Wednesday, August 06, 2008

Countdown to the 2008 Beijing Olympic Games – the billon dollar sponsorship boondoggle

The start of the Beijing Olympics are less than 48 hours away (the Games’ soccer competition began today) with what is being billed the most expensive Opening Ceremonies in Olympic history. The Chinese are sparing no expense in what is being billed as a look at the history of China at a cost in excess of $100 million. 12 sponsor members of what some would call the most prestigious (others called it the most odorous) group in Olympic corporate history, are the 12 companies who comprise the International Olympic Committee’s TOP program. These 12 companies have a great deal invested in the Beijing Games, collectively more than $866 million in cash and goods and services they have agreed to provide.

Most of the companies are American based global companies: General Electric (which owns NBC), Coca-Cola, Visa, McDonald's, Kodak, and Johnson & Johnson. (The others are Canadian-based Manulife Financial; Lenovo, the Chinese personal computer maker; the French information technology services company Atos Origin; the Swiss watch manufacturer Omega; Panasonic; and Samsung)

These 12 global brands are in essence partners with the IOC and the Chinese government in presenting the Games of the 29th Olympiad in Beijing . Over the last ten days, Sports Business News has offered an inside preview of the political, media and business issues relating to what likely will be the most controversial Olympics since the 1936 Nazi Games. These 12 companies are putting their moral, ethical and philosophical ideology on the line in the belief not in the Olympic Games but in being able to connect to what was the world’s largest untapped market. In fact, before the IOC awarded the 2008 Games to Beijing on July 13, 2001 over Toronto, China was a country few Western based companies had access to.

Washington Post columnist Sally Jenkins in Beijing pointed out that by agreeing to become partners in the 2008 Beijing Games, the IOC’s major sponsors are at the very least showing the world they are willing to accept the media censorship the Communist government have imposed on the media in Beijing.

Jenkins elaborated in Tuesday’s Post: When these acquiesced to the Chinese government's crackdown, and effectively accepted the censorship of the press during these Games, they fell into a special category of profiteers that Franklin Delano Roosevelt described in his "Four Freedoms" speech.

"We must especially beware of that small group of selfish men who would clip the wings of the American eagle in order to feather their own nests," Roosevelt said.

It's plain to see that the Chinese people have worked mightily to create a beautiful Beijing Games, from the elegantly manicured gardens to the whisked-clean streets, and that they are a source of immense national pride. No one could wish to injure that pride, and every one wishes them a successful Games. But the Olympics are not solely about the host, they are about all the participating nations, and the common goal of "preservation of human dignity." The moment it became apparent that the Beijing Olympics was causing a crackdown, and that basic Olympic values were being constricted rather than expanded, these Olympic partners should have spoken out, and threatened to withdraw if abuses didn't halt. When they didn't, it cast a permanent pall over these Games. Like the air here, the Olympic movement is struggling for a clean breath.

Companies that sponsor events (let alone the Olympics) always have to ask themselves a number of questions. When it comes to the Beijing Games -- Are Olympic Sponsorships Worth It to be near the top of that list.

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.). To no one’s surprise, the sponsorship of Chinese computer maker Lenovo will last only one four-year quadrennial. Kodak, one of the IOC’s long standing sponsors will end their Olympic sponsorship after the Beijing Games. Kodak’s Olympic sponsorship goes back to the 1896 Athens Games, the first so called modern Olympic Games.

Johnson & Johnson and Manulife Financial haven’t decided what their Olympic sponsorship future is. With the 2010 Winter Games set for Vancouver , British Columbia it’s likely Manulife Financial will continue their IOC involvement through the 2012 London Games.

The IOC’s TOP program generated $279 hundred million in 1993-1996 quadrennial, $579 hundred million during the 1997-2000 and $663 hundred million during 2001-2004. The $866 hundred million represents what the 12 TOP companies have invested in the current quadrennial, which also includes the 2006 Winter Games in Torino .

