Cycle News Monday, October 04, 2004

Winning the Games may not be a fast track to success

LESS than a week after Glasgow won the right to bid on behalf of Scotland for the 2014 Commonwealth Games, concerns are being expressed about the financial viability of the project. Glasgow got the nod over Edinburgh as Scotland’s standard-bearer, but events industry insiders and business leaders are already voicing fears, even before the planned feasibility study gets under way.

Few will forget the financial meltdown in Edinburgh in 1986, which reported a £3m deficit on a £27m budget. But 16 years on in Manchester, the cost of staging the so-called ‘Friendly Games’ had risen to more than £300m - £170m for capital projects and £130m for operating expenses.

Despite being loudly acclaimed, Manchester 2002 Ltd came within hours of insolvency until a government rescue package worth £105m took public spending to £250m - or to put it another way, a subsidy of more than £300 per ticket sold.

Sponsors such as Rover Cars, Bupa, Microsoft and Cadbury came to the party, taking commercial income including ticket sales and TV rights to an estimated £50m and Manchester City Council claimed a ‘profit’ of £16m.

Kevin Roberts, editorial director of Sport Business Group, a research company which offers advice to sports businesses worldwide, says: "The Commonwealth Games is definitely a second or even a third tier event, assuming the Olympics and FIFA World Cup are at the top, followed by, for example, the World Athletics Championships, then regional championships like Euro 2004, with the Commonwealth Games probably top of the third division.

"Commonwealth countries - with the exception of Canada, Australia, New Zealand and the UK - have largely underdeveloped consumer economies and limited brand transference from region to region, which makes it a very hard sell indeed."

Nigel Currie, chairman of the European Sponsorship Consultants Association, has different concerns. He says: "My worry is where the Commonwealth, and therefore the Commonwealth Games, will be in a decade’s time.

"The Commonwealth is no longer a meaningful economic or political block, and is in danger of slipping further into obscurity. That will have a degenerative effect on the Games, already marginal in global terms, and one that will struggle more and more to attract the top athletes, further devaluing the currency of the event."

Iain McMillan, director of CBI Scotland, warns that company patronage of such an event cannot be taken for granted. "In principle, Glasgow’s proposed bid for the 2014 Commonwealth Games is good for Scottish businesses, and I am sure the CBI and our members will be keen to learn from organisers what the opportunities are," he says.

"But they will need to demonstrate to individual companies in Scotland precisely what the costs and benefits are, because the days of philanthropic corporate giving are gone."

Charles Munro headed-up the BBC Host Broadcaster operation in Edinburgh in 1986 before going on to Auckland in 1990, then to the 1998 Kuala Lumpur Commonwealth Games. He believes Glasgow has much to contemplate before bidding.

"Broadcasting is the key to the financing of any Commonwealth Games, but in terms of selling TV rights, the Commonwealth is a difficult market with only five territories - UK, Australia, Canada, South Africa and New Zealand - able to commit significantly to help recoup the huge outlay, with no discernible advertising revenues in the home UK market.

"Firstly, there is a purpose-built international broadcast centre [which cost in excess of £20m at Manchester] and a similar amount for production costs of covering a multi-sport, multi-venue event - all against the backdrop of the Commonwealth Games, which used to be second only to the Olympics, lagging behind in today’s global sports TV market.

"It would be logical to assume that the BBC would be invited to be the host broadcaster, and Glasgow would need such an undertaking when submitting their bid, but given issues such as the corporation’s charter renewal, and London’s 2012 Olympic bid, the BBC has very many difficult issues to consider."

Manchester City Council gave its 48,000 capacity City of Manchester Stadium, which cost the taxpayer £120m, to Manchester City Football Club. But with Ibrox, Hampden and Parkhead all recently upgraded, a fourth stadium for the city is considered by some to be unnecessary and far from sustainable.

Stephen Morrow, senior lecturer in sports studies at the University of Stirling, says: "Major stadia are notoriously uneconomic, and even Sydney’s Olympic Stadium has run into financial trouble, which is why Manchester Council was prepared to give the Commonwealth Stadium away for nothing rather than be left with the spectre of a ‘white elephant’ hanging round its neck.

"Whether many of these bids are rational from an economic or financial perspective is not proven at best. As each new event comes along, it is always conveniently forgotten that almost every previous major sports event is accompanied by a post mortem into why the putative economic benefits were not realised.

"I am doubtful that a coherent argument could be made for funding this particular event rather than more Scottish-specific events like the International Cycle Union Mountain Bike World, to be held at Fort William in 2007, which is precisely the kind of event Scotland should be targeting.

"We have advantages in certain niche areas and a further attraction is that the economic and social benefits are spread beyond the central belt. Overall, it is my view that this is the wrong event and the wrong focus in terms of strategy, accompanied by major concerns about how any [Commonwealth] Games would be funded."

Niels de Vos was commercial director of the Manchester Commonwealth Games, and sounds two cautionary notes for Glasgow should the city decide to bid. "Firstly, try to get key sponsors on board alongside the public sector before submitting the bid, thus strengthening the prospects of winning and demonstrating that there is a commercial appetite for the product.

"Conversely, a lack of commitment from sponsors at that stage should sound some alarm bells before committing to anything."

De Vos adds: "Previous Commonwealth Games - Manchester included - were almost doomed to fail by chasing sponsorship after already securing the event, and it would be prudent for Glasgow to say, ‘This is the maximum the Games will cost’, and that public sector exposure will be mitigated as much as possible by commercial activity, including sponsorship, ticket sales and TV income."

Official estimates of the economic impact of the 2002 Manchester Commonwealth Games produced by Cambridge Policy Consultants trumpeted "£600m of new investment, 6,100 new FTE jobs" and a "rate of return for economic benefits achieved by the host cities of the last four Olympic Games, in Seoul, Barcelona Atlanta and Sydney".

But Sydney-based academic Ray Spurr, says: "These are fantasy figures. Suggesting that a Commonwealth Games can generate similar benefits to an Olympics is further evidence of the dangerous practice of talking up the returns from major sporting events."

The bid assessment group, comprising the Commonwealth Games Council for Scotland, Glasgow City Council and the Scottish Executive, will complete its £1m feasibility study next year, with an estimated $10m (£5.5m) fee (refundable should the bid not be successful) lodged with the Commonwealth Games Federation, which will name the successful bidder at its general assembly in 2007.

Louise Martin, Commonwealth Games Council chairwoman, says: "We are in no doubt at all that our heads have to rule our hearts on this one. Even if that means not submitting a bid if the numbers are not right."
(Source: http://scotlandonsunday.scotsman.com/business.cfm?id=1153222004)