Feeling The Pinch

The postponement of the Tokyo 2020 Olympics Games will cost the International Olympic Committee “several hundred million dollars” of added costs President Thomas Bach told German newspaper Die Welt. In the same interview he went on to say that it was “impossible to say for now” the extent of the added costs for the IOC caused by the coronavirus pandemic.

It was also revealed that the IOC had insurance for the cancellation of the Olympic Games but not for the postponement of them. Which explains why they were so loathe to announce a postponement.

When published, this interview will have caused alarm bells to go off all across Lausanne where many of the Olympic Sports have their head offices.

The IOC had income of USD$5.7 billion for the last four-year Olympic cycle (2013 to 2016), most of that money coming from broadcast rights and sponsorship. However if sponsors require compensation for an event being delayed, which is most likely as whole campaigns would have been planned around the event, and if payments need to be paid to compensate NBC then that income will be severely affected. (Stick To Facts)

The IOC paid USD540million to Federations after the Rio Olympic Games. This money was handed out based on each sport’s audience and size. If the cost of postponing the Games is going to cost “several hundred million dollars” many of those International Federations could find that their IOC subsidy is no more, or at least heavily reduced.

Those who have a reliance on those funds for survival could find themselves in dire straits.

Some experts feel that the IOC would rather see the Olympic Games cancelled as the insurance payment would safeguard their future. With estimates in Japan putting the overall cost of the postponement at USD$2 billion-USD$6 billion Japan may well opt to cut its losses. As these additional costs will put the nation’s economy in a very precarious position.

There is no doubt that some sports will and are already finding themselves in an equally precarious position.

One that appears to be looking for options to stay afloat at this time is the sport of Hockey.

In an email sent to employees in the past fortnight staff were told that ‘the situation is not dramatic but there are many unknown elements as of now. We don’t know how much money we will receive this year (and when) from sponsors/tv/manufacturers and IOC, and we operate with limited cash.”

So where have things gone wrong?

Sponsorship has been a bone of contention now for a while within the sport. The sport’s FIH Pro League which was “four years in the making” and launched in 2019 failed to attract a naming rights sponsor in either its first or second year. Which put pressure on the competition as a whole. Previous CEO Jason McCracken reportedly resigned due to a failure to secure a naming rights sponsor over a year out from the start of the League, so understandably the spotlight has fallen firmly on the commercial Sponsorship Director who has been in the role since October 2017, before McCracken resigned. When appointed the Press release stated that “he will be responsible for increasing investment in the sport, predominantly through key FIH events.”

While a league featuring the top teams in the world appealed to many, and looked good on paper, there were many who had concerns as to how this League could work without a naming rights sponsor injecting a large sum of money, and an airline subsidising the officials and teams travelling across the globe.

Incredibly the League went ahead, despite many of the National Associations predicting a loss if they took part. Germany and New Zealand were two of the nations with both a men’s and women’s team participating that predicted making a profit.

Worryingly in just the second year the competition was restructured in order to reduce the costs on the teams. Which raises many questions of those who did the financial forecasts.

After poor attendances and a drastically downgraded television product the league, like many across the globe had to be put on hold due to the outbreak of Covid-19. With no games being played there have been no payments from the television stations, and with no other International tournaments the money appears to have dried up. Was this a case of putting all of one’s eggs in one basket?

Worryingly though it has been said that the sponsorship deals that the sport currently has actually saw the new contracts worth less than the those signed previously. It is interesting to note that as predicted Odisha (Oh Dear Sir) has now become a Global partner along with Polytan, with Hero remaining the “Global Leadership Partner.” Star Sports are no longer listed on the website as a partner.

What must clearly be a concern for lovers of the sport is the level of sponsorship received from these companies. As everyone knows a sponsor wants to see a return on investment before they come on board, they want exposure, and they want business. Yet this has to work both ways. Polytan make the pitches that the sport is played on and it is alleged that the sponsorship deal is worth in the region of USD$1million. Which may sound a fairly reasonable commitment, but when laying a Polytan pitch costs near enough the same amount this suddenly does not look to be such a good deal, especially if the FIH are encouraging National Associations to have Polytan pitches fitted. Laying two pitches in one year will see the sponsor already well ahead on their investment.

Crucially the sponsorship deals done must cover the costs of hosting an event. A failure to bring in that amount of revenue will always see an event or a sport lose money.

The Board is made up of 16 individuals. The President, the five Confederation Presidents, eight elected members, the CEO and an Athletes’ representative. Is this too many when the recommended number for a board to be effective by those experienced in Governance is for no more than seven? Maybe for global representation nine, but 16?

Executive Board Meetings are only held three times a year, but once again the cost in hosting needs to be looked at. As many companies do, should the FIH purchase economy airfares and if the elected officer wishes to upgrade they do so at their own cost? Or do these people warrant a Business class ticket? If they are expected to work on the aircraft then they should be given a Business Class ticket, as trying to work in economy is nigh on impossible. If it is only reading Board papers should that have been done prior to setting off for the meeting? Can that be done in economy?

Based on FareCompare’s statistics the average price for a business class ticket is $3000, which makes the cost of flying everyone to the Board meeting at least $45,000 – the CEO is already there – without the added cost of accommodation. This cost over three meetings would cover the salary of two staff members for a year.

Interestingly the Board meeting that was scheduled for the 14th and 15th of March in Lausanne was cancelled over a week prior due to the fears of flying with the outbreak of Covid 19, yet the Pro League was not put on hold until the 14th of March!

