Even under a dark cloud of Covid, brands can’t quit the Olympics
When Usain Bolt won his record-breaking third 100 meter gold medal in a row at the 2016 Olympics in Rio de Janeiro, the Jamaican sprinter was met at the finish line with a watch company’s logo. As the games’ “official timekeeper,” Omega, the luxury Swiss watchmaker, was granted the right to flash its emblem on millions of screens around the world as Bolt made history.
Five years later, Omega remains one of 15 global Olympic partners—a group of large companies given exclusive marketing opportunities in exchange for shoveling hundreds of millions of dollars every four years to the International Olympic Committee (IOC). The partner program, which launched in 1985, accounts for about 20% of the IOC’s revenue (the rest comes from TV rights) and has become about as central to the Olympic experience as the athletes themselves.
But that economic foundation of the games is being threatened this year by the coronavirus pandemic, which already postponed the Tokyo Olympics from 2020 until this July, and is again putting the global competition in jeopardy. Covid-19 cases in parts of Japan continue to rise, while the country’s vaccine rollout slogs behind that of other developed countries. A majority of Japanese citizens want the games canceled. Prominent national and regional newspapers have called for their cancelation. And the Tokyo medical community is nearly unanimous in its view that the games are a health risk.
Will the Tokyo Olympics have spectators?
Few experts believe the Tokyo Olympics, set to run from July 23 to August 8, will be scrapped entirely, but it’s clear any version of the games that moves forward will be a diminished one. Spectators from outside Japan will not be allowed into venues. The IOC is unsure if it will permit any fans at all (a decision on that is expected soon). Athletes will be asked to leave the Olympic village shortly after participating in their final events. TV ratings, like they have for most major sporting events in the pandemic era, could suffer. For the sponsors, that’s all bad news.
“The crowds are going to be miniscule. The experience is going to be sterile,” Rick Burton, a professor of sport management at Syracuse University and the former chief marketing officer of the US Olympic Committee for the 2008 Beijing games, told Quartz. “The sponsors are going to be thinking the ratings will be down. They’re worried they’re not going to get their money’s worth.”
And yet, despite the inevitability of an underwhelming—perhaps even dangerous—summer games, the Tokyo Olympics still present a branding opportunity companies can’t refuse. No event in history can compare to the sheer reach, or generate the global affinity, of the Olympic games. Even the Covid Olympics are still the Olympics. Its sponsors are full steam ahead.
How global Olympic sponsorships work
The IOC—and the Olympics—are funded by several tiers of sponsors: the highest being its worldwide partners. Below them, each participating country has its own sponsors, and athletes often arrange separate deals for themselves (though if their sponsors aren’t also official Olympics sponsors, they have to put those deals on hold while the Olympics are airing).
The lower level sponsors are usually companies based in the host country (Mitsubishi, Nikkei, and Tokyo Gas are all partners this year, for instance), but the roughly 12 to 15 worldwide partners can come from anywhere. Coca-Cola has been a worldwide sponsor since 1985, and has been involved in the games in some capacity dating back to 1928. Toyota is this year’s official mobility partner. Samsung is the official communications partner. Each one of the companies in this highest tier get their entire product categories to themselves.
Starting in July, these global brands will be everywhere. They will take products and staff to Tokyo. They’ll launch massive marketing campaigns using the famous (and trademarked) Olympic symbols, like the torch and the five interlocking rings. You’ll likely recall some of their TV commercials from over the years, like this 2016 one from Procter & Gamble thanking the mothers of athletes:
This association with the Olympics, of course, costs brands lots of money. They typically pay the IOC for a four-year package, called a quadrennium, which gives them marketing rights to one summer and one winter Olympics. A quadrennium can cost as much as $300 million for one sponsor. Airbnb, a new worldwide partner for the Tokyo Olympics, will reportedly give the IOC $500 million through 2028 for the right to be the games’ official housing partner. (Representatives from Airbnb, Coca-Cola, Visa, and Toyota did not respond to a request to comment on this story.)
In total, the IOC is expected to bring in about $2 billion from global sponsors this quadrennium. That figure could balloon to more than $3 billion between now and 2024:
What the brands get out of this arrangement isn't always easy to quantify, but they're sure it's worth it. There's a reason the IOC has no trouble filling up spots each Olympics—often with the same companies coming back for more.
How brands know the Olympics work
Like with much of marketing, it's difficult to attribute the sale of a product directly to any single piece of Olympics advertising. Still, there is enough evidence to suggest a $300 million sponsorship is the type of opportunity brands cannot get anywhere else, even in an Olympics that may go down in history with an asterisk.
"After we ran significant media during Olympic games, we would not only see a benefit to the business for a week or two, we would see a lift of all key metrics for six or eight weeks or more," said Tony Pace, the former CMO of Subway, who has been involved in virtually every Olympics for the past three decades. At the ad agency McCann Erickson in the 1990s, Pace worked with Coca-Cola to sponsor the torch relay for the 1996 Atlanta games. At Subway, he led the sandwich chain's partnership with US swimmer Michael Phelps.
Pace said being associated with the Olympics can boost morale within companies—a significant, if immeasurable, benefit of the partner program.
"Even weeks after the Olympics, you'd be flying on a United Airlines flight [a longtime sponsor of Team USA], and you'd talk to a steward with an Olympic pin on who was so proud of their company being associated with the Olympics," Pace said. "It impacts their service level. At the end of the day, happy, engaged people do a better job. It's the kind of thing that doesn't dissipate in two or three days after the event happens. The premium you're paying is more than justified by the longevity of the impact."
