Olympic sponsors stick by 2021 games, but what will disrupted budgets deliver?

Author: Rebecca Stewart. Source: The Drum

The Olympic flame will remain extinguished until next summer, with the tournament now officially having been dialled back by 365 days.

On Monday (30 March), the International Olympic Committee (IOC) penned in the Tokyo 2020 Games from 23 July 2021 to 8 August. Additionally, The Paralympic Games will run between 24 August and 5 September 2021.

Despite running one year behind schedule, there is no rebrand planned. Tokyo 2021 will remain Tokyo 2020. With fresh dates cemented, organisers, athletes and fans have now been relieved of the uncertainty inspired by first postponement in the 124-year modern history of the modern Olympic Games.

For the sponsors bankrolling the Games and athletes, the celebration is muted, their best laid plans now lie in tatters.

US Olympics TV rights holder, NBCUniversal, announced proudly just last month how it had already sold 90% of its commercials for the tournament. The total sum amounted to $1.25bn; a new record, surpassing the total for the 2016 Games in Rio de Janiero and giving an indication of how much advertisers had planned to stump up.

Some brands – including Nike, Coke and Adidas – have already launched products and activations pinned to this year’s event. Many have spent the best part of a year laying the pipework for big-budget creative executions, as well as competitions, online promotions and on-the-ground campaigns.

In the meantime, the Covid-19 pandemic has been wreaking havoc on marketers’ budgets. Airbnb, Budweiser, Coca-Cola and John Lewis are just some companies to have frozen or redirected spend in the wake of the pandemic. At the start of this week, Warc forecast a recession in the first half of the year for the global ad market – which, if materialised, will have a knock-on impact on budgets for the next 12 months at least.

The Olympics is a platform for glitzy, award-winning work that delivers real results for brands (see: Under Armour’s ‘Rule Yourself’; P&G’s ‘Thank You Mom’; and Nike’s ‘Unlimited Youth’). In the midst of a coronavirus crunch, where marketing budgets are stretched, Tokyo 2020 could see sponsors take a different approach to Olympic advertising.
Sponsors on standby

Joel Seymour-Hyde is managing director UK at sports and entertainment agency Octagon, which countsMastercard, Unilever, Budweiser and Expedia among its clients. He says, in a world where brands’ revenues and share prices are tanking it would be “naïve” to think it will be business as usual for Olympic sponsors in 2021.

“Will budgets be impacted? Of course they will,” he asserts. There is a unique challenge in Olympics marketing: the fact that the partners get minimal media rights in exchange for other main assets like IP and the right to buy tickets.

He adds: “Therefore typically the ratio of activation spend, including marketing, campaigns, media, employee engagement, B2B and hospitality, to rights fees is higher for Olympics sponsors v most other properties.”

The obvious implications of this for 2021, Seymour-Hyde argues, would be some reduction in associated media spend, and potential reductions in the scale of hospitality initiatives. “It ultimately depends on how long and deep the disruption goes,” he adds.
Nike is among brands to have aleady shelled out spend on products, including athlete's uniforms
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At the time of writing, the majority of the IOC’s top-tier global brand partners (many of which have inked long-term deals) had issued statements expressing their continued support of the Games.

The longest-standing sponsor of the Games Coca-Cola said it “fully respects” the decision of the IOC and the Tokyo Organising Committee (TOCOG). “We know this decision was made in the best interest of the health, safety and security of all,” added a spokesperson.

Airbnb, a newcomer to the (pricey) world of Olympic sponsorship also reaffirmed its commitment. Along with P&G, Dow, Bridgestone and Intel.

Alibaba Group “stands firm” for the postponement too: “Despite the delay, such a decision, made amidst the ongoing global fight against Covid-19, is the epitome of the Olympic spirit of peace, friendship and solidarity,” the Chinese firm said.

For its part, payment provider Visa has already made official moves to extend its Olympic athlete sponsorship through to 2021, as well as its headline deal.

“As a proud sponsor of the Olympic Movement for more than 30 years, we will work with the IOC, the TOCOG, the government of Japan and our partners in the coming months to make the Olympic and Paralympic Games Tokyo 2020 as memorable in 2021 as they would have been this year,” it said in a statement.

For sports marketing consultant Tim Crow, it’s unlikely any flagship sponsors will pull out, unless their own businesses go into freefall.

For the large part, sponsors contracts will allow them to extend their rights to the new date of the Games, and their fees due to the IOC will simply be re-phased.

How much of their lost activation costs they can recover will depend on insurance, which could be a sticking point for smaller, struggling brands on a lower sponsorship tier.

“Inevitably there are a lot of lawyers trying to talk up litigation but I don't see that happening either,” Crow insists.

Next year's spend will be all about “how businesses are doing, how the world economy is doing, and how clear the world is of the virus.”

One sponsor to keep a close eye on is new kid on the block Airbnb, which this week unveiled a coronavirus contingency plan to help its business save $800m. This includes the suspension of all marketing activity for the foreseeable future.

Crow believes there’s a silver lining to the postponement though, with many brands seeing the 2021 Games as an opportunity to engage with customers following the most tumultuous period in modern history.

“These are big businesses with big budgets, and they'll already be seeing the Olympics as a potential means of helping them bounce back,” he argues.
The new Tokyo 2020 – a chance to bounce back?

Seymour-Hyde agrees, saying that when the Games do return to screens the positive reaction from athletes, consumer, sponsors and broadcaster should be huge.

“This applies to all sport, and already there is consensus that the return of live sport will be a huge cultural moment,” he adds. “Clearly there is nothing a brand or sponsor loves more than tapping it to the cultural zeitgeist, so it’s a fantastic creative challenge and opportunity.

With every sponsor likely to be on the same page (and sharing the same brief) it’s going to have to be some very special work to cut above the clutter and noise – particularly if traditional media spend budgets are tighter.

Crow chips in: “The worldwide context of the Tokyo Games has changed so fundamentally that we’ll see many of the global Olympic sponsors, in particular the consumer brands, re-work their campaigns.”

Many, he argues, will seek to capitalise on the inherent DNA of the Olympics, which at its heart is a celebration of humanity, of the best in human spirit: “We'll see that really dialled up.”

As for the legalities, over the next few months, the ins and outs of what this means for existing sponsorship contracts are likely to be negotiated on an ad hoc basis. Commercial media lawyer Nick Breen told The Drum last month that the implications of cancellation or postponement would be “significant” for brands; especially those that have already stumped up cash.

He also highlights how the effects would be “less severe” where an annual or repeated event (like the Olympics) was merely rescheduled and sponsors could carry over agreements into the following year.

“It won’t always be clean or even possible to reschedule an event or defer a sponsorship to a subsequent event, but in the majority of cases, sponsors and promoters will need to find a commercial and pragmatic solution, rather than resorting to a legal dispute,” he explained.

One certain thing is that by the time 2021 rolls around, the world will be more than ready for Tokyo 2020 and everything it represents. If brands are smart they will go for gold in the next 12 months, readying strategies that allow them to bounce back in a post-coronavirus world.