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Olympics feel pinch but no panic from downturn

Nov. 06, 2008, 7:21 p.m. (ET)

LONDON(AP) Stocks markets and oil prices may dip and dive, but Olympic organizers with preparations under way for three games in the next six years aren't breaking a sweat.

The reasons? Time and television money.

The global economic downturn has squeezed private financing for venues that will be a part of London's 2012 Summer Games and Sochi's 2014 winter edition, but with brisk ticket sales for the 2010 Vancouver Olympics and most of the sponsors locked in, the IOC can afford to hold off making new deals for television rights and sponsorships.

“All of us feel this,” said Gerhard Heiberg, head of the International Olympic Committee's marketing commission. “Of course, this has an impact for everyone in the world. It never comes at a convenient time. But we don't feel we are affected too much in general. Things are moving everywhere in the right direction. Some things may take longer than originally hoped.”

The financial pinch comes as IOC president Jacques Rogge seeks another term that will keep him in office until 2013. He says the committee is closely monitoring the financial situation.

“It would be naive and shortsighted to say that nothing will happen,” Rogge said last week, confirming his plans to seek re-election next October, when he is expected to be unopposed. “Yes, the situation is so volatile that it is too soon to draw conclusions.”

Rogge said the Olympic movement is in “excellent financial health.” Total Olympic TV and sponsorship revenues for the 2005-08 cycle - covering the 2006 Turin Winter Games and 2008 Beijing Olympics - totaled about $3.5 billion (2.7 billion euros).

Twelve companies signed up for the 2005-08 global sponsorship program, known as TOP, generating nearly $900 million (705 million euros) in revenues. TV rights fees, with the largest chunk from U.S. network NBC, provided the other $2.6 billion (2 billion euros).

NBC is signed up through the Vancouver and London Games, and nine international sponsors have renewed so far.

“Most of our major contracts are long-term contracts,” IOC vice president Thomas Bach said. “Most of our contracts are not with banks or financial services, so it remains to be seen whether there will be a recession affecting the real economy and, if there is, how deep it will be. For the time being, there is no reason to panic.”

The Olympics' financial security gives organizers the ability to wait until the world economy picks up to get into more sponsor negotiations. Heiberg said talks with remaining potential sponsors for 2009-13 likely will be pushed back.

“We feel the interest is there, but we feel we should take it a little easy to see what happens before trying to conclude anything,” he said.

Heiberg remains hopeful of signing up one or two more global sponsors, and still expects overall TOP revenue to exceed the $1 billion (780 million euros) mark for the first time in the next four-year period.

Also looming is the high-stakes bidding for the U.S. broadcast rights for the 2014 and 2016 Olympics. That, too, could be postponed.

“We are not under any pressure,” Heiberg said. “We are talking about 2014 and '16. There is more than enough time. After the success of Beijing, several players are interested in talking to us. We are not in a hurry. They are not in a hurry.”

The IOC had hoped to open the U.S. negotiations soon after the Beijing Games and complete a deal before the October 2009 decision on the 2016 host city. Chicago, Madrid, Tokyo and Rio de Janeiro are the four finalists.

NBC beat out Rupert Murdoch's Fox network and ABC/ESPN in a $2.2 billion (1.7 billion euros) deal for the 2010 and 2012 Olympics, and could face the same competitors again in the next bidding. The networks may prefer to wait until they know where the 2016 games will be held.

“For an American market, the games in Sochi are going to be very unattractive,” said Canadian member Dick Pound, the IOC's former TV rights negotiator, referring to the eight-hour time difference between Russia and the U.S. East Coast. “Much depends on where the 2016 games go. I don't know what kind of appetite the American broadcasters are likely to have before next year.”

The financial crunch is biting into the London Games, which has a $15.2 billion (12 billion euros) budget for venues, infrastructure and long-term regeneration.

Most under pressure is the $1.6 billion (1.25 billion euros) athletes' village, where 17,000 athletes and officials are scheduled to stay in apartments that are to be sold off after the games. Australian construction company Lend Lease is having trouble securing private financing from the banks to build the village.

“The terms that they can offer now are different from the terms they could offer say six months ago,” Olympics Minister Tessa Jowell said recently. “Remember we bid for the games in one economic environment and we are staging them in another.”

The government has been forced to use $155.8 million (122 million euros) so far from the Olympics contingency fund to pay for the village.

“That money could be offset by further private funding,” Rogge said. “If not, of course the government will get it back when the village is being sold.”

The village has already been scaled back from 4,200 apartments to 3,000 due to the fall in the housing market, and could be further trimmed to 2,700, raising concerns that athletes could be crowded three to a room.

London organizers are also reviewing plans for temporary venues for basketball, shooting and equestrian, including the possible scrapping of a 12,000-seat, $98.4 million (77 million euros) facility for basketball.

Funding for the $656 million (514 million euros) international broadcast and press center is also uncertain.

But London's $820 million (640 million euros) Olympic Stadium is now taking shape with the recent installation of 35-ton steel supports that dot the city skyline. The 85,000-seat venue will be converted after the games to a 25,000-capacity arena for athletics. Officials are also searching for a local football or rugby team as a tenant.

With London already facing the tough task of measuring up to the grandeur of the Beijing Olympics, Mayor Boris Johnson is determined to hold down costs while not taking away from the spectacle.

“We do not want ... austerity games,” he said. “We want to show London off to the world.”

Vancouver organizers, meanwhile, reported last week that, with a little more than a week to go in the first phase of ticket sales, packages to the Winter Games are selling out.

They say the games remain financially strong, despite a deficit of $40.5 million (32 million euros) in the year ending July 31. Nearly 80 percent of revenue has already been committed or received and organizers have surpassed their sponsorship target.

Russia, which is facing the financial pinch and drop in oil prices, recently appointed a deputy prime minister - Dmitry Kozak - to oversee preparations in Sochi, where virtually all venues are to be built from scratch with a budget of $12 billion (9.5 billion euros).

“Things are moving in the right direction,” Rogge said. “There are technical challenges and construction challenges, but not a major funding issue today. It's a priority project for the Russian federation and (Prime Minister Vladimir) Putin, and we are confident the funding will be there.”