Let the Bailout Games Begin
NBC expects to take a bath and VANOC, rocked by recession, still has its hand out.
Once upon a time, when Vancouver 2010 was an itty-bitty bid, they were called the "Sea to Sky Games."
Then the International Olympic Committee (IOC) gave its seal of approval in 2003, when President Jacques Rogge opened an envelope in Prague and read "Vonn-KOO-vah!"
Hello, Canada's Games.
The years turned to months and months turned to weeks. Now we count the days and hours until the wintry version of the Montreal Olympics.
Welcome to the Bailout Games.
Even with the intense participation of some of the world's biggest corporations, the 2010 Winter Olympics are being held together by government spending -- much of it never contemplated before the economic bubble burst weeks after the 2008 Beijing Games.
A year ago, amid the doldrums of the Great Recession, VANOC's message was all about being the shining light that would guide British Columbia safely through the turmoil of the times because it had a billion dollars to spend. Then came the spring, and chief executive John Furlong's admission that making a profit was unlikely. Canadian Olympic Committee CEO Chris Rudge said in May there would be no financial legacy of Vancouver 2010. Just venues.
VANOC's chief financial officer, John McLaughlin, said it best on June 16th in a teleconference discussing quarterly financial results.
"While some experts are suggesting the worst is behind us, we don't believe we'll see a marked improvement," McLaughlin said.
Not since London 1948, the first Games after World War II, has an Olympic organizing committee faced such daunting economic challenges.
Publicly, VANOC has continuously stated that its sponsors are fulfilling their core obligations of goods, services and cash. But sponsors have not bought all the tickets, hotel rooms, advertising and branded merchandise they were expected to. It was the slow sales of out-of-home advertising coupled with the IOC failure to sign up two more global sponsors that led to the IOC's August pledge to help cover up to $22 million in losses after the Games. Ultimately, B.C.'s taxpayers will be called upon to make the budget balance when VANOC winds up in 2011.
VANOC did its best to cozy up to governments when the private sector's well went dry. Last June, the billboard across the street from its 3585 Graveley St. headquarters thanked all 22 government partners in both official languages. The poster showed the mascots waving the Canadian flag. It was significant, especially because the maple leaf doesn't actually fly outside City of Vancouver-owned property VANOC leases.
So how did it get in this mess?
It was simply not prepared.
When it published the $1.63 billion budget and business plan in May 2007, the word "recession" appeared once in the 196-page document. There it is on page 94, the first of five assumptions. "The Canadian economy will remain relatively strong, with no recession, through Games time."
Hey, times were still good and the party would last beyond 2010, right?
That was just before the summer when the sub-prime mortgage meltdown began to spread across the U.S. The credit crunch was starting. The winds of recession fluttered faintly, but they fluttered. By September 2008 it was a full-force storm. Founding chairman Jack Poole -- who was born in the Great Depression and experienced bankruptcy first-hand in the 1980s recession -- said it best when he called the economic climate "scary."
GM takes a bad turn
Everyone in the media knows that recessions are not kind when advertising is the primary source of revenue. The Olympics are the biggest marketing event in sports -- and advertising is what fuels an organizing committee's operations budget. The five rings aren't sacred when it comes to pragmatic executives and shareholders. Advertising budgets are always the first to be cut when a recession hits.
VANOC postponed, with just two days' public notice, the closed-door Nov. 19 board meeting. That week's world press briefing was the excuse. The delay until the first week of December offered executives and directors a chance to buy time to figure out what the heck was going on.
Rookie Vancouver Mayor Gregor Robertson began the year with a bang, proclaiming Vancouver taxpayers were "on the hook" for the entire cost of the $1.1 billion Olympic Village. An emergency sitting of the legislature granted Vancouver borrowing powers and a TD Canada Trust-led syndicate helped the city out-buy Wall Street's Fortress Credit Corporation.
Fortress' parent, Fortress Investment Group, is the owner of the debt-laden Intrawest, whose jewel is Whistler Blackcomb. If Intrawest can't refinance the $524 million it owes, the site of sledding sports and alpine skiing may be operating under receivership by the time the Games begin.
Sponsors Nortel in January and then General Motors in June sought bankruptcy protection on both sides of the border. While most Nortel equipment was either ordered or installed, GM's brief drive through bankruptcy was a white-knuckle experience. The Pontiacs and Saturns in the VANOC fleet disappeared when those brands were canceled by the automaker. The slimming down was part of the massive $57.6 billion infusion (in U.S. funds) from the Obama administration and $9.5 billion from Ontario and the feds. Indirect government help kept VANOC from going to Hertz or Avis.
When the history of the Vancouver Games is written, the last week of March 2009 will be key. London 2012 CEO Sebastian Coe and Sochi 2014 CEO Dmitry Chernyshenko both traveled halfway around the world to Denver for the SportAccord convention where the IOC executive board was holding its only North American meeting of 2009. VANOC CEO John Furlong didn't make the short trip to the Mile High City -- instead opting to update the IOC via teleconference on March 26.
That's also the date that chief financial officer John McLaughlin sent a letter to Philip Steenkamp, head of the B.C. Winter Games Secretariat, seeking more money for ceremonies and torch relay. The amount was redacted, for fear of compromising business interests.
The provincial government quietly spent another $8 million to rent the fourth floor of the Vancouver Art Gallery for a B.C. Pavilion that wasn't previously planned. It also assumed Paralympic spending. Meanwhile, massive cuts to community arts and sports spending happened before the throne speech declared "the cupboard is bare" with a $2.8 billion deficit budget.
Ottawa also went on a $37 million spree over two weeks in September, including $11 million for Own the Podium, a $10 million Canada pavilion, $7.7 million for bilingualism, $6.2 million for tourism and trade promotion and $400,000 on the Cultural Olympiad.
The year ended on a low note with General Electric (GE) CEO Jeff Immelt telling investment analysts that the Olympics would be a bust. NBC made $70 million on Salt Lake 2002. Vancouver 2010, just 50 km from the Excited States, in a Pacific time zone, will cause the same broadcaster to report a $200 million loss.
Governments, get out your bailing buckets
Canada's rights holder, the CTV/Rogers consortium, has a goal to merely break even. And that includes revenue from t-shirts and tickets to high definition screenings in movie theatres.
Ottawa and Victoria to the rescue -- expect to see tourism promotion ads on American and Canadian Games telecasts, effectively propping up the broadcasters who expected to sell more ads at higher prices.
Enjoy the Bailout Games. You're paying for them.