Olympic sponsorships are lucrative for other reasons. First, there is no television event like it—not the Super Bowl, not the World Cup, not the UEFA Champions League. As many as 4 billion people will experience some part of the Olympics, either from watching the event on TV, seeing clips on social media, or being inundated with ads, logos, and other media from its sponsors.
"Somewhere between half the world and two thirds of the world are going to tune in at some point," Ryan McConnell, the senior vice president for consulting at the research firm Kantar said. Part of McConnell's job is to measure enthusiasm from US sports fans and work with companies on how best to capitalize on that. He said even the most famous brands in the world benefit from Olympic fervor.
"Even in this strange Covid world we live in right now, the Olympics still command high dollars," McConnell said. "As much as you might think everyone knows Coke, you need to remind people. If you stop sponsorship, it might not happen tomorrow, but over the long term, your brand takes a hit, and that affects sales."
"It's really isolated and condensed high-quality viewership," said Adam Holt, the senior vice president of sales at FanAI, a company that measures the return-on-investment of sports sponsorships. "It's not just passively slapping their logos on things, which consumers are blind to. It's being integrated into everything the Olympics does."
The Olympics also have late July and early August all to itself. Major League Baseball is the only major US sports league in season at that time. College and pro football have not yet begun. The English Premier League won't start its next season until a week after the Olympics end. And most Hollywood studios save their biggest potential blockbuster movies for earlier in the summer or the Christmas season. The Olympics have almost no serious competition for eyeballs. "That time is historically a media desert," Pace said.
"There's incredible power in that," he added. "Those kind of opportunities for guaranteed audience are increasingly rare, and because of that, they're worth more than they used to be."
Why the Olympics are so lucrative, even during Covid
Though the brand takeover of the Olympics might distract from its less commercialized roots, the games are still, at their core, a global celebration of amateur athletes. More than 200 countries participate. And they allow the world to come together to think positively about the future. Marketers love that.
"The purity of real people competing against each other is what sets itself apart," said Julius Geis, a branding expert who consulted on Munich's bid to host the 2018 Olympic games. "That's what fascinates brands. It gives them the opportunity to really be on eye level with everyday people, and create these lasting emotional bonds. Super Bowl ads can't do that."
Apart from the more palpable marketing opportunities, merely being seen as supporting the Olympics is a boost to brands. Coca-Cola is what it is today in part because of the Olympics. If it were Pepsi, instead of Coke, who had sponsored the games for nearly 40 years, perhaps it, and not Coke, would be the beverage industry leader in market share. Global admiration for the Olympics rubs off on all who support it.
"You want to take the love that people have for the Olympics and use that to borrow that equity for your brand," Elizabeth Lindsey, the president of brands and properties at Wasserman, a US-based sports marketing company, said. (Wasserman's founder, Casey Wasserman, led Los Angeles' successful bid for the 2028 games, and now is the head of its organizing committee.)
Covid is also creating an opportunity for these brands to be seen as not giving up on the Olympics, much like the actual athletes. "There's an opportunity for even greater brand affinity if you don't just abandon them," Lindsey added.
Covid presents obstacles, but not insurmountable ones
The biggest downside for the Tokyo sponsors will probably be the lack of in-person brand experiences, like events and product launches. While much of their investment in the Olympics is designed for viewers at home to see, companies do plan considerable on-site experiences for fans and athletes on the ground. If attendance is lackluster (or non-existent), that's a solid chunk of marketing tossed out the window.
"If it's done in front of no people, that absolutely impacts the value of all the inventory they're purchasing," Scott Jones, a professor of marketing at Stetson University, said of the potential for an Olympics with little on-site marketing.
The other hazard is the expected tempering of enthusiasm for the Tokyo games, given the situation of the pandemic in the country. "It could be a little bit less engaging, a little bit less fulfilling for the viewer," McConnell said. And if something were to go wrong at the event—like a major outbreak that led to deaths—then the brands that funded the games could take a hit. "If you're seen as moving forward irresponsibly because of money, that's not a great look," he added.
What happens if you're sponsoring an event where there's a clear outbreak? That's the PR nightmare. You can imagine how much negotiating is going on right now.
Because of Covid, sponsors and the IOC are likely in daily contact, going over their complex contracts, which are often hundreds of pages long. Burton said there is language in each contract that creates the obligation for the IOC to "make good" for the companies in the event something happens that impacts the value of the sponsorship. Often that just means rolling agreements into the 2022 winter Olympics in Beijing, or the 2024 summer Olympics in Paris.
"What happens if you're sponsoring an event where there's a clear outbreak? That's the PR nightmare," Jones said. "You can imagine how much negotiating is going on right now."
Still, no one expects brands to pull out at the last minute due to Covid. The opportunity is that lucrative, and too much money has already been invested. TV viewers, Geis posited, will blame the IOC, and not the sponsors, if something goes wrong. The bigger concern continues to be a lack of global interest, at least compared to prior Olympics. Kantar found that two thirds of sports fans in the US found sporting events without fans during the pandemic to be less enjoyable than ones before.
But the Olympics could be different. They could, as Pace theorized, help to usher in a new "roaring 20s." What better way to announce that the world is back, having slayed the Covid beast, than to stage a global celebration of sport? So long as there are no catastrophes, brands are betting on that comeback story. They're betting on national pride to win out now and in the future.
"One of the only things that has transcended these challenges is live sports," Lindsey argued. "And the Olympics, in particular, are even transcendent of that."
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