The FIH has 18 committees and panels listed on their organisational chart as of December 2019. As covered in our podcast many of these meetings have seen the committee members fly to Switzerland to attend their meetings. Here is a cost that was probably unnecessary and the Covid-19 pandemic will hopefully now see these conducted over the internet in the future, thus saving a considerable amount of money. Although we were advised that the National Associations from which they come or the Confederation foot the bill for travel, and not the FIH.

The FIH offices have always been owned by the FIH Foundation, even before the organisation moved from Belgium to Switzerland. The FIH is supposed to pay rent into the Foundation. That rent then funds the purpose of the Foundation.

The purpose of the Foundation is “to develop the vocation, improve the quality of sport, encourage the growth of the sport and lend assistance to organisations involved with Hockey within the framework defined by the official bodies, in particular the FIH.”

So the rent from the offices in Lausanne would help fund the development of the game. Yet there were no staff employed by the Foundation until the appointment of Michael Joyce in April 2018 as its first Executive Director. His appointment “was made with the intention of creating a new strategy and fundraising activities to enhance the provisions of the Hockey Foundation and the development projects it will support.”

The appointment came about we were told following a process that saw the Foundation’s statutes updated “to enable a more dynamic structure” and we were told that the FIH had “undertaken a feasibility study on the functioning and role of successful Foundations.”

Yet less than a year and a half into the role, Joyce was moved sideways out of the Foundation and into a lesser development role at the FIH. President of the Foundation, and former President of the FIH, Leandro Negre was also moved on. Joyce is however still listed on the Swiss Commercial register as holding the position of “member of the board secretary general manager.”

The Board of the Foundation consists of four current FIH Board members and one former FIH Board member. There appear to be no independent members.

It is alleged that the FIH has not been paying rent to the Foundation for a number of months now, and that the Foundation has assisted the FIH with its “limited cash” problem by way of a loan.

The IOC is also believed to have helped out the FIH with an advance of $5million of its Olympic funding a year in advance. They may be pleased to have received that money as some sports may not receive anything after the Covid -19 Pandemic and postponement of the Olympic Games. However the bad news for hockey is that the advance payment could now see the FIH moved to the back of the queue when it comes to funding post the Olympic Games, if they indeed take place next year.

Clearly there are major financial issues. As the internal email went on to state: “we are looking into different ways of getting support, from technical unemployment communicated last week, to credit line from UBS/Swiss Confederation, loan from Foundation, mortgage on office etc.”

So what is the plan to pull the sport out of the current hole it finds itself in?

A Staff restructure would be a start as based on the Organisational Chart there is a CEO, six Directors and 12 Managers along with a senior Legal counsel and a Head of National Associations. That is 21 people in senior positions. They are overseeing according to the chart 11 other staff. Is that top heavy management?

The Board meeting that was planned for the 5th and 6th of August in Tokyo is unlikely to happen there with the postponement of the Olympic Games. The biennial Congress was due to be held in Delhi for the second time in succession, – the first time this has happened – in October this year, but will that go ahead now?

One of the reasons that Delhi was chosen as the host was due to the FIH changing several key rules regarding the Congress, rules that could see it permanently being hosted by India. The country or federation hosting the FIH Congress will now bear the cost of accommodating the delegates. That is all well and good as long there are no conflicts of interest and it does not have an impact on voting; something that will need to be monitored very closely as it could result in voting being skewed.

The FIH it was revealed will buy the air tickets for the delegates. As one successful business man stated when it comes to conferences ‘if someone else is paying there is normally not much work done.’

The first question here is why are the FIH paying the airfares of the Member nations? The second is surely each member nation should budget for this event, and pay their own way to show their commitment to the sport? After all they know that it is happening every two years.

With each the of the 136 Member nations (according to FIH website – however believed to be 137) allowed to send a maximum of three delegates, this is a huge bill for the FIH to foot, at a time when they clearly cannot afford it. So will Congress in fact go ahead?

If it doesn’t where does that leave the organisation legally? Are those whose term in office has come to an end entitled to still be a part of the decision process? With most organisations if an Annual General Meeting is not held within the required period and those whose term has ended are involved in decisions at Board level, those decisions can be challenged. There is nothing in the FIH Statutes to cover a postponement or cancellation of Congress.

It would appear that some form of Global Conference needs to be convened online so that all of the member nations can ask pertinent questions and be made aware of the true financial situation that the sport finds itself in. For an extraordinary Congress to be held ahead of October a request would need to be “signed by at least one fifth (1/5) of all full Members, stating the matters to be discussed at the meeting. The Executive Board shall determine the date, the venue and the agenda for each such meeting.” The CEO must convene that meeting “within three (3) months of receipt of that request being sent to the CEO.” For such a fast sport the wheels of administration clearly move slowly.

At the Congress in Delhi, President Dr Narinder Batra is up for re-election. It is said that he will stand unopposed and is likely to be elected for a second term of four years. He will no doubt at this point in time be regretting the words he uttered in Dubai in 2016 when he became the first Asian elected to hold the position of President of the FIH. He was quoted as saying “I will focus on increasing the revenue and reach of the sport. That will be my goal and I can assure you, we will not disappoint on the revenue front.”

Let us hope the situation is not as dire as the email sent to staff would appear. Let us hope that the member nations find their voice and start to ask questions so that the sport can get back on track as soon as possible, as the consequences if they don’t do not bear considering.