|"McDonald’s was one of six IOC partners whose current contracts pre-date the price hike and expire in ‘20. The others are GE, P&G, Dow Chemical, Visa and Coca-Cola. The other eight TOP members have all renewed or signed since the price hike. All of these brands are going to be looking at that scenario, and making a decision about whether the additional investment they’re going to require is going to generate a bigger incremental return"|
|Shauna Coxsey, Tara Hayes, Matt Cousins and Nathan Phillips. Four names you’re probably not familiar with, but it might not be long before you are. All four are climbers and not just the best in Britain but some of the best in the world. With yesterday’s announcement from the International Olympic Committee (IOC) that climbing is to be one of five new sports added to the Olympic programme, they could be set to take Tokyo 2020 by storm.|
|The progression of climbing from a sport regarded for eccentrics and adventurers to one on the fringes of mainstream consciousness has been swift. Yet the reasons behind its incredible growth are as diverse as the sport itself and the IOC’s decision could be another leap forward.|
Entering the Mainstream
Arguably it was two climbers, Tommy Caldwell and Kevin Jorgeson, who pushed climbing into the spotlight like never before, with their historic free climb of Yosemite’s El Capitan last year. Their epic 19 day ascent of the 3,000 metre Dawn Wall, drew media attention from around the world and made stars (if only reluctantly) of Caldwell and Jorgeson. Whilst the media’s gaze was only fleeting, it gave a unique look at a sport that has slowly been taking off around the world, particularly in the UK.According to the British Mountaineering Council the number of climbing walls in the UK has risen by over 100 in the last five years alone, with 350 public access walls listed in the BMC wall directory. The increase in walls is driven largely by an uptake of young people joining the sport, with the number of people taking part in the BMC Youth Climbing Series rising by 50% over the same period.
Technology, Technology, Technology
So the sport is a clearly a growing force but why and how has it become so, and more interestingly, how far can it go? The simple answer is technology. As with so many extreme sports new technology has allowed climbing to grow through improved equipment, providing a safer and more complete experience of a sport that inherently carries risk – without removing the thrill. Sport climbing is itself a descendant of the introduction of technology. Permanent anchors are secured to the rock face from which climbers can place protection to ensure survival from even the most eye watering falls.
|The shift may appear to be a natural progression from the days of Royal Robbins placing steel pitons into the Yosemite cliffs, but the effect has been more wide-ranging. The improvements in rope, harnesses and other climbing gear has allowed the very best climbers to push the limits of what’s possible. The dynamic and occasionally terrifying nature of these new challenges has opened up the sport of climbing to a new thrill seeking audience, one that is looking to not only participate but create and consume as much content about the sport itself as possible.|
In 2006 film makers Josh Lowell and Peter Mortimer created the first Reel Rock film tour, taking a collection of short climbing films to live audiences all around the world. Now in its 11th year the tour has been a huge success and attracts sponsors such as The North Face, National Geographic and Petzl, highlighting the growing appetite for climbing content. It appears the sport has become as much about capturing the ascent, as the ascent itself. After all, if a tree falls in a forest and no one is around to hear it, does it make a sound?
It’s a question that a number of companies and brands are already looking to answer. Epic TV has been quick to provide a channel for the new band of climbers wishing to share their latest exploits, earning them not just an audience but an opportunity to create their own brand with which to attract sponsorship and turn professional. Climbers such as Alex Honnold and Sean McColl regularly share not just their climbing achievements, but their training regimes and other aspects of their lifestyle that hold as much interest to fans as the climbing.
