian Sports Commission, which also funds the OWIA.
The Crawford Report is also flawed in its disregard of the remaining AUD10.3m which the AOC spent on its other Program Services over the 2005-2008 quad, comprising:-
I stress that the AOC neither seeks nor receives any funding from the Commonwealth.
The United States Olympic Committee (USOC) and the AOC are the only National Olympic Committees (NOCs) from the developed countries that do not rely on any funding from their national Governments to fund the actual costs of their Olympic Teams. In Australia all State and the ACT Governments generously contribute to the Olympic Team Appeals conducted in their States and Territory.
From the AOC’s Financial Statements you can calculate that the amount of AUD45.6m spent by the AOC on Program Services for the last quad was 64% of our break-even revenue and expenditure of AUD71m and exceeded the total commercial revenue generated for the period.
For the purposes of their report, the Panel commissioned comparisons of the USOC’s and AOC’s accounts by a private group named Gemba whose edited report is included as an appendix to the Crawford Report. At page 19 of the Gemba Report they conclude that “The USOC (at 72%) invests a significantly higher proportion of its revenue into preparing the Olympic Team than the AOC (at 42%)”. In the case of the AOC you will note that Gemba includes a net profit of 35%.
In arriving at this percentage Gemba has not studied or has disregarded the notes to the AOC’s and AOF’s Financial Statements and my AOC Presidents Addresses and AOF Chairman’s Reports which, as mentioned above, were available to it on the AOC website. To this extent Gemba’s report and the Crawford Panel’s reliance on it are flawed and mistaken as is explained at length in the attached note headed “AOC”.
Also, the USOC’s financials are not appropriate for comparison with the AOC as the USOC is alone among all NOCs in receiving a share of the broadcast fees for its territory (12.75%) and 20% of revenue from the worldwide marketing programme known as The Olympic Programme or TOP thus greatly increasing its revenue and enabling it to provide 72% thereof for its Program Services.
The Gemba report also makes the assertion, included in your article that “the Olympics makes it more difficult for sports that see the Games as their pinnacle to raise funds independently.” There is no meaningful analysis of NSOs (NFs) provided in the edited version of the report by Gemba to support this assertion and as an example a review of the continued commercial success of Swimming Australia over many years suggests that this is another flawed assertion by Gemba that has been accepted by the Crawford Panel.
Your final quote from the Crawford Report (again based on the flawed Gemba analysis) is that “restrictions on local groups appear to be more stringent than those in other countries, including the United States.”
These restrictions have their foundation in the following Bye-Law 3 to Rule 41 of the Olympic Charter:-
“Except as permitted by the IOC Executive Board, no competitor, coach, trainer or official who participates in the Olympic Games may allow his person, name, picture or sports performances to be used for advertising purposes during the Olympic Games”.
It is through this Rule that the IOC is able to offer category exclusivity to its 10 TOP sponsors and permit the NOCs to do likewise with their national sponsors. The apparel category has been identified by Gemba at p.20 as the one in which “the USOC has also provided more commercial flexibility to NSOs (NFs) by allowing them to do their own apparel deals”.
From the above revenue analysis, you will appreciate why the USOC only retains the ceremonial apparel revenue and allows its member sports to select their own competition apparel manufacturers.
In Australia, with adidas, Speedo, Karbon (winter), Xtm (winter) and Sportscraft as our competition and ceremonial apparel partners, this has become the AOC’s single largest category source of marketing revenue with the proceeds going to the benefit of our Teams as a whole and the other Program Services detailed above.
The only one of our 29 NFs for London and 6 NFs for Vancouver which has taken issue with the AOC over this treatment is Athletics Australia, a notified client of Gemba, which has a competing apparel sponsor to adidas. However, in terms of significance within the Australian Olympic Team (not, I hasten to acknowledge as an Olympic sport) Athletics only provided 41 of our total 435 athletes for Beijing ranking them behind rowing and swimming. Over the period of the Olympic Games from Seoul in 1988 to Beijing in 2008 Athletics ranks 8th among our 16 sports that have won gold medals, 5th in medals and equal 10th in total medallists among our 23 sports which have won medals (refer attached table).
Furthermore, the supposed impediments referred to by Gemba have not stopped Swimming Australia from concluding their own apparel deal that I am informed is of comparable value to the apparel deal secured by USA Swimming with the same company (Speedo).
Finally the Crawford Panel should have tested the statement at the foot of page 20 of Gemba’s Report that “Other large Olympic Associations including China and Japan, have an Apparel Structure similar to that of the US. The British Olympic Association has the same model as the AOC”. Mr Crawford could have done so by checking with the Secretary-General of the Association of National Olympic Committees (ANOC), Mrs Gunilla Lindberg who would have confirmed in greater specifity than I can that the great majority of NOCs apply the same restrictions as the AOC to their apparel categories.
In preparation for your article you would appear to have gone to the IOC’s website (olympic.org) and particularly the section titled “Revenue Sources & Distribution”. It is unclear whether you dug deeper and went to the section titled “Olympic Marketing Fact File” on the same site.
As your article acknowledges, and as I informed Mr Crawford and his Panel in answer to their questions when the AOC appeared before them on 24 November 2008, the Organizing Committees for the Olympic Games and Olympic Winter Games (OCOGs) keep the gate proceeds from their Games. However, your article does not mention that the OCOGs also receive 50% of the broadcast revenue (after the costs for the Host Broadcaster [refer later]. It is important to note that the USOC receives 12.75% of the broadcast fees paid for its territory, which are more than the total fees paid for the rest of the world.
