● From our sister site, TheSportsExaminer.com ●
Amid the excitement of multiple U.S. Olympic Trials taking place across the country and Friday’s major announcement of changes in the designated venues for 10 sports for the 2028 Olympic Games came a report to the Los Angeles City Council: the annual report of the LA28 organizing committee.
For those watching the finances and worried – because worrying about money is something many people do – the key paragraphs of the LA28 report narrative were these:
“LA28’s financial health is reflected on the Statement of Financial Position with an ending cash balance of $65.4M million at the end of 2022.
“On the Statement of Activities, revenue in 2022 is $55.2M offset by $142.6M expenses, which results in an annual deficit of $87.4M. The total cumulative deficit is $233.1M. In accordance with generally accepted accounting principles (GAAP), LA28 is required to defer the recognition of significant revenues received ($298.3M through 2022) until the contractual obligations can be performed (e.g. activation of sponsorship and licensing rights at a future date). As deferred revenue becomes recognized in future years, it will offset the current reported deficit.”
Kind of dismal today, hopeful tomorrow, right? The report also added that “LA28’s operating reserves remain healthy due to payments received from domestic sponsorships and licensing partners totaling $175 million.”
The report includes audited financial statements for 2022, which are not of much help, looking at what the status was 18 months ago. But, in the 2023 annual report, LA28 included a new chart tracking cash flow, which provides a limited look at what has been going on. With a second chart in the 2024 report, we can see some interesting comparative results:
Revenues:
● $121.6 million forecast for 2022
● $121.6 million actual in 2022 (variance: 0)
● $181.7 million forecast for 2023
● $179.3 million actual in 2023 (variance: -$2.3 million)
Expenses:
● $137.6 million forecast for 2022
● $138.3 million actual in 2023 (variance: +0.7 million)
● $189.2 million forecast for 2023
● $139.0 million actual for 2023 (variance: -$50.2 million)
The overall budget of $6.884 billion has not changed; LA28 promises a revised budget by the end of 2024. Thus, the numbers for 2025-28 have simply been recalculated to match the existing bottom lines.
But the $50.2 million reduction in expenses for 2023 vs. projections is a good sign. LA28 was told early and often after winning the bid in 2017 to keep spending as low as possible through 2024, because it will have to spend a lot starting n 2025.
That was good advice and the organizing committee listened. Its tax return (IRS Form 990) reported 126 employees at the end of 2022, up from 87 at the end of 2021. That number is a little more than 180 now, as reported in April 2024 at the Association of Summer Olympic International Federations (ASOIF) General Assembly.
That’s not nothing, but it is limited staffing – which includes the full-on sponsorship sales effort – and very few department heads for the major functional areas have been hired and most have not been staffed at all. That will begin to change after the Paris Games conclude. Personnel costs of $34.46 million in 2022 was by far the largest expense item.
Encouragingly, LA28’s revenue streams from sponsorships and licensing have began in earnest:
● $19.11 million in 2021 sponsorship revenue
● $39.52 million in 2022 sponsorship revenue (2.07x)
● $1.39 million in 2021 licensing revenue
● $7.47 million in 2022 licensing revenue (5.37x)
It should also be noted that LA28 is the operator of the joint venture between it and the U.S. Olympic and Paralympic Committee, and is paying $58.0 million per year in quarterly transfers to the USOPC through 2028 (the annual amount will increase to $64.0 million in 2025) with a total amount of $476.1 million. These payments are shown on the LA28 financials as expenses, and were 66.4% of the 2022 deficit.
There are clouds on the horizon, however.
The Host City Contract between LA28 and the International Olympic Committee, signed in 2017, promises payments of $898 million as LA28’s share of the IOC’s television rights sales for the 2028 and a share of the IOC’s sponsorship program (known as TOP). This amount is flexible and not guaranteed:
“for indicative purposes only, based on the experience of the IOC from previous editions of the Games of the Olympiad and without taking into account potential evolutions in the International Programme that may occur after the execution of the HCC (including, without limitation, potential renegotiations or renewals of current agreements covering key product categories which are forecasted to generate an estimated increase of USD 200.000.000 (two hundred million United States dollars) in the amount indicated below), the amount of the OCOG’s share of the net revenues (including cash and value-in-kind) from the International Programme foreseen under §8.1(e), is currently estimated at USD 437.000.000 (four hundred thirty seven million United States dollars).”
It has been widely reported that Toyota, the IOC’s mobility sponsor, will not renew after the Paris Games conclude, which could end up impacting the amount LA28 will receive. And there are worries that the TOP program from 2025-28 will not sign as many partners as from 2021-24 (15). But, following the language of the agreement, the LA28 budget shows $637 million in IOC transfers on sponsorship.
LA28 lost one of its early sponsors, Salesforce, in April, possibly the first time a signed commercial partner had pulled out of a Games. A sponsorship with Cisco was recently announced and more agreements are promised post-Paris; whether the $2.5 billion budget target for the domestic sponsorship program can be met has been questioned.
Those are worries.
~ Rich Perelman
Be the first to comment