The Olympics are proving a tough sell to a business world which seems willing to miss an advertising bonanza that promises to deliver billions of television viewers worldwide and an avalanche of goodwill.
The roster of companies foregoing sponsorship deals for the Games is like a who's who of advertising, among them Bank of America, General Motors and Home Depot have all dropped out as U.S. team sponsors.
These deals add up. The International Olympic Committee (IOC) raises about $4.5 billion (2.8 billion pounds) from the sponsorship and global TV rights deals for each four-year period, analysts estimate.
"You have a confluence of many factors. One, winter versus summer. Two, a hangover from Beijing. Three, the economic times," said Andrew Benett, global chief strategy officer of Euro RSCG, part of advertising services company Havas SA.
"All of that together means it will not be as big of a bang -- even as past winter Olympics."
The overriding issue is the recession, forecast to cut worldwide ad spending by 8 to 12 percent this year as companies avoid splashy new campaigns.
The Olympics are not safe from those budget pressures even if they do hold up better than other top events like the NFL's Super Bowl or the Academy Awards.
Kelly Crabb, partner with law firm Morrison & Foerster, who worked for the Beijing Olympic Organising Committee, said with corporations slashing expenses "there may be some sponsors that are going to bail out."
In doing so, they would step away from a coveted chance to showcase their products to a blockbuster TV audience.
Some 4.7 billion viewers, or 70 percent of the world's population, watched the 2008 Beijing Games, said Nielsen.
What audiences see when they watch the Olympics is equally appealing to advertisers, who love to be associated with the sort of feel-good stories that often come out of the Games.
"When looking for a sponsorship that can really elevate their brand, there are few opportunities out there like the Olympics," said Gary Pluchino, senior vice president with sports, entertainment and media company IMG.
YOUNGER AUDIENCES
For all that appeal, the Olympics face challenges that stretch beyond the current economic collapse.
Topping the list is the familiar problem of how to attract younger audiences more interested in texting, gaming and web surfing than watching bobsleigh or decathlon on TV.
It is a particularly vexing issue for the Winter Olympics, according to marketing experts. Those 20-somethings who do watch winter sports on TV are often more taken with extreme sports than many of the more traditional sports to be featured in Vancouver next year.
One result of the current pullback in spending, experts said, is the IOC and United States Olympic Committee may have to rethink how sponsorship deals are priced or structured.
"They are going to have to wake up based on the economy. Sponsorships to the Olympics are not cheap -- companies put down $10 million or $20 million for sponsorships and today that will not happen anywhere nearly as frequently as it did in the past," Euro RSCG's Benett said of national sponsorships.
Those involved in talks said the USOC already has started cutting deals.
The IOC, meanwhile, was forced to assure Vancouver organisers it would help with a potential budget gap because the IOC has fallen short on signing up corporate sponsors.
Global sponsors like McDonald's and Coca-Cola pay up to $100 million for a four-year Olympic period.
Advertisers hope NBC Universal, which has U.S. broadcast rights to the Vancouver Games, will be willing to cut prices.
U.S. corporate spending on TV ads alone totalled almost $1 billion for Beijing, according to TNS Media Intelligence.
So far sources say NBC Universal, jointly owned by General Electric and Vivendi, has held the line.
Negotiations are moving slowly but NBC Universal executives nonetheless said advertisers are coming to the table and deal-making is starting to pick up.
"Sales are accelerating significantly, particularly in recent weeks," Seth Winter, senior vice president, NBC Sports & Olympics sales and marketing, said in an e-mail.
Olympic organisers have reason to worry about any struggles by NBC as they are set to open the bidding for the next four-year period after the host city for the 2016 Summer Games is chosen from Chicago, Tokyo, Rio de Janeiro and Madrid on October 2 in Copenhagen.
Many think a Chicago victory could boost the value of a TV deal as a U.S. host city would be more attractive to American broadcasters who account for the bulk of the IOC's TV revenue.
There is also some progress on the sponsorship front, with the USOC and Procter & Gamble announcing a deal this week covering the Vancouver and London 2012 Games.
"We are always looking for great opportunities to invest in our brands for the long term... regardless of the economy," Kirk Perry, vice president for North America at Procter & Gamble, said in an interview.
Still, as Euro RSCG's Benett noted: "We represent 82 of the Fortune 100 companies and I can count on one hand the number of clients that are flat to up in terms of their marketing spend.
"So there is no way the Olympics will be immune to this, the IOC will be immune to this, or NBC will be immune to this."
(Source: Reuters)
