United States: Sink or Swim; The U.S. now runs its Olympic program on a venture-capital model, funneling money to likely medal winners, and leaving the rest to pay their own way.(Cover Story)

Byline: Adam Piore (With Jon Boroshok, Devin Gordon and Stefan Theil)

The U.S. water-polo team was tired of losing. So team executive director Bruce Wigo came up with a plan that didn't require a Speedo or any underwater rough stuff. He called up United States Olympic Committee executives and told them to hire the best coach in the world. It was a stretch--at the time, the team didn't even have enough funding to hire a full-time coach. But it was just the kind of pitch USOC executives had been looking for. They lured Romanian Radko Rudic away from Italy to the United States.

The USOC agreed to pay half his salary, while water-polo supporters raised the rest privately. In the past four years Rudic has led the U.S. national team to upsets over top-ranked Hungary and Serbia-Montenegro, placing it in the medal hunt this year.

Rudic's hiring in 2000 was among the first moves in a virtual reinvention of the way the United States trains, recruits and rewards its best athletes and teams. Content for years to divvy up its money and leave spending decisions to individual sports committees, U.S. Olympic Committee executives have begun writing their budgets with an eye toward the bottom line: winning. Just as business executives pitch their plans with PowerPoint presentations and cost-benefit analysis, Olympic coaches in the United States now must present specific plans detailing how they plan to use the money to increase their chances of bringing home gold. "Our programs have become venture-capitalist," says Steve Roush, managing director of sports performance for the U.S. Olympic Committee. "We've gone away from just writing a check for the sport. Now we invest in specific programs. It's an investment in increasing medal count."

It's a natural shift, given the source of funds. Alone among the big sports powers, U.S. Olympic teams receive no direct government subsidies. Increasingly, it is corporate sponsors who invest in U.S. Olympic glory, and they want a bang for their buck. Since 1984, when the L.A. Games proved that the Olympics could make a profit, the USOC's budget has soared from $125 million to $480 million for the period leading up to the Games. Most of that money comes from corporate sponsors. How all of this money filters down to the individual athlete varies from sport to sport, depending on its past performance and the strength of its medal plan.

After the U.S. water-polo team had its success, U.S. swimming pitched a plan to reward winning athletes with financial bonuses. The bonuses range from $10,000 to $50,000 per victory in a world-class competition--with extra money for a world record. That's big money to people like Aaron Peirsol, a swimmer at the University of Texas, who won an Olympic silver medal in the 200-meter backstroke in Sydney.

But it's small change for one of America's most-hyped Olympians, Michael Phelps, 18. On a recent day the celebrated Olympic swimmer was off the coast of Miami hamming it up for the crowd as he filmed a Visa commercial that's likely to contribute only a small drop in what's likely to amount to far more advertising money than most athletes will ever see. "Hey, there's a baby shark down here!" Phelps yelled at a nearby camera crew. "Hold on, hold on! Sorry. Thought I had a booger. Don't want that in the commercial." Phelps is hoping to win eight gold medals in Athens--a feat that would surpass by one the seven medals Mark Spitz won in 1972. He has lined up sponsorship deals with Visa; Argent, a California-based mortgage company, and AT&T, which are all sponsors of the U.S. swim team, too.