Ever since it was announced the 2012 Olympic Games would be held in London there has been plenty of talk about money: From funding and sponsorship, to the cost of tickets and the effect on the UK economy.
But how do the Olympic figures really stack up? Where does the money come from to build everything, and where does revenue from ticket sales, sponsorship, broadcasting rights and merchandise actually end up?
The £11.3billion needed for London 2012 came from £9.3billion of public sector funding and £2billion from the London Organising Committee of the Olympic and Paralympic Games or “LOCOG” as it’s known.
Public sector funding includes money from central Government (ie taxpayers), the National Lottery and local authorities in London.
It was spent on building venues and infrastructure (£5.3billion), elite sport and Paralympic funding (£400million), security (£600million), regeneration of Lea Valley (£1.7billion), a contingency fund (£2.7billion) and VAT (£800million).
Where LOCOG’s cash comes from
LOCOG is essentially privately funded. It received about £700million from the International Olympic Committee (IOC), £700million from local sponsorship and £600million from ticket sales and merchandise.
From that money it doesn’t have to build venues (that comes from the public sector money) but it does have to organise and run the events.
The opening ceremony alone cost £80million, with LOCOG contributing £40million and the Government £40million.
LOGOC chief executive Paul Deighton told Reuters in March that he expects to break even on the Games. “One way I describe our project is trying to land about £2billion of revenues, with about £2billion of costs,” he said.
So, the money people pay for tickets sales and merchandise at the Olympics basically goes back to LOCOG to help recoup its initial outlay.
The IOC’s cash
The IOC, which organises summer winter and youth Olympic Games, gets its funding through global sponsorship and broadcast deals.
Olympic sponsors are assigned into one of four categories: worldwide and tiers one, two and three.
Worldwide partners include McDonald’s, Proctor & Gamble, Coca-Cola, Acer, Dow, Visa and General Electric. Global sponsors get exclusive Olympic worldwide marketing rights for their money.
It is estimated the IOC has generated about $1billion (£640million) in sponsorship revenue in the current four-year cycle which ends this year 2012.
McDonald’s pays a reported $100m (£64million) for each two-games deal of one winter and one summer games.
LOCOG receives money directly from tier one, two and three “local” sponsors which sponsor the London 2012 games as opposed to the Olympics worldwide.
Among others, tier one sponsors includes Adidas, Lloyds, BA and BT; tier two has Cadbury, Thomas Cook and Cisco; and tier three includes about 27 companies such as Ticketmaster, Eurostar and Thames Water.
Sponsors get a special level of protection under the London Olympic Games and Paralympic Games Act 2006 and the Olympic Symbol (Protection) Act of 1995.
The laws introduce an additional layer of protection around the word "Olympics", the Games' mottoes and symbols, and also ban unauthorised "association". This prohibits non-sponsors from employing images or wording that might suggest a link to the Games.
IOC gets another chunk of finding from broadcasting rights around the world, particularly the US.
US network NBC paid a record $1.18billion (£754million) for the US broadcast rights to the 2012 London Games and $4.38billion (£2.8billion) for the four Olympics from 2014 to 2020.
From these rights sales, the IOC gave LOCOG around £350million.
Where the money goes
With much of the money to host the 2012 Games coming from central and local Government, questions have continually been raised about whether it will be of any benefit to the UK.
The answer is yes, according to a report by Lloyds Banking Group. ‘The Economic Impact of the London 2012 Olympic & Paralympic Games’, concludes that London 2012 will give the UK economy a £16.5billion boost by 2017 with the construction and tourism benefitting the most.
“By 2017” is a key phrase.
The UK is likely to see a negative economic impact in the short term due to the amount of upfront spending needed for infrastructure and security. This will be partly offset by spending by visitors and spectators now the Games are underway.
However, there are fears spending elsewhere in London could fall as locals avoid central London and normal tourists not interested in the Games stay away.
Buildings that last years, not two weeks
Benefits for the economy tend to come over the long term as London takes advantage of the improved transport system and new sports facilities and construction.
According to Lloyds, most of the GDP effect linked to the Games (57%) stems from construction projects occurring before 2012 including the building of the Olympic Park and the development of other sites and venues across the UK as thousands were employed and billions spent.
Games-related tourism across the UK during London 2012 and over the first five legacy years is expected to deliver 12% of the contribution.
Staging the event itself is expected to contribute 6%. The remainder of the impact, 24%, is due to legacy construction activity.
To put a human side to that – 130,000 people have been employed (plus another 70,000 volunteers who didn’t get paid) as part of delivering the Olympic Games.
Updated transport links will help people move around, the Olympic village will be sold for housing in London, much of it affordable for local families.
At a time of austerity, the money spent on London 2012 is providing not only a global celebration of sport, but a financial boost that could help thousands of Britons for years to come.