So the Olympics are over, and literally billions of people witnessed at least some of the festivities during the two weeks in London. United States was the big winner, taking home 46 gold medals, and 104 medals overall. Several breakout stars emerged including Gabby Douglas, Missy Franklin, Ryan Lochte, and Ashton Eaton. The usual suspects were also at work as Michael Phelps, the Men’s and Women’s Basketball team, Women’s Soccer, and the Williams Sisters all claimed their usual golds. Now that the dust has settled, most of the athletes that competed in London will go back home to resume training after a brief hiatus. Did the athletes get paid for their time in London? For the majority of athletes, the answer is no. Here’s why I have a problem with that.
Winning Isn’t Everything, It’s the Only Thing
Do the athletes get ANY compensation? Yes. Athletes are paid by the United States Olympic Committee for the medals they win. Each athlete receives $25,000 for gold, $15,000 for silver, and $10,000 for bronze. In addition to the money awarded by the USOC, athletes for various sports are eligible for additional compensation from their respective governing body. For example, US Swimming gives $75,000 per gold medal related to swimming events. How does the US’ model compare to other countries? By comparison, Italy will pay each athlete $182,400 for each gold medal, more than 7 times the amount the US gives its winners.
The real money is obviously in the endorsement deals. Winning the gold “prize” money will pail in comparison to the money that can be had in deals with the likes of Nike, Citizen, Visa, Subway, Gatorade, and other huge sponsors. Unfortunately, there are only a select handful of sports that are marketable. Basketball, Swimming, Soccer, Tennis, Gymnastics, Volleyball (Court and Beach), and Track & Field are the most popular, with the rest of the sports taking a back seat. Winning gold in archery will only take you so far…
Death and Taxes
As previously mentioned, athletes are awarded compensation for winning medals. I don’t think any reasonable person would argue against this. These athletes have proven to be amount the three best in the world, and deserve to be compensated. What’s the issue then? Under current tax laws, the medals themselves are taxed at their fair market value. This is fairly insignificant because the medals aren’t worth more than a several hundred dollars. The more substantial penalty is on the aforementioned prize money. Athletes must pay the top tax rate of 35% for each of the medals earned during the Olympics. For the $25,000 awarded for gold medals, these means paying a healthy sum of $8750. At the current rates, Michael Phelps would have paid over $175,000 in taxes for his 22 Olympic medals.
Show Me the Money
While many of the athletes will walk away from London with millions in new endorsement deals or even hundreds of thousands in medal compensation, the majority of the athletes will come away with nothing to show for their efforts. Training for the Olympics is not cheap, and can run upwards of $25,000 a year for some sports. Forbes wrote an excellent piece listing the average annual costs of training for various sports. Who knew that ping pong players spent $20,000 on training, paddles, and “sparring partners.”
For every Michael Phelps, there are 100 athletes who struggle to make ends-meat. This is their full-time job, yet many athletes have to pick-up part time jobs just to pay the bills. They’ll often spend 6 to 10 hours per day training, while working an additional 8 hour shift to have some income. Why shouldn’t they be paid for their thousands of hours of their blood, sweat, and tears? And don’t even start with the whole “It’s an honor to represent their country, they shouldn’t mind doing it for free” argument. By that logic, politicians at the national level that represent our country should work for free too. Yes, it is an honor to represent our great country, but that doesn’t mean people shouldn’t get paid for it.
Who is getting all the money generated by the Olympics? That would be the International Olympic Committee, or IOC. The IOC is comprised of 109 active members and other honorary members as well. The Committee is charged with organizing and selecting the location for the games. The Committee distributes over 90% of its revenue to various organizations which “Support the staging of the Olympic Games and promote the worldwide development of the sport.” Of this 90%, an estimated 70% goes to Olmypic Organizing Committees, and 20% is distributed to athlete organizations like the National Olympic Committee. Organizations like the NOC help to train and develop Olympic teams. The IOC retains the remaining 10% of the revenues for its operating expenses. Athletes are not paid a dime by the IOC.
Here is the current structure versus the structure which I believe should be in place. This model operates under the assumption that every athlete that competes is paid $50,000 by the IOC. For 2012, this would amount to about $500 million, which is 6.25% of the revenues earned by the IOC. While $50,000 amount isn’t overwhelming, it could easily pay for the training costs for a few years for the majority of these athletes. Also, consider that this amount is essentially split over the course of 4 years, so it would amount to $12,500 a year. Athletes who are already financially stable like Phelps or the Men’s Basketball team would likely donate their money to charity, or have it distributed among the other athletes. These athletes spend thousands of hours training, they shouldn’t have to work additional jobs just to pay the bills. This money would allow them to focus on their dreams. Get it right IOC, pay up.