Separately, the OCOGs receive 50% of the revenue from the IOC’s worldwide sale of marketing rights across about ten business categories under TOP (known as The Olympic Programme). In return for surrendering marketing rights for these business categories in their territories, the 203 NOCs which participate in the Games each receive a share of the 20% of TOP revenue that is allocated to the NOC’s. In the case of the AOC, the share of TOP for the 2005-2008 quad amounted to approximately one-third of our total revenue from sponsorship sales and licensing of AUD34m. For the current quad we expect it will be a slightly smaller percentage of the AOC’s AUD36m target given the payments from TOP are received in USD. The USOC also receives 20% of TOP revenue and the remaining 10% of TOP is retained by the IOC.
So the largest beneficiaries of the broadcast fees and worldwide marketing rights are the OCOGs and together with the gate proceeds and revenue from national sponsorships and licensing in the host countries, this is how they pay for the operating expenses for their Games with the venue and infrastructure costs borne by the host city. In the case of Sydney it was the State of NSW, with contributions for two sporting venues and surplus Defence Department land at Newington from the Australian Government.
For FIFA’s World Cup (which Australia is bidding for 2018 or 2022) and Rugby’s World Cup (which Australia has twice hosted) the organizing committees only retain the gate proceeds. All broadcasting rights fees and worldwide marketing revenue is retained by the “owners” namely FIFA and the International Rugby Board respectively and used for the development of their games worldwide. All venue (and infrastructure) costs are borne by the host country and this is the subject of the debate currently unfolding in Australia as the States look to the Commonwealth for financial support to build or upgrade their stadia.
From the balance of all revenue retained by the IOC and, again, as I informed Mr Crawford and his Panel, you will have seen from the IOC website that it supports the NOCs, International Federations (IFs), International Paralympic Committee (IPC), the Paralympic Games Organising Committees, the World Anti-Doping Authority (WADA), and together with the NOCs and IFs (from the amounts they receive from the IOC) the International Council for Arbitration for Sport and its Court of Arbitration for Sport. Commencing 2010 the IOC will also be funding its Youth Olympic Games and Youth Olympic Winter Games as they are expected to only attract minimal broadcast and marketing revenue in the early years.
From the IOCs total share of revenue from the 2006 Olympic Winter and 2008 Olympic Games, it will distribute USD316m over the 2009-2012 Olympic quad among the 203 NOCs through its world and continental Olympic Solidarity funding programmes. From the 2002 and 2004 Games the AOC received AUD1.08m for Olympic Solidarity and AUD1.23m for our 2006 and 2008 Olympic Teams in the form of Games participation subsidies.
Since Sydney, the IOC has become the Host Broadcaster (or producer of content) of their Games through its joint venture in Olympic Broadcasting Services (OBS) in which it holds 80%. After the costs of OBS are deducted, the 50% payments to the OCOGs are made and the 12.75% of US Broadcast Fees is paid to the USOC, the IOC will pay a total of USD296m to the 26 IFs for their sports on the programme for the London Games and USD121m to the 7 IFs on the programme for the Vancouver Games. The IFs resolve between themselves the recommended break-up of these amounts depending on their profile at the Games (such things as number of events, number of athletes, number of hours, spectators etc). For the summer Games they are broken into four groups with Athletics in the first and receiving the largest amount. I am a member of the International Federation for Rowing’s (FISA) Council. Our sport is in the third category and from the USD296m from Beijing we will receive about USD8m for the 2009-2012 quad. In FISA’s case the money all goes to administer our sport internationally for those four years including the employment of development officers in South America, Africa, Asia and soon Oceania and such programmes as coaching and umpires courses. As a result of this funding, member NFs such as Rowing Australia pay only token membership fees.
I am in London this week but on my return will be pleased to meet and take you through the IOC Consolidated Financial Statements which comply with IFRS Standards and are audited by PricewaterhouseCoopers. Contrary to your assertion that the “IOC publishes very little financial information”, as well as being circulated to all members, the financial statements are presented and discussed at our annual Session (or AGM) which is open to all other stakeholders including IFs, NOCs, IPC, future OCOGs as well as the media.
In response to your criticism “that most of the money is self-sustaining in that it goes one way or another to entities that perpetuate the Games cycle” I have detailed all of the beneficiaries above and wholeheartedly agree with your conclusion. Modern Olympism was conceived by Pierre de Coubertin in 1894 and the Olympic Games and Olympic Movement have never been stronger as recognised by the presence at our recent meetings in Copenhagen of world leaders such as President Obama, President Lula of Brazil, Prime Minister Hatoyama of Japan, King Juan Carlos of Spain, UN Secretary-General, Ban Ki-Moon and Nobel Peace Prize winner, José Ramos-Horta.
The AOC is most concerned that Gemba’s flawed and misleading report found its way into the Appendix to the Crawford Report without the AOC being given the opportunity to correct it before publication.
As a result Gemba and the Crawford Panel by the production and release of their Report have greatly damaged the reputations of the IOC, AOC and me. This has been compounded by journalists, like you, being misinformed and expressing negative views which aggravates the damage to our respective reputations.
As mentioned above, we can discuss these matters when I am back in Australia next week. In the meantime and given the constraints on my time while here in London for meetings of the IOC’s Coordination Commission for the London Olympics, you will note that I am copying this response to your media colleagues Peter Fitzsimons (SMH), Peter Ruehl (Australian Financial Review) and Chip Le Grand (The Australian), Minister Kate Ellis, Shadow Minister Dr Andrew Southcott, the members of the Crawford Panel, the Secretary of the Department of Health and Ageing and my colleagues on the AOC Executive and Athletes Commission.
I am also posting your article and this response on the AOC website to put others on notice of the flawed Crawford Report and the flawed Gemba Report on which the Panel relied.
You may consider publishing this response, in full, in your newspaper.
Regards
John Coates
John Coates AC
President, Australian Olympic Committee & IOC Executive Board Member
Around the Rings Olympics Blog 