So the sport is growing, with new stars, increasing brand presence and a highly engaged audience mostly made up of Generation Z and Millennials - surely then a place in the Olympics would be a positive next step for a sport on the rise? Yet there remain concerns, including those from professional climbers such as Adam Ondra, who feels the expected format of the competition may need to be amended to reward the more aesthetic aspects of the sport. It’s a concern that isn’t exclusive to climbing, with the much publicised trouble surrounding golf at this summer’s games proving that format is a difficult area to get right for even the biggest of mainstream sports.
|Where Next? |
Regardless of the concerns around format, it’s clear that climbing is entering another stage of its development and a place in the Olympics will act as validation to the thousands who compete in and watch the sport worldwide. It won’t be long before brands outside the outdoor and adventure space take notice and names such as Coxsey, Hayes, Cousins and Phillips move from the unknown to the everyday.
|Getting an Olympic Games right is rare alchemy. The Road to Rio has been long and hard for athletes, organisers and sponsors alike. In the seven years since it won the bid to host the 2016 Olympic and Paralympic Games, the country has experienced more than its fair share of drama: rioting around #changebrazil, a FIFA World Cup meltdown against Germany, the spectre of political corruption and the tragic emergence of Zika.Is the country really ready for the Games? Can the infrastructure hold up? Will the doping scandal forever tarnish Rio’s moment in the sun?|
These will all have been questions and concerns for the sponsors of Rio 2016 – the 59 different brands that make up the four partnership tiers of the Games represent a unique ecosystem that has helped ROCOG meet its $570m target for sponsorship revenue and played a key role in making Rio a reality.
|While sponsorship is never an exact science, Synergy’s PeRiodic Table is an interactive graphic that allows you to explore a little more about each of the brands that are part of the Games. From sponsorship category to Twitter following, our interactive infographic – designed to be sorted and filtered as you see fit – provides the chance to discover some of the stories hidden beneath the surface of Rio 2016’s sponsorship landscape. Click here for the full table.|
Heritage Matters: whilst the entire list of brands is typically sorted in alphabetical order, it’s notable that Coca-Cola sits before either Atos or Bridgestone in the TOP sponsor hierarchy. This is a quirk of Coke’s gift of rights: they will always be the first-mentioned brand in the IOC’s sponsorship recognition programme, acknowledging a relationship stretching back to 1928.
|If You’ve Got It, Flaunt It: at time of publishing this, only 11 of the 46 brands with an active Twitter handle featured Rio 2016 marques on their profile. A potential missed opportunity for lager brand Skol, whose Twitter presence has perhaps the most overt Olympic theme, but lacks any actual recognition of its officialdom.|
|Missing The Tweet Spot: although it’s true that not every brand has to have a Twitter footprint, it’s interesting to note the official sponsors without a social presence, or those that have failed to build one ahead of the Games. For international brands with only a local relationship (anyone outside the TOP sponsor tier) like Nike, Nissan or Airbnb, the use of Brazil-focused feeds is also worth noting. While likely to be down to the IOC’s commercial restrictions around the use of social media, it will be interesting to see how many of the global Twitter handles end up giving a RT to their local market counterparts.|
Toyota Revs Up For Tokyo: although the brand signed up as one of the IOC’s new TOP sponsors back in 2015, Nissan were already a Tier 1 sponsor of Rio 2016. This means Toyota can only talk about Rio in Japan (something Nissan cannot officially do), before turning their global attention to Tokyo 2020 following the conclusion of the current Games.
|Necessity Is The Mother Of Investment: the outbreak of Zika not only created valid concern amongst athletes and spectators, but also led to the signing of OFF! – the Games first ever insect repellent partner. It probably depends on your level of cynicism whether you think this was to ensure a consistent quality control in terms of the level of safety provided to participants and attendees, or simply to head off commercial concerns around ambush of the category by unofficial brands.|
With 1,000 days to go to Rio 2016 just gone, it’s interesting to compare the status of Rio’s domestic sponsorship programme with London 2012′s at the same point back in 2009.
What our research shows is, despite London 2012 being in the market at the nadir of the UK recession, and Rio being expected when it was awarded the Games to successfully leverage Brazil’s booming economy, at this stage Rio is a long way behind London in almost every respect.
This should come as no surprise. We’ve commented previously about how, after a stunning start in early 2011 with huge finance and telco category deals, Rio’s sponsorship sales programme has gradually stalled along with the Brazilian economy, and now faces big challenges given the ongoing protests, persistently negative PR about the Rio 2016 operation, Brazil’s economy, and Brazil’s ability to stage major – and even minor – events.
