Saturday, August 12, 2006

The world will be watching – the Beijing Olympics

Two years from today, the world will be watching as the Beijing Olympics will be into their first week of competition. The Games begin on August 8, 2008. China who first participated in the 1984 Los Angeles Olympics (the communist country did not support the Russian led boycott), a mere 22 years later will be the center of the universe for two weeks. Beijing was chosen ahead of Toronto, in what was regarded as Juan Antonio Samaranch’s lasting Olympic legacy, bringing the Games to the largest country in the world. The Lords of the Game made their momentous decision five years ago awarding the Games to Beijing – it represented in July 2001 what it does today, what it will in two years, the single greatest marketing opportunity the IOC will ever offer its major sponsors. 1.3 billion consumers have corporations salivating at the chance.

According to a Wall Street Journal report, thirty-six companies have reached marketing agreements with the Beijing Organizing Committee, or Bocog. BOCOG isn’t quite done yet, the organizers are still actively soliciting suppliers. It’s likely the Beijing Organizing Committee could generate close to $1 billion in sponsorship and marketing dollars by the time the Games begin. And the money games only begin with sponsorship fees. Volkswagen China Group are paying more then $100 million for local sponsorship rights, an astounding sponsorship fee by any standard.

Anthony Laver, Volkswagen China Group director of Olympic marketing told the WSJ he believes that in the 12 months before the Games, official sponsors will spend up to $2 billion on advertising.

If maximizing marketing and sponsorship dollars played a determining factor in the Games being awarded to Beijing, a report released Tuesday from “Reporters Without Borders” made it abundantly clear, China politically remains a communist country, where freedom remains a question mark.

Reporters Without Borders is outraged that, 730 days before the start of the Beijing Games, the Chinese authorities are able to continue a crackdown on the press with virtually nothing being said by the IOC or the national Olympic committees. Nothing seems capable of eliciting a reaction from the Olympic bodies, not even restrictions on the foreign press.

"This silence allows the Chinese government to shamelessly continue its massive human rights violations," Reporters Without Borders said. "Already marred by corruption, the preparation of the games has been accompanied by a crackdown on dissent, which officials say is necessary to make sure they are safe." The press freedom organization also fears that all the surveillance and crowd-control equipment that China has bought from US, Israeli and French companies to ensure security at the games, will afterwards be used for repression.

Freedom of the press, a cornerstone of the American Constitution, won’t get in the way for companies focused on reaching the Chinese market. Sir Martin Sorrell, chief executive of marketing heavyweight WPP Group PLC, told the WSJ he believes China could be the world's second-largest advertising market. Sir Martin has said it is "difficult to think of any sporting or cultural event in the world that could be bigger."

If Chinese are prepared to set their own set of rules with the media, you better believe they’ll manipulate the Olympics marketing policies to suit their needs. Speaking at the World Broadcasters meeting in Beijing BOCOG President Liu Qi did his best to alleviate concerns the media may have about covering the 2008 Olympics.

"Based on the promise made by the Chinese government in the bid process and taking into full consideration the international practices of the Olympic Games, this regulation is intended to provide convenience to foreign journalists for their coverage of the Games in China," Liu said.

"Foreign journalists holding Olympic identity and accreditation cards will be entitled to visa exemption within the validity of the card, and with the Olympic identity and accreditation cards and valid passports or other travel documents, make multi-entries into the People's Republic of China."

"The visa application procedures for [other] foreign journalists will also be simplified," he said.

When it comes to the actions of the Chinese governments, actions speak much louder then do the words of an easily replaceable bureaucrat. If Qi's "promise" embarrasses the IOC, they will only have themselves to blame for awarding the Games to China in the first place.

A vanguard of the Olympic marketing program (TOP) established shortly after the financially successful 1984 Los Angeles Games (those Games had an estimated surplus in excess of $225 million) was to have fewer Olympic sponsors, but allow sponsors to enjoy exclusivity in their industry sector.

The 2008 Games are already home to three official beers: Tsingtao, Yanjing and Budweiser. The decision was rare, and required special permission from the International Olympic Committee.

"One beer cannot cover all China," says Liu Jun, Bocog's deputy director of marketing. Each of the beer companies established a different target audience, Mr. Liu says.

"Our point of view is this is the first time that China will conduct the Olympics," says a Tsingtao Brewery Co. representative. "We believe it is a great thing that many Chinese brands and businesses are able to participate."

Despite media cutbacks, the 2008 Games will likely represent the largest single influx of journalists into China. How the Chinese treat the foreign press will leave a lasting impression on the world.

"In no other major country is there so much control over foreign journalists," says Jonathan Watts of the Foreign Correspondents Club of China. Dozens of foreign journalists - both visitors and those based there - are detained, threatened or attacked each year. "We are unable to give an exact figure at the moment, somewhere between 50 and 100 a year, but the number of journalists prevented from working by force is a problem that should be raised at the highest level," says Watts.

