Fixing the Games
Written by Juan Palenzuela, Associate
Edited by David Gaffney, Partner
With 150 days to go until the Tokyo Olympics, the prospects for full stadiums are looking shakier by the day. A new survey by Jiji Press, an agency that has been tracking local interest in the games, found that up to 63% of Japanese residents have no interest in attending. That figure has grown from 54% last year. While the impact of coronavirus cannot be underestimated, the latest survey is perhaps a symptom of a wider trend: the Olympics are becoming less relevant for both viewers and host cities alike. Hosting the games used to be a glamorous endeavour. A flashy, no-brainer investment that would pay pretty well. The 1992 competition in Barcelona, which took place just 15 years after the restoration of democracy in Spain, reinvigorated the city and showcased the fact that Spain was open to the world. That has changed. Some of the latest Olympic Games have proved to be a true headache for the hosts. Rio, for example, is still struggling with the debt it took on to host the 2016 games, as well as facilities that are now abandoned, and underequipped public services once made for fans and athletes. The 2004 edition in Athens, meanwhile, has been blamed as one of the contributing factors to the severe government debt crisis. The International Olympic Committee (IOC) is under scrutiny and has been repeatedly criticised for its use of funding at a time when host nations are struggling to pay. Of all the revenues it receives from ticketing, transmitting licences and other partnerships, 10% goes to the body itself, with 90% going towards supporting sports and Olympic bodies around the globe. Considering that each edition of the games generates around $4bn, that’s nearly £400m that goes into paying officials, advertising and PR campaigns. Added to that is the apparently old-fashioned IOC’s reluctance to harness the power of social media. During the 2016 games, it banned all unauthorised GIFs, in a weird anachronistic attempt to invigorate broadcasting licence partners. The IOC needs to face the fact that the inclusion of new sports such as surfing and BMX may not be enough to attract new viewers and remediate for the rising costs of hosting an event. Instead, if it wishes to survive over the long term, it will need to take a deep look not only at how it funds itself, but at its strategy to engage with new audiences and future generations.
Bernie Sanders cemented his front-runner status in the US democratic primaries over the weekend by securing nearly 40% of the votes in Nevada. That is nearly 27 points ahead of Joe Biden in second place. Despite many campaigns floundering, no candidate has dropped out since the first caucus in Iowa, although that is likely to change soon, with the South Carolina primaries this Saturday and ‘Super Tuesday’ next week, when multiple states will hold polls. More than 160 new cases of Coronavirus have been confirmed in South Korea, which is now the country with the second most confirmed cases. The virus has also continued to spread in Italy, which reported its first death over the weekend, and in the UK, with four new cases. Austrian authorities are reportedly considering whether to introduce border controls with Italy to stop the virus from spreading further. Malaysia’s prime minister, Mahathir Mohamad, submitted his resignation to the king a few hours ago following turmoil in the country’s governing coalition during the weekend. Key leaders within that coalition had accused some of Mohammad’s MPs of betrayal.
Business and economy
The search for a new head of Norway’s sovereign wealth fund nears a conclusion after applications closed on Friday. Whoever is selected will have a key role in shaping the fund’s future strategy, which will have an unparalleled level of influence on markets across the world. The fund’s $1.2tn in assets means that it owns, on average, a 1.4% stake in every listed company globally. The owners of The Sun reportedly lost £68m last year as its newspaper sales fell eight per cent to 1.38 million. It remains, nonetheless, Britain’s most popular daily paper. Added to weakening sales is the price of a phone hacking scandal that has cost the company nearly £26.7m in legal bills to date. JPMorgan Chase is reportedly close to making an entry into the UK’s retail banking market by launching a range of savings and loan products using the Chase brand in the next few months. Investment banks have looked into additional sources of revenue as fees from advisory and trading have continued to decline. Goldman Sachs, for example, entered the UK retail market last year with its high street brand, Marcus.
Columns of note
Writing for the FT, Rana Foroohar argues that the spread of coronavirus is accelerating a process of decoupling between China and developed countries. It will be a challenge to both sides, she says, but it will probably affect China disproportionately. The opacity that Chinese authorities have demonstrated in handling the epidemic is not helping, argues Foroohar. In The Times, Graham Ruddick says that the failure of online grocery shopping to really take off is frustrating the use of analytics to understand consumption habits and perhaps improve the product offering.
Source: The Times
The week ahead
This week, China, the epicentre of the coronavirus outbreak, will release its manufacturing Purchasing Managers' Index (PMI), which will tell investors much about the impact that the outbreak has had on the country’s economy so far. Markets sold off on Friday on worries that the outbreak has yet to be contained, but stocks have still outperformed most asset classes this year. On a more positive note, Warren Buffett is due to release his annual letter to investors on Saturday. Among other things, Buffett stressed that the outperformance of his Berkshire Hathaway empire was due to reliable earnings from its portfolio companies. He also remains confident that equities will continue to outperform bonds as long as low interest rates and low corporate tax rates prevail.
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Spain's newest submarine is 75 tonnes heavier than expected because someone put a decimal point in the wrong place. There are now doubts over whether the submarine will be able to resurface once deployed.
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