The Olympics don’t pay for themselves
With the London 2012 Olympics fast approaching the scramble for sponsors to start utilising their link with the International Olympic committee (IOC) to achieve a maximum return on their investment has begun.
The Olympics don’t pay for themselves and The Olympic Partner (TOP) sponsors of London 2012 are contributing more than 40% of the total cost of the games.
Since the commercial disaster of the 1976 Montreal games (which were only finally paid off in 2006) the IOC came to realise that ‘selling’ the Olympic rings was the only commercially sustainable option. This led to the more strategic approach of obtaining ‘TOP’ sponsors who were willing to pay more for the privilege of sporting the Olympic logo in their campaigns.
This strategy culminated in the commercial success of the 1984 LA games and has been present ever since.
The likes of McDonald’s, Coca-Cola, Panasonic, Visa, and Samsung are amongst the TOP sponsors for the London Olympic Games as well as many more companies involved in the TOP program and the lower tiers of the sponsorship table. Benefits of being a TOP partner include:
- Use of all Olympic imagery, as well as appropriate Olympic designations on products
- Hospitality opportunities at the Olympic Games
- Direct advertising and promotional opportunities, including preferential access to Olympic broadcast advertising
- On-site concessions/franchise and product sale/showcase opportunities
- Protection from ambush marketing
- Acknowledgement of support through a broad Olympic sponsorship recognition programme
So why are these companies dishing out millions of pounds to be involved in the games? Yes it is a global event watched by billions so the answer may seem obvious but the benefits are certainly not always tangible.
TOP sponsors can see a return on investments through the privileges listed above but this return is not often immediate and is unlikely to achieve break even. As Nigel Currie, director of sports agency BrandRapport said: “It is going to be a big decision for companies – it is millions of pounds over a long period of time. It is potentially a huge commitment for brands to make. It will be made at a very high level.”
So what other reasons are there for companies to be involved in the Olympics? The likes of McDonalds have a product range that is an obvious contradiction to the Olympic ideals but as a brand being involved in the Olympics allows to it cloud over this contradiction and could contribute to a change of perceptions in the long term.
McDonalds is also building a 1,500 seat restaurant within the Olympic village meaning 1 of 5 meals sold at the games will be from McDonalds (chicken nugget overload for Usain Bolt?).
It may seem optimistic for companies utilising their link with the games in this way to believe that they can somewhat re position themselves by sponsoring an event that lasts only 17 days, but TOP sponsors hold the rights to the Olympics for four years and this includes the summer, winter and Paralympics games. That’s a lot of PR time over three well-attended events that are watched globally.
Past Olympic Games are riddled with examples of major competitors utilising the games to gain an advantage over the other. It is not unusual for associated companies to be subject to ambush marketing or piggybacking from rivals all in the name of improving market share.
Soon after the announcement that Atlanta had been awarded the games in 1996 Kodak bought 50 major poster sites in the city for the next four years even though Fujifilm had bought the camera film rights to the games. This resulted in Kodak being indirectly involved with the games at a much cheaper rate than Fujifilm.
Footwear brands such as Nike, Adidas and Reebok are in constant argument over their right to showcase their sponsored athletes at the games and in advertisements.
Recently The Telegraph revealed how the agents of some Nike-sponsored athletes such as Mark Cavendish, Paula Radcliffe and Mo Farah were threatening their clients would take off their shoes and appear barefoot on the medal podium to combat clauses which require them to wear the shoes and tracksuit of Adidas, which is an official sponsor.
This example shows that the IOC has cracked down on the issue but surely Nike has a right to be associated with their own athletes’ successes?
Why London 2012?
The fact that companies are fighting for this association with the games must show its appeal from a commercial point of view but with such a high cost of involvement, limited knowledge of tangible returns, there are still some loopholes. There is even a clean policy within the stadiums, meaning that you won’t be seeing the hoarded advertisements that you see at the football World Cups.
So why be involved in London 2012? Being touted as the ‘greenest’ games ever it may be that companies wish to further their association with this image. They may wish to be seen contributing to grassroots sports development and the Olympic teams themselves. The country itself may be an appeal and companies may be aiming to gain a firmer presence within Britain and perhaps even regionally in London.
It may be that the large multinational companies can take that risk of Investment to be involved in an event which is perceived as being noble and Herculean in nature. Even if the return on investment fails to break even any subtle shifts of market positioning or customer perceptions that occur from being directly involved in the London Olympics may greatly outweigh the cost in the long term.