Deteriorating USOC-IOC relations threaten both organizations

By Amy Shipley
Washington Post Staff Writer
Tuesday, December 22, 2009; D01

The U.S. Olympic Committee nominated Chicago in the race for the 2016 Olympics determined to bring the Summer Games back to American soil for the first time since 1996 in Atlanta. Embarrassed four years ago when New York was eliminated in the second round of voting for the 2012 Games that were awarded to London, the USOC and Chicago bid leaders appeared to have left nothing to chance. They secured airtight funding, a sound infrastructure plan, the relentless enthusiasm of Mayor Richard M. Daley and -- in what many viewed to be the clincher -- an unprecedented final-hours lobbying appearance by a sitting president.

But when the International Olympic Committee's secret-ballot vote was revealed, Chicago was the first city eliminated, shocking the bid's leaders and stinging the Obama White House. The decision smacked of payback, evidence of the soured relations between the USOC and the IOC's 100-plus volunteer members, many of whom had grown resentful in recent years of the USOC's economic dominance of the Olympics and lack of engagement in the world of international sport.

"The IOC sent a really strong message to the U.S. Olympic Committee," said Dick Ebersol, chairman of NBC Universal Sports and Olympics. "'Join the Olympic movement or there will be no more Games in the United States.'"

In the aftermath of the emotional vote, people on both sides say the message might have been too powerful, producing the unintended consequence of pushing the United States further out of the Olympic movement than is good for anyone. After witnessing Chicago's humiliation, civic leaders in other potential U.S. host cities might think twice before making the considerable financial and emotional investment necessary to bid for an Olympics. And while views differ about how Olympic television and sponsorship revenue should be distributed, no one debates that U.S. consumers and companies bring more money into the Olympics than those from any other country and that any damage to those relationships could be costly.

Even the IOC members who participated in the Oct. 2 vote in Copenhagen seemed to sense, when the first-round ballots had been counted, that such a categorical defeat for one of the premier cities in the United States could have long-term repercussions.

Right after the vote, Donna de Varona, a 1964 Olympic gold medal winner who was a member of Chicago's bid team, said an IOC member approached her and said, "That was suicide."

"It was horrible for the Olympic movement," U.S. IOC member Anita DeFrantz said. "We knew it in the room. That's why there was the gasp. We understood it was the worst possible outcome."

Will U.S. bid again?

Several Olympic officials speculated it might be years before another U.S. city will be willing to risk the $60 million to $70 million required merely to get through a candidacy process seemingly tied more to international sport politics than the quality of a city's venues, transportation and hotels. The IOC, which consists of 106 members from around the world and includes two Americans, understands it can punish the United States by refusing to award it the Games, but it surely never expected to have difficulty luring the country's best cities into the field.

Many cities lose once, then gamely run again knowing they have a better chance of victory on their second attempt. But few in the Olympic movement expect Chicago, which most figured would advance to the final round of voting in a tight duel with eventual winner Rio de Janeiro, to muster the political and financial support to fuel another expensive run. And that raises the question: Who will bid for the United States? And when?

"Clearly, the process, the way it played out the last two times, is going to make people think twice about whether to bid," said Dan Knise, who led an unsuccessful joint effort between Washington and Baltimore to become the U.S. entrant in the race for the 2012 Summer Games. "There's always somebody trying to make a mark for itself, maybe a second-tier city that says, 'Let's take that bet, the payoff would be huge.' But I think maybe some of the world-class cities -- the New Yorks, San Franciscos and Chicagos -- don't take that bet anymore."

That's not an insignificant issue for the IOC. An even longer gap than the now-guaranteed 18 years without an Olympic Games on U.S. soil -- the last was the 2002 Winter Games in Salt Lake City -- represents a frightful proposition for an organization that gets more than a third of its revenue from its current U.S. broadcasting deal with NBC. (Negotiations for the U.S. television rights for the 2014 Games in Sochi, Russia, and 2016 Games in Rio de Janeiro are expected to begin next spring.)

"This is not the way you deal with the United States of America," said Canadian IOC member Dick Pound, the chairman of the IOC Marketing Committee until 2001. "The U.S. needs a Games from time to time to fire up [U.S. consumers'] interest. If there are never any Games in the U.S., the interest in the Olympics will inevitably decline, and that's bad for [the United States] and really bad for the Olympic movement."

