London Olympics Team Sets Sights on Sponsorship Gold ; BUSINESS ANALYSIS

By Matthew Beard and Simon English | The Independent (London, England), May 5, 2006 | Go to article overview
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London Olympics Team Sets Sights on Sponsorship Gold ; BUSINESS ANALYSIS

Matthew Beard and Simon English, The Independent (London, England)

Barely a year since Sebastian Coe and his team pulled off one of sport's great "muggings" by snatching the right for London to stage the 2012 Olympics from Paris, the race is on for multi-million pound sponsors of the world's largest sports event.

Lord Coe and his team have set the bar high - expecting the private sector to contribute at least pounds 750m towards the operating costs of the 2012 Olympics by selling intellectual rights, VIP packages and tickets to British companies.

If all goes well, this sum, the equivalent to the current annual marketing spend for the entire sports sector in Britain, would be combined with revenues from tickets sales, merchandising and international broadcast rights to cover the pounds 2bn operating cost of London 2012 and possibly make a profit.

Although branding seems the obvious reason to put your company's name to the Games, there are other factors such as improved government relations, boosting staff morale or simply blocking a rival.

The kernel of London's marketing plan was devised by Sir Keith Mills, vice chairman of the London Organising Committee of the Olympic Games (Locog) and the creator of loyalty schemes Air Miles and Nectar.

Among the 10 "tier one" sponsors - each paying between pounds 50m and pounds 100m - the first categories will come from banking, automotive, utilities and telecommunications, the latter divided into landline and mobile sponsors.

These sectors have been chosen in negotiation with the Games "franchiser", the International Olympics Committee, so as not to clash with any of the global companies such as McDonald's and Samsung, which belong to the rolling "TOP" sponsorship programme. Insiders say that the first sponsor is likely to come from the banking sector with an anticipated pounds 100m deal. Barclays, HSBC and RBS are all in discussions with Games organisers, whose negotiations are being led by Paul Deighton, Locog's chief executive, who is also a former Goldman Sachs banker.

Locog cites the recent pounds 100m paid to the 2010 Vancouver Winter Olympics by the telecoms firm Bel Canada as cause for optimism.

About 20 to 30 tier-two companies and up 50 tier-three companies will be unveiled starting in the second half of next year.

The investment for the top 10 companies will enable them to promote themselves as the exclusive official supplier. They will also have use of the famous Olympic rings - arguably the world's most marketable symbol - as incorporated in the logo of the organising committee' and have first refusal on broadcast commercial slots and receive an allocation of tickets and hotel rooms, at market prices.

Sponsors in the lower tiers will receive fewer such hospitality opportunities and their use of the rings may be restricted to business to business rather than consumer advertising. What no company can buy is a presence in the venues as the IOC operates a strict policy of "clean" venues. All packages are devised in consultation with the IOC and there is little room for horse- trading.

"Selling local sponsorship is an integral part of the Games. It is more important than venues, transportation and security," said Terence Burns, who brokered Delta Airlines' pounds 20m sponsorship of the Atlanta Games and subsequently sold rights for the IOC.

He reckons London has agood chance of achieving its sponsorship goals because there is a "leading-edge" sports sponsorship market in the UK. The key for the organisers is to value not just big cash offers, but companies which will aggressively market the 2012 brand, thus raising the Games' profile and boosting ticket sales and broadcast viewing figures.

"If I were selling the rights I would be less excited about the market leader who writes a cheque and is not very creative thereafter. More exciting are tier-two companies, which may give you less cash but will be very aggressive with their marketing and throw everything at it.

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