With their competition calendars wiped clean, Olympic organizers in the United States say the financial toll of the novel coronavirus is coming into focus and the overall economic impact of the ongoing pandemic promises to be staggering.
The national governing bodies (NGBs) that oversee the individual Olympic sports are nonprofit organizations that have seen their funding sources dry up in recent weeks, as thousands of competitions and events have been canceled or postponed indefinitely. Most rely heavily on membership dues and event proceeds for revenue but have been unable to host competitions during what would normally be a busy season. Max Cobb, head of the U.S. Olympic and Paralympic Committee’s NGB Council, said in an interview this week the lost revenue could reach $100 million.
“With the loss of the season so far - and potential loss of it through much of the summer - we’re looking at an enormous drop-off in membership renewals and huge number of events that have been canceled,” said Cobb, who is chief executive of U.S. Biathlon. “A handful of those events might happen at a later date, but most of that revenue is just never coming back.”
The NGBs have been left to readjust their budgets, scramble for new revenue streams and try to stem their losses. Many have resorted to layoffs, furloughs or pay cuts. Cobb said almost all applied for government payroll protection program and the majority received loans that provide temporary relief.
USA Triathlon, for example, has seen more than 400 of its sanctioned events postponed or canceled in recent weeks, according to Rocky Harris, the body’ chief executive. The organization was granted more than $900,000 in PPP funding, but officials there don’t know when their larger revenue streams might open back up.
Postponing the Tokyo Olympics to 2021 doesn’t mean the NGBs will be made whole a year from now, and many say it’s too early to forecast the lasting damage.
“I’m not sure sort we’ll ever return completely to the way it was before,” said Phil Andrews, chief executive of USA Weightlifting. “For a couple of reasons: one, some people are finding new ways of working; and two, the financial impact of this thing will be felt for years.”
While the organizations are ostensibly charged with grooming elite athletes for the Olympics every four years, their larger mission is to promote their respective sports by supporting thousands of amateur athletes, helping stage and sanction events at all levels. Neither the NGBs nor the USOPC receives government funding, and all of the NGBs have their own business models: largely some combination of membership fees, event revenue, corporate sponsorships and philanthropy.
Of these, membership is key. USA Boxing sees more than half of its revenue from member dues ($3.45 million of $6 million in 2018). USA Swimming brought in nearly $22.78 million from membership fees in 2018, about one-third of its revenue that year. And USA Triathlon had over 125,000 members in 2018, which accounted for nearly half the year’s $18 million of revenue.
And for most NGBs, membership is tied closely to events. If there’s no competition, people feel less incentive to pay membership fees. With the economy suffering and more people out of work, some NGBs fear those numbers will continue to suffer even after events have returned.
“Membership is a discretionary spend. It’s not something you need to survive like food or a roof over your head,” said Andrews. “Where people are running into economic problems, one of the things they’ll have to consider is: Should I renew my membership? That’s not at the top of the list if you’ve just lost your job.”
USRowing brought in $11.7 million in revenue in 2018, more than $6 million of which came from membership, regattas and events. Susan Smith, the interim chief executive at USRowing, said she’s estimating a 25- to 45-percent drop in membership this year and revenue could be cut in half.
Many NGBs are similarly concerned that long-term economic woes will impact corporate partnerships and fundraising beyond the current fiscal year. These financial concerns stretch across the Olympic movement in the United States, and last month, USOPC chief executive Sarah Hirshland sent a letter to the NGB heads and athletes, saying “the reality is we are all feeling the very real impact of both the global covid-19 pandemic and the Tokyo Games postponement.”
The USOPC is planning to finalize an “expense reduction plan” by the end of May and Hirshland has taken a 20-percent pay cut, members of her executive team have taken 10-percent cuts and some employees have been offered voluntary buyouts.
While the USOPC expects to spend $40-50 million less in 2020 than originally projected, those expenses largely shift to 2021 - as does the anticipated influx of money that stems from the Tokyo Games.
“What we know today is that we can expect both a significant delay in our revenue and a decline in the amount,” the USOPC told NGBs in an FAQ memo attached to Hirshland’s letter.
While the NGBs largely see indirect revenue from participating in an Olympics, the USOPC was expecting a windfall of nearly $200 million this summer, its share of U.S. media rights that NBC pays to the International Olympic Committee.
The USOPC distributes about $75 million of that to the NGBs, usually in the form of grants that last from one to four years and traditionally have been intended to support high-performance initiatives.
While this year is roiling NGB budgets, a bigger storm could be on the horizon for many corners of the Olympic movement. If the Tokyo Games cannot take place in 2021, as some health experts in Japan have warned is possible, the USOPC would not receive the nine-figure payout from the IOC.
“The impact of a cancellation would be devastating to our athletes, first and foremost, but also to our financial health and stability,” the USOPC said in its FAQ. “We would survive such a scenario, but the impact would be severe.”
The USOPC does have a $200 million endowment that stems from the 1984 Los Angeles Games but has been hesitant to tap into that as it weathers the current crisis. The organization says that endowment “provides us some security in the event of a ‘worst-case’ scenario.”
“It is important to remember that as difficult as our current situation is, it does not meet that test,” the USOPC said in its FAQ. “We need to retain the ability to deal with things getting significantly more difficult, for example if there were a cancellation of the Tokyo Games.”
Some NGBs have managed to generate new revenue streams and are hopeful they’re tinkering with a blueprint that will sustain business during slower times. Sports such as weightlifting, cycling and rowing, for example, have been staging virtual competitions with competitors using stationary exercise equipment in their homes. Many are also holding online coaching clinics and other educational webinars for athletes, officials and coaches alike.
“If you look at what we’re doing right now, you’d think we’re an education and training company,” said Smith, noting that USRowing has hosted 90 such online events.
Many NGBs worry that there will be added costs to staging events once they can safely resume, such as additional cleaning, security and screening, temperature checks. Some also worry that people might be hesitant to immediately return to competition. USA Weightlifting surveyed its members, and found that 8 percent said they weren’t comfortable returning to competition until a vaccine for the virus was available.
“Maybe that doesn’t sound like a lot, but if you think of it as 8 percent of revenue, it really is,” said Andrews, who’s forgoing his CEO salary while his office is closed and is planning to take a 30-percent pay cut when it reopens.
And it all creates a cloudy picture with many NGBs bracing for further cuts and scaling back plans heading into 2021, a year that will be critical for the Olympic movement in the United States.
“It’s the unknown that is so difficult,” Cobb said. “Things have been changing so quickly. If we think back 1½ months ago what our world was like and then think ahead another month and a half - things could be a lot different. The thing is, none of us know how different.”