Last week, in an interview with AP, Rio’s Chief Commercial Officer Renato Ciuchini revealed that the organisation was now targeting $1.3-$1.5 billion in domestic sponsorship revenue, and that $650m (£400m) has been raised to date.
By comparison, with 1,000 days to go to London 2012, we estimate that LOCOG had raised $894m (£552m) of its final total of $1.2 billion (£739m).
In other words, London had raised 75% of its final total, but Rio has raised only 50% of its minimum target and only 43% of its stretch target.
Deal Volume and Value
Rio is also well behind London in deal volume.
With 1,000 days to go London 2012 had closed 23 deals in 23 categories, whereas Rio has closed 10 deals in 8 categories (the Bradesco sponsorship covers both banking and insurance, and the telco category sponsorship was acquired by a joint bid by Embratel and Claro).
Conversely, Rio’s average category deal value, at $65m, is much higher than London’s $38.8m.
But on this point, Rio seems to be confident. Back in August, it slipped out an announcement that it had now sold 50% of its sponsorship packages, suggesting that it envisages doing only another ten deals.
If it sticks to this, Rio will have to average $85m for each deal to reach its stretch target of $1.5 billion, and $65m – its current average – to reach its minimum target.
As its current average is skewed by the huge Bradesco and Embratel-Claro deals, together worth $500m, the jury is very much out as to whether Rio can sustain this given the market challenges it now faces.
Rio also lags behind London in all three of the tiers that modern Games Committees use to market their domestic sponsorships.
At the same point in the London 2012 cycle, LOCOG had sold and announced six of its seven Tier 1 sponsorships (BMW was announced a month later, in late November 2009) and six of its seven Tier 2 sponsorships (the seventh, Arcelor Mittal, was announced in March 2010).
In comparison, Rio has three in Tier 1 (finance, telco and automotive) and four in Tier 2 (professional services, beer, packaged foods and dairy products).
But what’s most striking is that whereas LOCOG had eleven Tier 3 deals in place with 1,000 days to go, Rio has only one, with Nike (although oddly, that deal has yet to be officially announced – the Nike logo just appeared on the partners section of the Rio 2016 website).
I’ve written before about how important value in kind (VIK) is to the Olympic sponsorship model and to Games budgets.
Because the Games are the world’s biggest and most complex peacetime operation, it takes far more to deliver them than pure cash. The Olympic sponsorship model is like a giant joint venture, with both the IOC and the local organising committee outsourcing critical products and services from sponsors, without which the Games couldn’t happen – and that’s why the majority of Games sponsorship in the modern era is delivered in the form of VIK.
As such, all of Rio’s sponsorships to date will have included an element of VIK – some (Embratel-Claro, Nissan, Ernst & Young, Nike) more than others.
But the fact that Rio 2016 has done so few deals at this stage compared to London 2012, particularly at the Tier 3 level which is always heavily VIK-based, means that right now it is having to do two things with important budget, cashflow and delivery implications.
Rio 2016 must be paying cash for vital products and services which Games committees normally use VIK deals to finance, which means that its cashflow and overall budget must be incredibly strained. And it must also have had to delay sourcing other key products and services, with inevitable consequences for its operations and deadlines.
Let me be really clear that, for certain types of business situations, and certain brand categories, Rio 2016 has enormous potential for brands in Brazil.
But right now, Rio 2016 is a sponsorship price-taker rather than price-setter in Brazil. Brands have three very good reasons to be wary about investing, and to exert downward pressure on price.
1. The spectre of a Government bailout looms over Rio’s budget even if it reaches its stretch sponsorship target, as a Rio 2016 spokesman recently admitted to AP. If that happens, there’s little doubt that would see the anti-FIFA protests become anti-Rio 2016 protests, which would be a disaster for the IOC, the Games, and of course the Games’ sponsors.
For an in-depth look at the marketing and sponsorship implications of the anti-FIFA protests, our Brazil team’s blog from June this year is a must-read and includes that point.
2. The IOC’s Gerhard Heiberg had this to say in the same AP piece on Rio 2016:
“I know that some sponsors are waiting to see how things are going to be at the World Cup. Will it be a success? Will it be chaotic? If people feel things are going to be very good for the games, it’s easier to get the sponsors. If people feel things are not going to be 100 percent, they will hold back on the Olympics. First they want to see what’s going to happen with the World Cup.”
