By Amy Shipley
Washington Post Staff Writer
Tuesday, October 21, 2008
The U.S. Olympic Committee is under pressure to renegotiate a controversial revenue-sharing deal with the International Olympic Committee or risk alienating IOC members who will decide next year whether to send the 2016 Summer Games to Chicago.
Since an IOC member last spring used the word "immoral" to describe the USOC's portion of a 12-year-old contract that guarantees it more sponsor and television money than the rest of the 204 national Olympic committees combined, the USOC has sought to pacify angry IOC members with some concessions while arguing that the deal is essentially fair.
The IOC's lead negotiator, Norwegian member Gerhard Heiberg, said he would like an agreement in six months that will assuage concerns about the deal, which guarantees the USOC a 12.75 percent portion of U.S. broadcast revenue and 20 percent of the IOC's top-tier sponsorship money. The other national Olympic committees also receive 20 percent of the sponsor revenue, but they have to share it.
Outgoing USOC chairman Peter Ueberroth said the USOC's slice of the Olympic pie is appropriate since U.S. companies generate about 60 percent of the IOC's total revenue. NBC's deal with the IOC for the U.S. broadcast rights for the Olympics is worth more than all of the other Olympic television agreements combined.
Unlike just about every other national Olympic committee in the world, the USOC does not receive government funding, which makes the money it earns from IOC revenue-sharing vital for U.S. athletes, according to Ueberroth. "We're going to begin to be sure the other 204 national Olympic committees at least know the facts," Ueberroth said. "Since we've been silent, we were being hammered by a few people who wanted to . . . recast the numbers."
Michael Payne, who directed IOC marketing efforts from 1983 to 2004 and was involved in negotiations for the current deal, said the arrangement has grown outmoded as non-U.S. Olympic sponsors and broadcasters assume a larger role in the IOC's financing. When the IOC began offering exclusive sponsorships in select categories to about a dozen companies in the 1980s, nearly all were based in the United States. Now, only half are.
"I don't think it's reasonable going forward for the USOC to continue to claim 20 percent of the top [sponsor] program when the rest of the world doesn't even get 20 percent," Payne said. "The days when the USOC said it was making a big sacrifice to sustain the rest of the world, that's no longer relevant."
U.S. officials counter that the majority of actual cash, as opposed to value-in-kind donations, still comes from the U.S. companies.
Canadian IOC member Dick Pound, the chairman of the IOC's marketing commission from 1988 until Heiberg took over in 2005, said the USOC's claim is bolstered because the U.S. market continues to drive up the price of all of the sponsor deals.
"Even now, it's still a stunningly important market," he said. "If you took out the U.S., my guess is the total sponsorship fees would be reduced by more than the U.S. takes."
The revenue-sharing dispute comes as the IOC is examining which city among Chicago, Madrid, Tokyo and Rio de Janeiro should be awarded the 2016 Games. That decision will be made by secret ballot in October 2009.
For the USOC, Chicago's presence in the 2016 race as well as its desire to have a continued voice in the Olympics make responding to the complaints critical. Yet U.S. officials say they also believe that standing their ground on certain economic principles is equally important both to satisfy Congress, which created the USOC in 1978, and ensure U.S. athletes remain adequately funded.
"We're continually interested in finding a solution that reflects the economic reality of how the Olympic movement is funded, while at the same time demonstrates our desire to be a good partner internationally," Ueberroth said.
Heiberg said Chicago's bid for the 2016 Games has been kept out of the negotiations and should not be adversely affected by the talks, but the IOC has been known to award the Games based on factors unrelated to the merit of the cities in the race. Its 100-plus volunteer members worldwide meet periodically to make decisions about matters pertaining to the Olympics.
"I have been surprised at the level of attention and concern this issue is now causing with not an insignificant group of [IOC] members," Payne said. "I've heard people say that if this issue isn't resolved, it isn't going to be helpful" for Chicago.
The questions of whether and how to redistribute the Olympic pie are considered so conflict-ridden that neither side has dared tackle them formally yet, putting off any attempt to restructure the current deal until after the 2012 Summer Games in London. Instead, the USOC and IOC have sought an attachment to the current contract that would mollify the IOC's vigorous dissenters and serve as a guide for future negotiations.
The issues that divide the two sides are nuanced and the facts are often unclear since the IOC does not release details of its contracts with national Olympic committees and international federations. That every member of the vast and disparate Olympic family has an economic stake in the outcome only adds to the difficulty in resolving it.
"It's not black and white," Payne said. "It's very gray, with a long and complex history. It's not easy for a new generation to ride in on the cavalry and fix it overnight."
In the mid-1980s, U.S. companies were responsible for nearly all of the IOC's revenue, and that fact drove a highly charged negotiation that went on for about eight years. When a deal was finally struck in 1996, nobody seemed happy with it. Some Americans thought the USOC's portion of the revenue from the U.S. broadcaster was absurdly small and wondered why the United States was giving so much money away. Officials from other nations, however, stewed over the dramatic discrepancy in money the USOC received compared with everyone else.
The dissatisfaction on both sides stoked the sense of indignation and resentment that seems to underlie the current dispute.
Last March, Denis Oswald, an IOC member from Switzerland, sent a letter to all of the national Olympic committees saying the USOC's share of the revenue was "no longer morally acceptable." Three months later, Hein Verbruggen, then a Dutch IOC member who resigned his membership after this summer's Olympics, called the USOC's portion "an immoral amount of money compared to what other people get."
The USOC took great offense at the verbal battering, in part because it disagreed with the substance of it but also because it had already been negotiating to placate its critics for three years.
Despite the opposing viewpoints, the USOC and IOC have reached tentative agreements several times, Ueberroth and Heiberg said, but that has meant little in a four-way negotiation in which no single person or entity seems to be calling the shots on the IOC's side.
Heiberg blamed appointed representatives for the national Olympic committees and international sports federations for nixing near deals. From the start, Heiberg added, the IOC wanted to ensure any formal agreement would satisfy all of the major players in the Olympic movement.
Andrew Ryan, the director of the Association of Summer Olympic International Sports Federations said the international federations are seeking several concessions from the USOC. The most contentious would require the USOC to effectively cap the amount of money it gets from the IOC in the coming years to keep "the amounts from diverging any further," Ryan said. The USOC would return the extra money to the IOC to distribute as it sees fit.
Ueberroth objected to a cap, saying it would inhibit revenue for both the USOC and IOC in the long run, but he said the USOC has been willing to give money back to the Olympic community in a good-faith gesture. It has, however, proposed sending the support directly to financially strapped Olympic bodies because it could not satisfy Congress without a strict accounting of its spending.
"We are ordered and committed to being transparent," Ueberroth said. ". . . Congress has a right to know every nickel we spend."