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 拢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 拢500m for the IOC by 2008.
The consensus is that the UK sponsorship market is worth 拢700m-拢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 拢332m from such contracts in 2000, while Athens 2004 brought in just 拢139m from its national partner deals.
High expectations
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 拢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 拢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 拢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.
First, a number of domestic sponsorship agreements at the Olympics have traditionally tended to be 'value in kind' supplier deals. Such deals are easier for host cities to sell, given their logistical focus. At both Athens and Sydney, close to half the organising committees' domestic sponsorship revenue came from value in kind supplier deals. Sponsorship categories such as airlines, automotive and telecommunications tend to take this form of contract.
The London bid's sponsor partners were almost exclusively value in kind agreements, so the smart money is on these brands being sold up to official sponsor status for 2012. British Airways, Virgin Atlantic, BT and EDF Energy are therefore likely to be the first brands to be approached by LOGOC.
Related benefits
For many brands, the attraction of sponsoring the Olympics is almost entirely based on the use of the rings symbol and the emotional connection it can create with consumers. As a result, brand exposure at Games venues is of secondary importance to the ability to exploit the Olympic trademark as a sales promotion mechanism.
'The huge emotional pull that the Olympics creates is its major selling point,' says Day. 'This tends to override the cold economies of bottom-line sales impact in the eyes of brands. Just because it may not deliver financial return on investment in the strictest sense doesn't mean brands won't sign up - the other benefits can be as significant.'
Andy Westlake, director at sports sponsorship and marketing agency Fast Track, is confident that the allure of the Olympics will ensure that LOGOC hits its revenue target. 'The way commercial partnerships for the Olympics work is entirely different from other sports properties. I've no doubt that 2012 will be a hot property in the eyes of brand directors. All the signs we have seen point to the fact that London is a massive commercial opportunity for marketers.'
If Westlake is right about the market demand, then LOGOC's challenge is less mountainous than it might initially appear. Although there are restrictions to domestic sponsorship of the Games, the attention the event will receive means that the committee will be selling to global brands and their bigger budgets, rather than solely on a national level.
'I think the UK sponsorship market will double in size by 2012 because of London winning the Games,' says Steve Martin, managing director of M&C Saatchi Sponsorship. 'Within hours of the announcement we had four of our biggest clients on the phone asking us to look at the Olympics properly as a potential sponsorship property. I wouldn't be surprised if 拢15m-拢20m emerges as the cost for an official tie-up. The brands that make it work will be the ones that go in early and genuinely put a seven-year plan in place.'
Martin also believes 2012 will attract a new raft of brands to sports sponsorship beyond the financial services and alcohol sectors that have traditionally dominated such activity. FMCG and retail brands are likely to be the biggest new entrants to the sponsorship market off the back of the London Games.
Legal crackdown
However, LOGOC may not have it all its own way when it comes to commercially exploiting the Olympics. Many brands are likely to consider unofficial links such as individual athlete endorsements and well thought-out marketing campaigns.
Such ambush marketing is a bugbear of the IOC and LOGOC, and both bodies are supporting the introduction of an Olympics Bill by the government to outlaw unauthorised marketing by companies that do not have official ties with the London Games. The bill, which is expected to be become law by the end of the month, bans such advertising in and around Olympic venues and protects use of the word Olympic and the Olympic rings device from use in ads that the IOC has not approved.
Brands are unlikely to be deterred by such draconian measures, however.
Puma marketing director David Learmonth admits that the company will be looking at how to leverage an Olympic connection within the rules. 'As a sports brand we are tied into the industry, so it would be foolish to not consider what the Games can do for us,' he says. 'Given Adidas' successful long-term links with the British Olympic team, it will be difficult for us to get an official tie-up, so we have to look at other methods to promote ourselves. Our portfolio of athlete endorsement deals is one way for us to gain a presence, and we will be looking at a number of options.'
Venue costs
The attraction of the 2012 Games is likely to trigger a spending spree in the sponsorship sector, despite the heavy policing that will take place. Bearing in mind that LOGOC's figure of 拢415m only includes official sponsorship of the Games, and not money spent exploiting these tie-ups or unofficial activity on the part of other brands, and the value of London's bid easily tops the 拢1bn mark in terms of marketing expenditure.
Nor is it likely to stop at 2012. The biggest single problem host cities have encountered when staging an Olympics is the issue of white elephant facilities that are a drain on the city's economy once the Games have been and gone. Stadium Australia, Sydney's Olympic centrepiece, staged only a handful of events in the 12 months after the Games, generating nowhere near enough income to pay its huge upkeep bills.
One way host cities have identified to help cover the costs of maintaining these stadia is through continued sponsorship and commercial partnerships once the Olympics are over - another hefty bill for the marketing community.
Alan Pascoe, chairman of Fast Track and a member of the London 2012 bid team, is the man chiefly responsible for the Olympic legacy laid out in London's bid, and has aligned 25-year plans for each of the venues. These plans include the ability of these stadia to attract continued marketing income.
'It is a fairly simple equation if these venues are going to be commercially attractive to brands after 2012,' says Octagon's Day. 'They need to stage big events that consistently sell out. As long as the stadia are full, they are interesting to sponsors. That's the challenge.'
If Pascoe's plan to eliminate white elephant venues works, it seems likely that marketers will be asked to foot the bill for many years to come. All told, the impact of London 2012 on the marketing community looks set to be massive and enduring.
DATA FILE - IOC TOP PARTNERS
Brand Category Expiry
date
Atos Origin IT 2012
Coca-Cola Non-alcoholic beverages 2008
General Electric Energy 2012
Kodak Film/photographic images 2008
Lenovo IT equipment 2008
Manulife Life insurance 2008
McDonald's Retail food services 2012
Omega Timing/scoring 2008
Panasonic Audio/TV/video 2008
Samsung Wireless communications 2008
Visa Consumer payment systems 2012
Total revenue 2001-04 拢345m
Projected total revenue 2005-08 拢495m
Source: IOC