In Action - When the X Games met the Olympics

What the inclusion of action sports means for the world's largest sports tournament

By Kirsten Zoe Smith

16/10/21

This summer, the much-anticipated Tokyo Olympics debuted a whole roster of action sports. Park, street skateboarding, and freestyle BMX took place to great success alongside other action disciplines like surfing and climbing, signalling their full, if uncomfortable integration into the mainstream. At the same time, a rather poignant Summer X Games took place in Southern California; the birthplace of skateboarding. It was a rather modest event with a reduced set of disciplines and no crowd, but this had little impact on the quality of competition. Skateboarding legend Tony Hawk competed and seemed delighted to lose to 12-year-old Gui Khury who landed the first ever 1080 in Vert (three full aerial rotations on a half-pipe ramp). Alongside the youngest ever Olympic podium, this summer was truly historic for action sports - but how will these changes affect the business of the sports industry?

Because the Olympics are not-for-profit and amateur, there is a tendency to see them as more ethical than a professional, for-profit enterprise like the X-Games. Many think of the Olympics as a kind of sports United Nations. However, it’s important to acknowledge that whatever the cultural significance, sports tournaments are designed to make money. In the words of action sport scholar Professor Holly Thorpe (whose new book Action Sports and The Olympics: Past Present and Future will be released in November) the International Olympics Committee's (IOC) decision to include these new disciplines was 'in response to growing criticisms that the Olympics are increasingly irrelevant to everyday people'. By adding these sports, the IOC is hoping to diversify and expand its market - and it's easy to see why. Action sports are billion-dollar enterprises, spawning merchandising, fashion, broadcasting, and gaming franchises all over the world. The market is even more valuable as it is youth-based, meaning a new generation of loyal customers to bring into the brand. The inclusion of action sports in the Olympics was a commercially-based decision, so let's take a deeper dive into what this could mean for the business of action sports tournaments.

A Brief Overview of the X Games and Olympics

Both the X Games and the Olympics are medal awarding, multi-discipline tournaments. Both have summer and winter events, although for the X Games both are annual. An obvious difference would be that the X Games is professional, and for-profit, while the Olympics is amateur and not-for profit, but this really makes the structural distinction between the two too stark. The IOC is actually a privately funded corporation. It’s incorporated as a non-profit in Switzerland and has exclusive rights to the intellectual property, broadcasting, and marketing of the games. The 'professional' distinction is a technicality - basically, the X Games offers money for medals (ESPN does not advertise the amount but the numbers floating around vary from around 50,000 to 3 million USD for gold), while the IOC does not, making the tournament 'amateur'.

How do the Tournaments Work as Businesses?

Both tournaments make most of their money from selling the rights to broadcast the games, with sponsorship coming in a close second. The events themselves are second in importance to their role as online and television content. The X Games is owned outright by ESPN, the world’s largest sports broadcaster, which is in turn owned by Disney. They manage all production costs, and benefit from all sponsorship and broadcasting opportunities, while in contrast, the IOC only owns the intellectual property of the Olympics – they have only a minority role in actually financing and operating the games, tasks delegated almost in total to the host city. The IOC jealously guards their rights to all marketing and broadcasting which they sell off to the highest bidder (73% of the IOC’s revenue comes directly from broadcasting rights). NBCUniversal paid $7.75 billion to cover the games for the American market between 2014 and 2032, a deal which has generated 40+% of the IOC’s overall revenue. This is why they chose to host the games without an audience in 2021, because the revenues from attendees withers in comparison to the television rights.

Another key area of departure between the tournaments is their approach to commercialisation. The X Games is glaringly for-profit. Every year there are new and returning official sponsors like Wendy’s and Jeep. Athletes make their own deals and thank sponsors in emotional podium speeches. Toby Ryan, big air skateboarder even wore In-N-Out burger socks while competing and Evan Doherty had monster energy stickers plastered on his helmet - you can see this in the video below. The athletes bodies operate essentially as advertising space, which seems pernicious, but it’s important to remember the athletes have a great level of agency over who and how they advertise their sponsors while competing.