The 1952 Helsinki Olympic Games were the first to launch an international marketing program. Companies from 11 countries made contributions of goods and services ranging from food for the athletes to flowers for medalists.

The 1960 Rome Games included an extensive sponsor/supplier program with 46 companies that provided technical support and products such as perfume, chocolate, toothpaste and soap.

The Tokyo 1964 Games included 250 companies developing marketing relationships with the Games. The new “ Olympia ” cigarette brand generated more than US$1 million in revenue for the OCOG. (The tobacco sponsorship category was later banned) Seiko created quartz-timing technology, providing the most accurate timing system to date.

Montréal’s money losing 1976 Summer Games featured 628 sponsors/suppliers, and domestic sponsorship generated US$7 million for the OCOG.

The Sarajevo 1984 Winter Games OCOG signed 447 foreign and domestic sponsorship agreements.

The 1984 Los Angeles Olympic Games sponsorship program created a fundamental change in how the Olympic sponsorship program was managed. The Olympic movement stared into the abyss in 1979. Five years before the 1984, the only city remotely interested in hosting the 1984 Games was the city of Lost Angeles , who had previously hosted the 1932 Summer Games. Californians made it clear – the only way Lotus Land would even consider hosting the 1984 Games was if the Olympics wouldn’t produce a deficit taxpayers would be forced to deal with.

Frugal L.A. officials examined the mistakes made by previous hosts, including the costly 1976 Games in Montreal . They decided not to overextend their budget by building new state-of-the-art facilities specifically for the Olympics. The city also stipulated that new Olympics-related capital improvement projects would not be built unless they were fully funded by private sources.

The federal government donated $75 million to pay for the Games, and the city's Olympic Committee earned an additional $53 million from the sale of Olympic commemorative coins by the U.S. Mint. Los Angeles made an estimated profit of $250 million from the Games, the first time the Olympics had turned a profit since 1932. Four years later, the Summer Games in Seoul raked in nearly $300 million in profits.

At this time, Peter Ueberroth had stepped in as the head of the Games Organizing Committee. He was a prominent figure in the Games, receiving the Olympic Order in gold at its conclusion. Due to the success of the Games, he was named Time magazine's Man of the Year in 1984.

Ueberroth developed the concept of fewer Olympic sponsors with category exclusivity as a key benefit to an Olympic sponsorship, the genesis to the present-day Olympic TOP program. Accordingly, American based companies (led by McDonald’s) bought into what Ueberroth was selling for the 1984 Games.

An IOC TOP sponsorship is the designation given to major sponsors who invest in an Olympic quadrennial, a four-year period that includes one Winter and one Summer Olympic Games. The practice began in 1984 and has been a cornerstone for Olympic sponsorships ever since.

The IOC created The Olympic Partners (TOP) worldwide sponsorship program, in coordination with the 1988 Seoul OCOG’s in Seoul and Calgary , as well as 159 NOC’s. TOP is based on the 1984 Los Angeles model of product category exclusivity. Prior to the establishment of the TOP program, fewer than 10 NOC’s in the world had a source of marketing revenue.

During the next quadrennial (1989 to 1992 Barcelona and 1994 Lillehammer ) TOP grew from nine to 12 partners in the program’s second generation. Broadcast and marketing programs generated more than US$500 million, breaking almost every major marketing record for an Olympic Winter Games. (The total for the current quadrennial is $866 from sponsorship revenues and $1.44 billion from broadcast rights, a total of $2.31 billion)

The 2000 Sydney-Atlanta OCOG developed the most financially successful domestic sponsorship program to date, generating more revenue (US$492 million) than the domestic sponsorship program of Atlanta 1996 in a host country marketplace 15 times smaller. A new standard for brand protection through education, legislation and advertising controls was created in the process.

