Death, Taxes and Olympic Spending Over Budget


The Japanese government’s Board of Audit has determined the country will spend at least $25 billion in preparation for the 2020 Summer Olympics, nearly 4x the amount projected in their ’13 winning bid ($7.3 billion at the current exchange rate). In December 2017, the Tokyo organizing committee operated under the assumption that the 2020 Games would cost $12 billion, but in January ’18 Tokyo Governor Yuriko Koike authorized a project that included “barrier-free facilities for Paralympic athletes, training programs for volunteers, and advertising and tourism plans”, adding $7.1 billion to the budget. Some poor accounting (Tokyo organizers excluded $5.6 billion in expenses from the initial budget) and an increase in national government spending (+$5.8 billion) has pushed the total expenditure on the Tokyo Games to just shy of $25 billion, with the event still 2 years away.

Howie Long-Short: The only guarantee in this life as certain as death and taxes are the Olympics coming in over budget. In fact, “The Oxford Olympics Study 2016” was unable to identify a single Olympiad that came in on or below budget.

The reason the math ($12 + $7.1 + $5.6 + $5.8 = $30.8, not $25) doesn’t make sense is because of ongoing disputes surrounding what is (and what is not) an Olympic expense (think: road construction, incoming tourism) and who bears the responsibility for paying for it. The IOC and local organizers claim much of the money being spent is on “regular administrative costs”, expenses that fall “outside of the overall Games budget.”

It’s remarkable that local organizers and the IOC have said they’ve been committed to cutting spending (by using existing venues, slashing other construction costs) over the last several years and the 2020 Tokyo Olympics are still going to cost upwards of $27 billion, as a “large amount of spending is expected to continue after 2018 leading up to the event”, but tight deadlines and little transparency between government branches, the IOC and local organizers makes it difficult to control costs.

Wondering who is going to pick up the $25+ billion check? The IOC will contribute $1.7 billion and sponsorship, merchandise and ticket sales should account for another $3.6 billion; the balance (80%) falls on Japanese taxpayers.

Fan Marino: The IOC has a new TOP sponsor with Allianz (OTC: AZSEY) agreeing to an 8-year deal (begins in ’21, runs through ’28 LA Summer Games) worth an estimated $400 million; an agreement that also extends the company’s global partnership with the IPC. The German insurance provider intends on using the games to “demonstrate its digital transformation and attract younger customers”. While Allianz has minimal sporting presence in the U.S. (American Jews haven’t gotten over their association with the Nazi party), the company holds the naming rights to 2 major European venues; Bayern Munich’s Allianz Arena and Juventus’ Allianz Stadium. For those wondering, the IOC generated $1.02 billion from its TOP sponsorship program during the 4-year cycle ending in ’16, a +7.6% increase over the quadrennial ending in ’12.

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DRL Introduces Life Like Simulator, Opens Tryouts for Spot in ‘18 Season and $75,000 Contract

DRL has introduced the web-based, realistic, drone flight/racing DRL Simulator to be used in qualifying for the 2018 DRL Allianz (AZSEY) World Championship Season. Beginning today, aspiring pilots can download the Simulator on Steam (cost: $19.99) and compete on virtual maps of real racecourses from the 2016 and 2017 DRL seasons; with open tryouts running through January 15th, 2018. The top 24 pilots will qualify in the 2018 Swatch (OTC: SWGAY) DRL Tryouts, a live esports-style tournament that will be streamed globally on February 3rd, 2018. The winner will receive a spot in the Championship season and a $75,000 professional contract.

Howie Long-Short: DRL is a global sports league, so partnering with SWGAY; a brand with global reach, makes sense. During the 1st half of 2017, SWGAY grew sales 1.2% YOY (on a constant currency basis) to $3.9 billion; while increasing profits 6.8% YOY to $298.49 million. UBS strategist Karen Olney was quoted in a story yesterday touting Swiss stocks; citing their cheap valuations, a secure market and the potential for big returns as the local economy improves. SWGAY is based in Switzerland.

Fan Marino: You don’t have to be an expert pilot to participate in the competition. In fact, you don’t even need experience operating a drone. As DRL CEO Nicholas Horbaczewski said, the Simulator was built to be “one-to-one with real life” and will teach you all the elements necessary to fly one. Once you complete the 50 training missions, “you’ll be a very competent drone pilot.” Then pick up a DRL Nikko Air DRL Drone ($139.99) at a mass market retailer and impress your friends with your newfound skill-set.

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The Drone Racing League (DRL) has announced it will hold its 2018 Allianz World Championship in Saudi Arabia, next September. The 7th and final event of the DRL season will consist of 8 FPV (first person view) pilots racing custom-built drones, that travel more than 90 MPH, through a complex 3D racecourse; with the winner earning the title of “World’s Greatest Drone Pilot”. The race will be televised in 87 countries, on cable networks including; ESPN, OSN, Sky Sports and Fox Sports Asia.

Howie Long-Short: The DRL holds several dozen patents on the core technology that enables drone racing. They use the league to showcase the technology. The company is privately held, but has raised more than $32 million to date; including a $20 million series B round in June. Looking to play the DRL? SKYAY lead their Series B round and participated in both their seed and Series A rounds. Liberty Media Corporation (LMCA), Allianz (OTC: AZSEY), World Wrestling Entertainment (WWE) and MGM Television (OTC: MGMB) are all also invested in the company.

Fan Marino: The DRL consists of 16 professional pilots competing in 6 regular season races before a short postseason whittles it down to 8 qualifiers, competing for the World Championship. Think you can compete in the DRL? The league is holding annual open tryouts, beginning on November 15th, using their Steam simulator. All you need is a computer and an Xbox or drone controller to participate.  The Top 24 competitors will advance to a live racing simulator tournament with a chance to compete for $75,000 and 1 of 16 spots in the 2018 season.

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