This causal approach to sponsorship and financial incentive is alien to the IOC. The Olympic Partner (TOP) program retains all sponsorship revenues within the committee and requires sponsors to cough-up hundreds of millions in order to qualify as an official sponsor of the Games. A sponsor’s agency is severely limited as well. They have strict limitations around the words and images they can use in social media posts, particularly in respect to their products and the Olympic rings Logo. Athletes can only receive sponsorship from TOP approved companies, and many struggle to do so. Many athletes, but particularly those from minority sports have criticised the decision, arguing that companies putting up these kinds of sums do not want to take chances on lesser-known athletes (often women) who are not in the line up to win big, or in front of a large audience. The IOC argues that this is to retain the amateurism of the sport – a statement that tends to raise eyebrows from the sports community.

What's the impact on the Host City?

Because the IOC is not responsible for the costs of the Games, and makes money as long as the Olympics occur and are popular, they have a penchant for choosing city bids that are the most dramatic, lucrative, and ambitious – even if they are proposed by less well-off countries that are committing to bankrupting themselves. This consequences of this have been demonstrably dire. Economists argue that the incredible debts racked up by Greece after the 2000 Olympic Games in Athens contributed in no small part to the subsequent Greek debt crisis. All the arenas in Athens are now derelict. This trend has continued despite attempts to reform the IOC in the early 2010s, for instance, the city of Rio shouldered $13 billion from their games in 2016, were unable to pay construction workers, and now have a series of dilapidated state-of-the-art arenas because they are too expensive to maintain.

In wonderful contrast, all studies conducted on the X Games have shown that the tournament really does boost a local economy. A study by microeconomics in 2010 showed that the games generated a minimum of $50 million in identifiable economic benefits to the Los Angeles area. Spending by out-of-town visitors, as well as construction of events, broadcasting and transportation all saw windfalls. LA has a great history of making use of its already existing facilities to reduce costs, like the STAPLES center, and it stands as the only city to have made money from hosting the Olympics since 1984. The recent X Games in Norway saw great profits for Oslo winter events, and in spite of Disney’s new asset review that has them considering selling the games, they seem to consistently bring in profits and substantial audiences. X Games TV viewership was up double digits this year from 2021, and their partnership with TikTok to stream the events worked to gain 1.9 million views on the app. This added to the total of 6.75 million live-stream views across all X Games social media.

The profit incentive of the X Games means that they do not recklessly spend money. Forays into the international scene in the 2010s were scrapped because European markets proved to be less engaged than the established one back in the States. The use of existing infrastructure is the biggest cost-cutting difference with the Olympics. This year the private ramps of pro-skaters Axell Hodges and Pat Casey were used to host the games, a cheap option given the prohibition on spectators. Courses are often temporary structures, rather than new builds, and mega ramps have even been built into the roofs of existing stadiums. Financially, it makes absolutely no sense to build from scratch for every new tournament.

How Could the Inclusion of Action Sports affect The Olympics?

Given the growing concerns around the financing and ethics of hosting of the Olympics, the incorporation of action sports into the Games may be the first, rather than the last indicator that they are looking to these small competitors for inspiration. But this inclusion could challenge the business model of the IOC more than just bringing in a younger market. Young audiences are far more likely to consume sports media through short videos on athletes social media pages, creating a great challenge for the IOC's exclusive broadcasting rights. The direct interaction of athletes and fans through social media also has the potential to create pressure on the IOC's licensing regulations, as athletes can more easily communicate to a friendly audience about their conditions. Legal challenges to the black out period, where athletes have advertising restrictions for a period before and after the Olympic games have already forced some changes to commercial restrictions. I further suspect that the United States Supreme Court's recent ruling that college athletes have the right to profit off of their name, image and likeness in spite of the NCAA's amateur business model will send a message to the IOC that the challenges to their commercial model are not going to stop.

Skateboarding enthusiasts have feared for years that the Olympics will end up changing the culture of their sports for the worse. They value style over raw point scoring. Nevertheless, it may just be that the direction of change is the other way. The Olympics desperately need to change their structure, and action sports offer a new and growing young market, and ample opportunities for generating revenue without incurring unjustifiable costs. It will be interesting to see how action sports athletes, who have competed in the professional space for so long respond to the commercial restrictions of the Olympics. It is my hope that continued athlete pressure, and the introduction of this new competitor will force the Olympics to make significant changes to reduce the costs of the games, and realise the professional expectations of the people that make them money – the athletes.