Absolutely spot-on – and brave of Mr Heiberg to say so. We are aware of a wide range of name brands in Brazil, who would otherwise be primed to become Rio 2016 sponsors, who are adopting a ‘wait and see’ attitude until after the World Cup.
3. The potential value of Rio 2016 to a brand is inexorably dropping. There’s already less than three years to go until the Rio Games, and every day that passes reduces the potential value to a brand – especially when you consider that, given the Brazilian consumers’ overwhelming preference for football and therefore the World Cup, the first half of 2014 is arguably, for an Olympic sponsor in Brazil, a write-off.
|On 7 September in Buenos Aires, the IOC will elect the host city for the 2020 Olympic Games. Ahead of the election, I’ve taken a look at the Istanbul, Madrid and Tokyo 2020 bid proposals for their domestic sponsorship programmes, to see what they tell us about the next evolution of the Olympic sponsorship model.|
The Rival Bids
The three candidate cities’ bids present three very distinct overall visions, each of which naturally influence their sponsorship proposals – in particular those of Istanbul and Tokyo.
Istanbul’s ‘Bridge Together’ is the most ambitious bid, with a huge $20 billion infrastructure budget and a compelling narrative that blends the repositioning of Turkey, the business potential of a youthful growth market that spans Europe and Asia, and the opening of a new frontier for Olympism in the Muslim world. As the most exotic and (in budget terms) riskiest choice, it has strong echoes of the Rio 2016 bid.
Madrid’s ‘Illuminate The Future’ is in many ways the absolute opposite of Istanbul, with a minimalist $2 billion budget based on using existing infrastructure, and a focus on using the Games as a catalyst to regenerate and rejuvenate Spain.
Tokyo’s ‘Discover Tomorrow’ offers the best of both worlds, with its established infrastructure and modest $4 billion budget counterpointing Istanbul, and the strength of its giant economy contrasting strongly with Madrid. It also plays hard on its reputation as a global centre for innovation, exemplified by Zaha Hadid's futuristic Olympic Stadium design (pictured below) and on its vision of staging the first-ever ‘downtown Games’ in the heart of a city.
|The Bids’ Sponsorship Philosophies|
Each of the three candidate cities preface their domestic sponsorship revenue projections with introductory statements that make interesting reading.
Taking a lead from its overall bid vision, Istanbul leads on the ‘premium value’ of hosting the Games ‘in a new and vibrant region’, ‘the momentum created by the…strength of the Turkish economy’, and ‘the size and youthful demographic of the population’. It also plays to the IOC and its global sponsorship partners with the statement that Istanbul is ‘the regional hub for about 90 countries in the Coca-Cola empire’ - Coca-Cola, of course, being the IOC’s longest-established global partner.
Madrid and Tokyo both take more pragmatic approaches. Tokyo borrows from its overall bid vision by stressing the size and strength of both the Japan and Greater Tokyo Area economies, whereas Madrid sidesteps its economic woes by leading on the size and sophistication of its advertising and sponsorship markets. And both cite (without naming any names) their world-leading brands and their longstanding commitment to domestic and international sponsorship, with Tokyo inevitably adding that this has included TOP sponsorship by Japanese companies – Panasonic is a current TOP sponsor, with a contract through to Rio 2016.
Little Sign Of Innovation
Fairly standard stuff. But what about innovation? I was hoping to see proposals by each of the three candidate cities for how they intended to innovate the Olympic sponsorship model. Sadly, there’s little of this to report.
Extraordinarily, given that the Tokyo bid counts innovation as one of its defining characteristics, there’s absolutely nothing at all about sponsorship innovation in Tokyo’s proposals.
Madrid proposes two, although neither feels fully thought through.
The first is to ‘promote agreements with the main Social Networks…to counter the effects of ambush marketing [by preventing] non-sponsor brands from using hashtags, profiles, etc., which employ Games-related content and concepts.’ Fine, but what about partnering with the networks to create opportunities for Games sponsors?