Does that suggest journalists should be concerned about their safety if they’re covering the Beijing Games? Will journalists be permitted to cover the Games and report on what they see as they see fit? In a sad testament to how badly Western based companies want to find their way into the Chinese market, earlier this year Google agreed to censor its search services in China in order to gain greater access to China's fast-growing market.

Google’s position wasn’t that it was sacrificing its integrity. “While removing search results is inconsistent with Google's mission, providing no information... is more inconsistent with our mission,” was in part the Google’s rationale.

One issue companies clearly haven’t considered, if the Beijing Games are turned upside down by the media (or if there is a major event involving members of the media) companies associated with the Beijing Games could easily be hurt by their association. Nonetheless, the IOC’s major sponsors that have each agreed to invest more then $50 million each in sponsorship fees are moving forward with their planning.

SA's Leo Burnett ad agency, told the WSJ he is recommending to some of his clients, which include McDonald's, to start planning -- but wait on delivering ads until the second half of 2007. "Local brands are now trying to build a competitive presence against multinationals," he told the WSJ. "But in terms of Olympic experiences, there is nothing going on right now. A lot of multinationals were using the World Cup to stay engaged instead."

The multinationals and Chinese brands may be on different schedules because they are looking for very different results from their expensive marketing rights. "The message for the multinationals is that, 'We are here in China, and we are going to be part of this transformation that is taking place,' " says Scott Kronick, president of WPP Group's Ogilvy public-relations agency in Beijing in the WSJ report. "The message for local companies is that, 'We are a famous Chinese company that has the potential to be a global brand.' "

Yili (a Chinese based milk company), whose corporate goal is to become a global brand by 2010, has been one of the most aggressive Olympics advertisers since it announced its sponsorship of the Games in November 2005. "Sports resources are limited, and whoever strikes first prevails," says Yili's brand director, who declined to be named. The company according to the WSJ report tried to sign up athletes before Yili had won the official sponsorship.

It remains to be seen if the International Olympic Committee made the right decision in selecting Beijing. Needless to say the Chinese will attempt to ensure they put on the best show they can for the world. It's well worth remembering Beijing bid for the 2000 Games but lost to Sydney. It wasn’t that the IOC didn’t want to award the Games to Beijing. Politically, awarding the Olympics to Beijing a mere four years after the Tiananmen Square Massacre on June 4, 1989, wasn’t something Samaranch was prepared to do. The political landscape hasn’t changed since that terrible day.

What has changed – with markets shrinking everywhere else in the world, the opportunity to leverage an Olympic sponsorship to a quarter of the world’s population proved to be too much of a temptation to the IOC and their family of sponsors. You won’t find anyone associated with the IOC who would ever suggest sponsors play a role in determining where an Olympic Games should be held. However, no one is naïve enough to not appreciate how important marketing and sponsorship dollars are too the IOC. Be very clear in appreciating – sponsors may not be a part of the voting process when an Olympic city is selected, but you can be very sure each and every IOC voting member factors how where the Games will impact on the IOC’s ability to generate marketing dollars.

There are those who believe China will use hosting the Olympic Games along the lines of what Hitler did with the 1936 Berlin Games and the Russians tried to accomplish with the 1980 Olympics – using the Games as a platform to showcase the place Chinese athletes have in the world.

"They will spend more money on the preparation of athletes," USOC chairman Peter Ueberroth told The Philadelphia Inquirer last week, "and they clearly should be favored to win the most medals and the most gold medals."

Countries hosting an Olympic Games traditionally invest a great deal of money in the seven years leading up to hosting an Olympic Games once the IOC selects their country to host a Games. The Chinese are taking the opportunity to a new level, reportedly investing billions of dollars in ensuring their athletes reach the top of the podium.

"Their burgeoning economy has allowed them to take off," Steve Roush the U.S. Olympic Committee's chief of sports performance said, referring to athletic funding. "Given their form of government, no one knows for sure how much they're spending. In some places, it's the provincial government that's providing the funds. In some places, it's the city, and, in others, it's the national government. But it's all coming from the government."

The Lords of the Games should heed these comments from the Reporters without Borders report and ensure the Beijing Games are a success – current Chinese regulations, which were reinforced in April by the State Administration of Radio, Film and Television (SARFT), ban the Chinese media from using foreign news agency video footage without government permission. Under these circumstances, disinformation by the Chinese media before and during the games is inevitable.

So the sadly unforgettable scenarios of Berlin in 1936 and Moscow in 1980 could easily be played out again in Beijing.

For SportsBusinessNews.com this is Howard Bloom. Sources cited in this Insider Report: Reporters without Borders, Wall Street Journal and The Philadelphia Inquirer