News Analysis: Footing the Olympics Bill
London's Olympics will present unprecented marketing opportunities - and restrictions. Drew Barrand reports.
Now that London's bid for the 2012 Olympics has succeeded, the marketing of the Games can start. And the newly formed London Olympic Games Organising Committee (LOGOC) has laid a pounds 415m bill at the door of marketers.
This target for domestic sponsorship revenue for the Games is a realistic assessment of the value of such deals, according to figures issued by Lord Coe's bid team and ratified by the International Olympic Committee (IOC).
At first glance, this sum looks pretty steep. It seems even steeper when you consider that it does not include revenue derived from the IOC's TOP programme - the top-tier global Olympic sponsors, currently numbering 11, which have rolling four-year contracts with the body and are expected to generate close to pounds 500m for the IOC by 2008.
The consensus is that the UK sponsorship market is worth pounds 700m-pounds 800m a year. This would mean that, at the current rate of spend, the target for official domestic sponsorship of the 2012 Games would account for more than half of the sponsorship revenue laid out across all properties that year.
London's projection for its domestic sponsorship return outstrips anything that has come before it. Sydney attracted pounds 332m from such contracts in 2000, while Athens 2004 brought in just pounds 139m from its national partner deals.
It is unfair to compare Greece with the UK, given the vast difference in sophistication of the two sponsorship markets, but London's target is still nearly pounds 100m more than that gleaned by the Australian Games, which offers a more reasonable point of reference. Even allowing for inflation and an evolution of sponsorship's status in the marketing mix over the 12 years between the two events, it is still a significant leap.
Comparisons with the other bidding cities' projections highlight the costly nature of London's marketing plan. Of the five, only New York had a higher figure, with pounds 471m to be raised from domestic sponsorships. The US sponsorship market is well ahead of the UK in terms of spend, making New York's projection much less of a stretch than London's in comparative terms.
The Olympic sponsorship structure does little to help LOGOC's cause.
The exclusive nature of the TOP categories ensures that the host city cannot sell domestic packages to brands that compete against the top-tier partners. For example, categories such as non-alcoholic beverages and electronics are off limits, given Coca-Cola and Samsung's status as TOP sponsors.
Further difficulties are presented by the make-up of the domestic packages.
The IOC is committed to making the Olympics a relatively clean event visually when it comes to branding. Whatever promotional opportunities are afforded are handed to the TOP sponsors, so domestic deals provide very few chances for exposure at the Games.
Brands thinking of signing up early in the hope of creating a good head of steam prior to the event may be disappointed. IOC regulations state that domestic sponsors cannot start to leverage their associations with the 2012 Games until contracts for the 2008 Beijing Olympics have run their course, meaning promotional activity by 2012 sponsors cannot start before 1 January 2009.
'The London bid team has set the bar very high with the pounds 415m figure,' comments Aidan Day, managing director of Octagon Marketing. 'It's certainly challenging, especially when you consider the limitations of the packages available and who they can sell to.'
On the face of it, LOGOC 's task in selling domestic sponsorship seems nigh-on impossible. However, there are a number of reasons why this target is achievable and why the organising committee is confident that revenue may even surpass the minimum figure required to meet budget. …