The second is set out in a long and rambling paragraph which proposes ‘…an innovative marketing plan which will go beyond mere brand promotion. [It] will help sponsors to strengthen their ties with consumers through a 360-degree focus involving short-, medium- and long-term strategies and specific actions during the preceding years and the Games themselves.’ And so it continues, without providing any substantive details.
But in terms of innovation, comfortably the best of the three bids in my view is Istanbul.
|I like Istanbul's commitment, for example, to a ‘new, broad approach to activating the whole city across the sport, entertainment and cultural programmes, creating many new opportunities for partners’. And in parallel with its groundbreaking vision of seating 500,000 people along the Bosphorus for the Opening Ceremony, I also liked Istanbul’s proposal to re-imagine corporate hospitality at the Games by ‘leveraging the city’s spectacular geographical and historical assets’. There’s also a vague but intriguing idea about creating ‘a consolidated bank of media properties’, which I assume includes social media integration - Istanbul makes much more of its social media potential for sponsors than the other two bids, in particular the fact that Turkey is the world’s fourth largest user of social media.|
Tokyo Leads The Revenue Projections
|Confirming the economic power that underpins the Japanese bid, at $958m Tokyo projects comfortably the largest domestic sponsorship revenue of the three 2020 candidates - over $250m more than Madrid, and almost $300m more than Istanbul.|
Tokyo’s revenue forecast is also over $200m more than the $725m London projected in its bid for the 2012 Games, and almost double Rio’s $570m projection for 2016.
Given that London 2012 ultimately secured $1.197 billion from domestic sponsorship, and that Rio 2016, despite a struggle to sell sponsorships in the last two years, rapidly (reportedly) hit the $500m mark, Tokyo’s forecast not only highlights the conservativism of its two rivals’ forecasts, but also that Tokyo is taking the same approach. I have no doubt that Tokyo would sell well over $1billion of domestic sponsorship, and perhaps as much as $2billion given favourable economic conditions.
It’s also interesting to compare the three 2020 bids’ sponsorship revenue forecasts in the context of their estimated contribution to their respective organising committee’s overall budget.
At 28 per cent, Tokyo is five to six percentage points higher than Istanbul and Madrid, and almost eight per cent higher than Rio 2016. But it’s much closer not only to London 2012’s bid figure of 29.4 per cent, but also to London’s final actual figure of 31 per cent.
Given this, and the fact that Rio 2016’s budget is already under severe pressure, it seems Tokyo is being much more realistic than its competitors about the contribution of sponsorship to its budget.
Value In Kind – Finally In The Spotlight
As I’ve written before, Value In Kind (VIK), despite being habitually overlooked by the media, is fundamental to Olympic sponsorship. Because the Games are the world’s biggest and most complex peacetime operation, it takes far more to deliver them than pure cash. The Olympic sponsorship model is like a giant joint venture, with both the IOC and the local organising committee outsourcing critical products and services from sponsors, without which the Games couldn’t happen - and that’s why the majority of Games sponsorship in the modern era is delivered in the form of VIK. For London 2012, for example, VIK accounted for 55 per cent of domestic sponsorship, and 66 per cent of IOC sponsors’ contribution to the LOCOG budget.
Not before time given this background, for the first time in the history of Games bids, the IOC asked the three 2020 candidate cities to estimate the proportion of VIK they would source as part of their domestic sponsorship revenue, and it makes for very interesting reading.
|At 50 per cent, Madrid’s is the highest of the three and the closest to the modern norm of 50 to 60 per cent, whereas Istanbul at 40 per cent and particularly Tokyo at 34 per cent are much lower than a modern Games requires.|
Madrid’s realism would seem to be the product of their long experience of Games bidding and budgeting - this is Madrid’s third consecutive bid for the summer Games - as well as a recognition of the lack of cash likely to be available in the struggling Spanish economy. Whereas conversely, I assume that both Istanbul’s and Tokyo’s optimism springs from their stronger economies, although I do question whether Tokyo can deliver to only 34 per cent VIK, of which more below.
