Are Olympics Sponsorships Worth It?
With the opening ceremonies for the Beijing 2008 Olympic Games just days away, corporate sponsors are getting ready to do victory laps of their own. This year's Olympics have been hyped as a blockbuster for marketers, a chance to ride the wave of Chinese national pride that may translate into billions of dollars in sales of Adidas sneakers, McDonald's (MCD) Big Macs, or General Electric (GE) wind turbines.
But Beijing 2008 is likely to go down as the high-water mark of the Olympic sponsorship program. While the Games offer unique attractions to sponsors, multinationals are already looking more critically at whether the payback will be worth it for future Games. Of the 12 global sponsors for the Beijing Olympics, only eight have signed on for the 2010 Winter Games in Vancouver and 2012 Summer Games in London. (The International Olympic Committee sells sponsorships in four-year increments to cover both Winter and Summer Games.)
Among the high-profile sponsors deciding to back away is Lenovo. Its sponsorship of the 2006 Winter Games in Turin and the 2008 Summer Games in Beijing will be a one-time shot for the Chinese PC maker. Other current sponsors who so far have not committed to ponying up for the next pair of Games will be Johnson & Johnson (JNJ) and Manulife Financial (MFC). Even longtime Olympic supporter Eastman Kodak (EK), a sponsor since the IOC first established its global partnership program in 1986, has pulled the plug. "It's just not the best way for us to spend our money," says Kodak Chief Executive Antonio Perez.
Payback Is Elusive for Sponsors
The issue comes down to weighing the value of shelling out increasing amounts of money vs. the potential payback. Companies have paid $866 million, or an average of $72 million apiece, to sponsor the Turin and Beijing Games (BusinessWeek.com, 1/30/06). That's almost one-third more than the $663 million total paid to back the Salt Lake City and Athens Games in 2002 and 2004, and up from $579 million for the Nagano-Sydney cycle in 1998 and 2000. Rowland Jack, a senior bid consultant in the sports marketing and sponsorship team at Hill & Knowlton, says the attractiveness of the Beijing Games was probably a big factor accounting for the jump in sponsorship fees, as so many companies were interested in bidding.
Yet some research suggests few consumers even notice who is backing the Games. In a survey of 1,500 Chinese city dwellers earlier this year by London's Fournaise Marketing Group, only 15% could name two of the 12 global sponsors, and just 40% could name one sponsor: Coca-Cola (KO). Adding to the confusion for consumers are 21 additional national-level sponsors, including Adidas and Volkswagen (VOWG.DE). "If you are a traditional marketer, it's a big waste of money," says Fournaise CEO Jerome Fontaine.
Some sponsors feel otherwise. Longtime partner Coke has signed on through the 2020 Games.
"Coke has not in the least reconsidered its Olympic sponsorship," says Kevin Tressler, director of Coke's Worldwide Sports & Entertainment Marketing. Neither has GE, which has landed $700 million in revenues from 400 Olympics-related projects such as rainwater recycling at Beijing's Bird's Nest stadium. GE is a partner in London 2012, too.
Chinese Market Immaturity Was a Draw
There are other factors that make the Beijing Games unique. While provisions of the IOC charter ensure that nonsponsors' ads are restricted in and around Olympics venues to prevent ambush marketing (BusinessWeek.com, 3/12/08), Beijing extended the ban to all outdoor advertising in the city's airports, buses, and billboards within the city center. And just two weeks ago, the China Advertising Assn. took things even further, by saying use of Chinese Olympic athletes by nonsponsors was banned countrywide during the Games—something no other host country would attempt. (Companies can, however, apply for exemptions, as Nike (NKE) has done for its spots featuring China's gold-medal winning hurdler Liu Xiang.)
Another draw of Beijing 2008: the relative immaturity of the Chinese consumer market, and the intense pride among Chinese in hosting the Games. "For any kind of marketer or advertiser, you have to view the Olympics in Beijing differently from Olympics in other countries," says Michael Zhang, managing director of MediaCom China (MCCM). Government officials will notice which companies show up in support (BusinessWeek.com, 5/28/08) even if consumers don't, a major factor for sponsors in a country where guanxi, or relationships, are such an integral part of doing business.
But corporate relationship-building with government officials is unlikely to rank high when companies weigh the costs of sponsoring the 2012 Games. "I don't see that as important in London, where you are talking about a developed and mature market where commercial realities stand on their own merits," says Richard Basil-Jones, managing director of Nielsen Media Asia Pacific in Hong Kong.
Instead, marketers will have to weigh whether there are more cost-effective ways to reach consumers and leverage Olympic enthusiasm without having to pay the high price. Frank Vial, strategy director of branding agency Landor Associates, argues that in a world that's moving toward targeted marketing, "maybe the Olympics will have to reinvent itself as something other than a global, monolithic brand."