The nearly $900 million that NBC paid to broadcast the Beijing Summer Games represented more than the rights fees paid by the rest of the world's broadcasters combined, according to the IOC's marketing report. And seven U.S.-based companies contributed about two-thirds of the cash portion (about $432 million of about $643 million) of the IOC's top sponsor marketing program in 2005-08, according to a person with access to the figures.

Meantime, the 2002 Winter Games in Salt Lake City generated $494 million in domestic sponsorship revenue, an amount that was then a record for either a Summer or Winter Olympics, and that surpassed the much larger 2004 Summer Games in Athens by nearly $200 million.

"Somebody took the class bully and punched it, and that's probably not good for the IOC overall, to have done that to the U.S. market, to the U.S. president," said a former U.S. Olympic official who requested anonymity out of reluctance to criticize the USOC publicly.

Even so, the official added, "the prevailing sentiment is that it's the USOC's fault [the IOC] had to slap it so hard. They screwed up."

Whose money is it?

For the last decade, the USOC has housed a cast of largely ineffective or controversial leaders who have been unable to make peace -- let alone friends -- in the world of international sport. The one who made inroads, former Olympic wrestler Jim Scherr, was urged by the USOC board to depart the post of chief executive officer last spring, to the dismay of many sport leaders.

There have been 10 chief executives and chairmen and six chief marketing officers since 2000. On top of that, few U.S. officials hold positions of real power in international Olympic sport organizations, making it difficult for U.S. sports leaders to network effectively. There are five IOC members from Italy, yet only two from the United States, and no Americans head international governing bodies for Olympic sports.

Officials say the USOC's isolation and its officials' inexperience contributed to management missteps this year that possibly killed Chicago's bid well before the October vote. The biggest, most say, occurred when discussions over renegotiating controversial financial deals between the USOC and IOC stalled this past spring and were tabled, infuriating many IOC members.

The IOC isn't hurting for money; it has put away more than $400 million as insurance in case of a Games cancellation and is working on doubling that. But it is less a recipient of sponsor and television dollars than a grand distributor, apportioning critical funding to international sports federations, national Olympic committees and others under the Olympic umbrella.

Constituents in recent years have complained that their sports and athletes are being shortchanged because of large payouts to the USOC.

Because Congress in 1978 gave only the USOC the right to use the Olympic rings in the United States, the IOC was forced to cut a pair of special deals for U.S. marketing and television rights in the late 1980s that have become increasingly contentious: The USOC receives 20 percent of the revenue from the IOC's top sponsor program while the rest of the national Olympic committees combined also receive 20 percent (U.S. officials say that after the IOC lops off administrative fees, the U.S. portion is closer to 13 percent), and 12.75 percent from the U.S. broadcasting deal (the international sports federations, other national Olympic committees and IOC split 38.25 percent).

Those two deals provided about 52 percent of the operating income for 2005-08 for the USOC, which unlike other national Olympic committees, receives no money from its government. In the last Olympic quadrennium, the USOC got more than $300 million from the IOC; the rest of the more than 200 national Olympic committees combined got $373 million.

"It's time to redo the deal," Ebersol said. "We don't have a God-given right to take this money."

Many U.S. sports officials disagree profoundly with Ebersol, but none seems to have the political capital to mount an argument persuasive enough to temper the fierce animosity globally.

"My position was, 'If you think you're giving us too much money, just give us back our sponsors, and we won't worry about the 20 percent,'" former USOC executive director Dick Schultz said.

With that sentiment prevailing among some U.S. Olympic officials and no Games in Chicago to give the organization what Ebersol estimated would have been a $500 million boost, it's unclear whether the USOC would be receptive to rewriting deals and accepting less favorable financial terms as a goodwill gesture.

And the dynamics of the discussions have changed dramatically on the heels of Chicago's loss. Chicago's candidacy was considered a pawn in the hot debate, so if the USOC steps out of the bid process for a while -- it did not enter a city in the race for the 2018 Winter Games and has not announced a plan for 2020 -- it will be under less pressure to give back money.

"The USOC has leverage and should use it," DeFrantz said. "We have nothing to lose anymore."

USOC Chairman Larry Probst said "all things are on the table" for future talks, but noted that U.S. officials have to do a better job of "educating" the international community on the structure of the current arrangements because "there's a lot of misinformation out there."

If the United States doesn't back down over the divisive contracts, money could be tighter, and global tensions greater.

"There are lots of nightmare scenarios," Pound said, "that could come back and bite everybody."

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