Privatised profits and socialised losses

The Olympics will create four millionaire sportsmen and women from Britain\’s pool of gold medal-winners, sports agents predict.

Jessica Ennis, Victoria Pendleton, Sir Chris Hoy and Mo Farah could each earn upwards of £1m a year by signing enhanced endorsement deals and banking higher appearance fees.

We really do have to stop this you know. Stop subsidising the training.

It\’s just stealing money from the poor so that a gilded few can get ever richer.

26 thoughts on “Privatised profits and socialised losses”

  1. Why not continue subsidising the training / facilities etc, but get those being subsidised to sign up to paying a percentage of any future endorsement / sponsorship contracts to the funding body.

  2. Was interesting that some Sports Agent said there were so many Gold Medals this Olympics that the commercial value of being a Gold Medallist had collapsed.

    Win a Gold in Athens in rowing and you’d be guaranteed 500k in endorsements and motivational speeches. These days ? Unless you are a household name then join the back of the queue.

    And I’m sure the likes of Mo and Jessica more than repay the investment the state made in them. There is a 50% income tax rate this year.

  3. At the risk / reward trade off , no private enterprise would ever make these sporting investments. £250m+ in investment for a few £1m+ endorsement deals.

  4. Shinsei67, I’m not sure of your point. Aren’t there the same number of Gold Medals every Olympics? Someone must get Gold (and Silver and Bronze) in each race.

  5. “Tom // Aug 17, 2012 at 8:35 am

    Shinsei67, I’m not sure of your point. Aren’t there the same number of Gold Medals every Olympics? Someone must get Gold (and Silver and Bronze) in each race”
    But not the same number of British people get them
    each time.

    If Jessica Ennis had been the only Brit to get gold this year then her marketablity in the UK would be a lot more.

    Likewise if Jonny Wilkinson had been the 4th British fly half to kick the winning goal in the rugby world cup (if only) – he would have been a lot less famous.

  6. Isn’t this an argument for progressive tax? Govt revenues are used to give people a chance of success, and those who do best from those chances repay the govt with higher taxes.
    Tax revenues are in this sense a return on the govt’s investment.
    What’s true for sport funding applies to education, health and welfare spending too.

  7. Gosh, I thought they were all amateurs. I thought that was the reason for all the weepy mush we have had from the media lately

  8. Chris is right, it’s a pretty good example of the argument for government spending and progressive tax. Look at the numbers. £250M out brings in less than one percent of that. The gap is financed by fleecing the poorer (the lottery is a tax on desperation) and borrowing from the yet unborn.

    Great stuff.

  9. “£250M out brings in less than one percent of that.”

    Sounds highly unlikely.

    How many more bicycles have Halfords or Evans Cycles sold since cycling became popular post the Olympics (and TdeF) ?

    How many riding stables are now so busy they are having to turn away people from £50 per half hour dressage lessons ?

    How many pairs of Adidas trainers, as worn by Jessica Ennis, have flown off the shelves of Footlocker ?

    I don’t know the numbers but I suspect the economic boost has been considerably greater than 1% of £250m. In fact I suspect it will be a multiple of £250m.

  10. chris,

    Except that track cycling is a pretty poor investment. Not only did we spend £26m to get those medals, there’s also the cost of running the velodrome in Manchester (open for public use around 2-3 hours a day).

  11. “It’s just stealing money from the poor so that a gilded few can get ever richer.”

    Only if you pretend there is no utility for ‘the poor’ in watching their nation’s athletes do well. But in fact they tend to watch avidly and enjoy.

    It’s a much better thing to subsidise than the ROH.

  12. @Tim Almond.

    I suspect the Manchester velodrome might be seeing a bit more demand these days.

    If you’ve got the sunk cost of a velodrome surely a good idea to invest in a few cyclists to win gold medals and inspire youngsters to give it a go.

    The Herne Hill velodrome in London seems to be being used for 5-8 hours every day.

    http://www.hernehillvelodrome.com/calendar/

  13. “I don’t know the numbers but I suspect the economic boost has been considerably greater than 1% of £250m. In fact I suspect it will be a multiple of £250m.”
    And of course a complete & utter fallacy. For that to be true it’d have to be ‘new’ money & most of it won’t be. It’ll be money that consumers would have spent anyway. If Adidas trainers are flying off the shelves of Footlocker because of Jessica Ennis then Nike’s won’t be. Or it’ll be platform sandals or knee boots. Same with the bikes. Take up cycling, use less petrol, maybe put off buying a new car.
    It’s the same argument for the Olympics itself. Attracted a lot of visitors for two weeks. Deterred a similar number from coming for a holiday. There’s only s much hotel accommodation & 40,000 room/nights were commandeered by the Olympic family, one hears.