Only time will tell which of the three cities get to test their VIK estimate, and how it ultimately compares with the much higher VIK norms of the modern Olympic era. But it is good to see the IOC finally shining a light on an overlooked but fundamental element of the Olympic sponsorship model.
Three Tiers Remain Standard
|All three 2020 bids use the familiar three-tier Partner-Sponsor-Supplier Olympic sponsorship hierarchy in their projections, along with the usual number of brands in each tier - around ten in tier one and two, and around twenty in tier three.|
Unsurprisingly, given the closeness of their total revenue projections, Istanbul’s and Madrid’s revenue projections for each tier are very similar. It’s equally unsurprising that Tokyo’s bigger overall revenue projection is reflected in its much bigger revenue forecasts for tier one (in particular) and tier two.
In contrast, it’s odd that Tokyo projects such a small figure for tier three. At $108m this is only $4m more than Madrid and $10m more than Istanbul, which is very much out of kilter with the rest of Tokyo’s revenue projections, but perhaps explains why Tokyo’s VIK figure is also so low – usually, tier three deals are predominantly VIK. This minimalist approach to tier three as well as to VIK suggests that Tokyo intends to rely more on cash than VIK than recent Games hosts, but as I stated above, only time will tell.
Also worth noting here are the IOC Evaluation Commission’s comments, which suggest that, in sponsorship terms at least, Tokyo is ahead of Istanbul with Madrid third.
Tokyo’s projections get, by IOC standards, a glowing report: ‘Given the scale of the Japanese economy and the support for sport…demonstrated by the corporate sector, the overall revenue target is considered achievable.’
Both Istanbul and Madrid are called out for projecting ‘average values for each tier…lower than recent summer Olympic Games.’ But whereas the IOC believes that in Istanbul’s case this is because of ‘a careful approach to budgeting’ and that Istanbul’s overall estimate is ‘conservative’, with Madrid it states that it ‘remains cautious about the achievability of domestic sponsorship targets’ owing to ‘the Spanish economic environment.’
Tokyo’s Idiosyncratic Categories
|As the 2020 Games will mark a natural end to the current cycle of IOC global sponsorships – seven of the ten global category deals currently run to 2020 – the primacy of the TOPs continues to dictate the categories which local organising committees can sell. As a result, the three 2020 bids’ proposals for the categories they will tender domestically all strongly resemble previous recent Games, although there are some intriguing nuances.|
Tokyo is the most idiosyncratic, in two ways: the influence of Japanese culture in the inclusion of a broad Food category led by rice in tier one, Cooking Oil and Noodle categories in tier two, and Kimono in tier three; and Tokyo’s tier three is very different to its bid rivals in envisaging six categories with more than one supplier.
The weakness of Spain’s economy is arguably evident in Madrid stating that it will tender one of three categories (Fuels, Professional Services and Web) without stating which one or what will happen to the other two, and also in Automotive appearing in Madrid’s tier two; Automotive was tier one in Beijing, London and Rio, and is tier one in both Istanbul and Tokyo.
It’s also interesting to see that Istanbul and Madrid both make Sportswear tier one whereas Tokyo make it tier two: that the Alcohol category, which bounces around the tiers from Games to Games like a pinball, is tier one for Madrid and Tokyo but tier two for Istanbul; and that the web, the most problematic category in the IOC’s rights bundle, appears as ‘Internet Providers’ in Istanbul tier two, ‘Web’ (as discussed above) in Madrid tier one, and ‘Internet Search Engine’ in Tokyo tier one.
Paralympics Sponsorship Still A Footnote
After the enormous success of the London 2012 Paralympics, one would be forgiven for expecting to see much more emphasis being given to Paralympics sponsorship. Surprisingly, this isn’t the case.
Both Istanbul and Madrid attribute no incremental value directly to Paralympics sponsorship, stating simply that the Olympics and Paralympics will be sold together.
Tokyo, however, states that it expects to generate a minimum additional $26m from domestic Paralympics sponsorship, which earned it qualified praise from the IOC Evaluation Commission. As such I can’t help but feel that Tokyo has stolen a march on its rivals by looking at the Paralympics separately.