The relevance of the Olympic games has faded since the end of the Cold War, but the dollars surrounding the event just keep growing. The games themselves are estimated to cost London as much as $15 billion, or roughly 5 times the original estimate. London's games end up getting paid for via equipment, sponsorships, and broadcast rights.
The money trail flows from London through the broadcasters. In the U.S., NBC won the rights to the London games getting started this week in 2003 with a $2b bid in a 3-way auction. The networks, in turn, get their revenues from the sponsors buying ads. This puts sponsors at the base of the entire pyramid, making sure you'll see as much as possible from the big ticket sponsors.
The question is whether or not there's any tangible return on the money. Jack Ablin, chief investment officer of Harris Private Bank admits the return on the investment is tough to calculate directly, but will come in part through a steady drumbeat of reminders prodding viewers to give into temptation. Of the marketers Ablin says "they're smart people, they know how to market, and you're going to see (their products) ten times an hour."
That repetition may, as Ablin says, provoke those already so inclined to go to McDonalds (MCD) but at the expense of other viewers turning off their sets. Considering the overwhelming amount of shmaltz bloating Olympic coverage to the point that a 1 minute event takes an hour to broadcast, it's entirely possible an audience will ignore or even resent sponsors. But that's a chance they seem willing to take.
Is there a payoff for the sponsors or is it all just a giant boondoggle disguised as a marketing opportunity?
A little of both, most likely. The fact is the Olympics are a financial food chain, with host cities paying upfront then collecting revenues from ticket buyers and advertisers. As long as companies feel a need to be part of the Games, the system will continue to limp along in its deeply flawed ways. Is there an actual return on the advertising investment? That's something you can try to figure out while you sit through commercials.