The Olympic Properties of the United States (OPUS) sponsorship for 2002 broke records for both Winter and Summer Games. (A great indicator of why Chicago remains a front runner when it comes to hosting the 2016 Summer Games)

In the smallest country to host the Olympic Games to date, Athens 2004 achieved its sponsorship revenue target two years before the Games and ultimately generated revenue from national and torch relay sponsorship that was 50% higher than initial estimates.

Torino 2006 stands (before the Beijing Games) as the most lucrative and successful sponsorship program in Italian history. The program accounted for 6.14% of the total sponsorship spending in the market, which was significantly higher than previous Olympic Winter Games sponsorship programs and represented nearly 1% of the total advertising spent in the Italian market. (35 times greater than that of Salt Lake 2002)

The Beijing Games will take Olympic sponsorships to a new level – economically and their level of importance (as seen by the companies investing hundreds of millions of dollars in the Beijing Games)

“These Olympic Games are going to be more of a national celebration than any other Games that we have witnessed by far," says Alexandria Oikonomidou, director of Ogilvy Sports, the Olympic and sports marketing practice of Ogilvy Public Relations Worldwide Beijing (WPP), who previously worked for ATHOC, the organizing committee for the Athens 2004 Olympic Games in a Business Week report.

National pride, added Li Li Leung, managing director of Helios Partners China, an Atlanta-based sports marketing firm that counts Lenovo, BHP Billiton (BHP), and Snickers as clients, is "the most important value that the Olympic movement [has] for the Chinese people."

For multinationals, according to a May 2008 report in Business Week, latching onto China 's national pride is part of their localization strategy. "Chinese people like to make 'foreign friends.' This extends from a person to a nation. They are so proud of their country that they appreciate anybody or any nation that goes out of its way to be 'friends of China,'" Jing Wang, a professor at the Massachusetts Institute of Technology and author of Brand New China: Advertising, Media, and Commercial Culture, wrote in an e-mail interview with Business Week.
China is the biggest country in the world, with one-quarter of the world’s population living within the borders of the communist country. There will be more than 20,000 journalists in Beijing covering the Olympics. Tuesday, the alleged treatment of two Japanese journalists sent a scary message to the 20,000 media people in China assigned to cover the 29th Olympiad.

According to a Reuters report: two Japanese reporters covering a bombing in China that took place Monday were beaten and then jailed by Chinese officials. The two men, one a photographer with the regional Chunichi Shimbun newspaper and the other a reporter for Nippon Television, were detained near the site of the attack in Kashgar in China 's western Xinjiang region, which saw 16 police killed only four days before the Beijing Olympics begin, spokesmen for the two companies said on Tuesday.

The journalists were then taken to a police building where they were beaten, before being released about two hours later. Neither was seriously injured, the spokesmen said.

The death of 16 Chinese policemen is terrible, suggestions the attack may have been the work of terrorists on the eve of the Olympic Games in the host country makes this a major international news story.

The alleged beating and jailing of two reporters covering a breaking news story in China sends a chilling message to the 20,000 journalists in China for the Games -- you had better be careful where you step. It should send an even scarier message to the International Olympic Committee and the 12 major international companies that have invested in the Beijing Games. You too will be held accountable if the actions of the Chinese government bring shame and embarrassment to the Olympic movement.

And leave it to the Chinese to make it clear what message they want sent to the media. According to a Reuters report: the Beijing city government said on its Web site that Chinese and foreign journalists who want to report and film in Tiananmen "are advised to make advanced appointments by phone." It said that will help ensure orderly newsgathering amid what are expected to be large crowds in the square on each day of the games, which start Friday.

IOC spokeswoman Giselle Davies told the media attempting to cover the Games the new arrangement didn't match the IOC’s “understanding” of access to Tiananmen. Just what the IOC and their hundred million corporate partners needs to hear – alleged media beatings and more restrictions placed upon the more than 20,000 journalists in Beijing. Yes indeed – all for the glory and the all mighty dollar, a site to behold and embrace.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: Business Week, Reuters, The Washington Post and the International Olympic Committee

Labels: , , , ,