  14. ” suspect the Manchester velodrome might be seeing a bit more demand these days.

    If you’ve got the sunk cost of a velodrome surely a good idea to invest in a few cyclists to win gold medals and inspire youngsters to give it a go.”

    Oh heavens. Now the standard arts/sports boondogle
    1/ Spend on the facility.
    2/Spend to get people to use the facility

    The usual argument used to get others to pay for your interests.
    Demolition would be the answer

  15. Shinsei67,

    I suspect the Manchester velodrome might be seeing a bit more demand these days.

    Those 2 hours a day aren’t what people use, that’s all the times that you can book it for according to their website.

    If you’ve got the sunk cost of a velodrome surely a good idea to invest in a few cyclists to win gold medals and inspire youngsters to give it a go.

    Wrong way around. The Manchester and London velodromes were built for Olympic sport, not as a public facility. The one in London is going to cost £400K/year just to keep open.

  16. Jessica Ennis gets my endorsement. Phwoar. I hear from my undergraduate mates that some of her male fans er, raced her to the finish line. In a manner of speaking.

  17. @Bloke in Spain

    “And of course a complete & utter fallacy. For that to be true it’d have to be ‘new’ money & most of it won’t be.”

    You have a somewhat statist view of economics.

    So innovation doesn’t generate demand, it just cannibalises demand from other areas ?

    People buying an iPad just means that they spend less on beer or shoes.

    You do wonder how economies grow at all.

  18. @Tim Almond:

    “Those 2 hours a day aren’t what people use, that’s all the times that you can book it for according to their website.”

    So you mean the rest of the time it is being used by other people. Like official cycling clubs and athletes. Doesn’t sound like it isn’t being used as you suggested.

    I know people who use the Herne Hill velodrome for recreational cycling. I’ve no reason to think others won’t use the Olympic velodrome. And £400k doesn’t sound like an unreasonable sum for it to generate annually.

  19. I fear that Tim is falling into the same error for which he lampoons Mr Murphy. It is pointed out to him that primary support for elite athletes came from the National Lottery. So he counters that the lottery is a “tax on the gullible”. Is that so? If it is, then all profits from betting would be a tax but, as far as I know, private companies are not yet allowed to levy taxes.
    So what we have here is the facts being twisted to suit Tim’s mean-spirited prejudice, incidentally a prejudice that seems to be prevalent among expatriate bloggers and commenters but shared by relatively few who actually live in this country.

  20. Shinsei67
    Can’t see anything particularly stateist about the notion of products & services competing for the dosh available to pay for them. Happens in my pocket all the time.
    “People buying an iPad just means that they spend less on beer or shoes.”
    By & large that’s what most people do. Or they buy it on credit which is tomorrows beer & shoes. Yes economies grow. But by a small percentage p/a. Not by multiples of 100%. The Olympics didn’t happen in some magical separate economy.

  21. Um, I’m probably being silly, but surely there’s a category difference here. The govt spends the money in order to boost popularity in sport and the national mood and attract business and tourism to Britain &c &c.

    Private companies choose to pay £1m sponsorship deals to La Pendleton et al because they think it will help them flog more product, presumably raking them back many millions in profit.

    It’s fortuitous – in the proper sense of the word – that “being in a position to earn sponsorship” is an outcome of “government investing in sport”. And, as many have pointed out, they get taxed on it at 50%.

  22. Tim, you may be interested in the Crawford Report:

    http://www.health.gov.au/internet/main/publishing.nsf/Content/1DDA76A44E5F4DD4CA257671000E4C45/$File/Crawford_Report.pdf

    This was an Australian study into their elite sport programme. They actually agree look at a lot of the issues you raise, and reckon the objective of finishing Top Five in the Olympic medal table is unnecessarily expensive: it’s achievable if they throw enough cash at it, but the opportunity costs are too high, and those hundreds of millions of dollars required could be better spent elsewhere e.g. on mass participation activity. “The Panel believes that the ASC has focused overwhelmingly on elite Olympic sport to the detrimet of other sports as well as participation and community sports. … Even, in its own submission, the ASC suggested ‘community sport was on the brink of collapse’.”

    They also consider, but for now reject, the idea of funding athlete training by a form of “student loan” – only repayable if the athlete goes on to make a substantial income stream from their sport. That’s an alternative to chris’ argument about progressive taxation.

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