A quarter-of-the-century of TOP demonstrates how Olympic Movement saved itself from disaster
Monday, 05 December 2011
It is a little after noon on July 28, 2010 and Jacques Rogge, the International Olympic Committee (IOC) President, is in a London hotel just up the road from Big Ben with the mothers of some of the world's best-known Olympians. The occasion?
A news conference to announce the arrival of Procter & Gamble (P&G), the consumer products company behind brands like Gillette, Duracell and Iams, as a worldwide Olympic sponsor.
Exactly 12 days earlier in New York, the Dow Chemical Company, another blue-chip US corporation, had also signed on as a TOP partner. Taken together, the two deals demonstrated the continuing vigour of the Olympic Movement's flagship global marketing programme, even in exceptionally testing economic times.
Consider this: by the time the Olympic cauldron is extinguished in London at the end of the Games in 2012, TOP (as The Olympic Partners programme is universally known) will have generated a staggering $3.5 billion (£2.2 billion/€2.5 billion) in cash and so-called value-in-kind products and services, or thereabouts, for the Movement, since its inception in 1985. The majority of this revenue has been channelled to Games organisers and to the 205 National Olympic Committees (NOGs) around the world. Moreover, in tile process of activating their TOP partnership rights, over the last 25 years getting on for 30 of the world's most respected multinational corporations have helped to promote the Olympic values.
As Rogge recently observed: "The TOP programme has helped ensure the viability of the Games and secure the financial future of the Olympic Movement. Quite simply, staging the Olympic Games would not be possible without our partners across the globe."
Today, the Olympic Movement, in addition to everything else it represents, is one of the biggest commercial actors in the world of sport, generating revenues of more than $5 billion (£3 billion/€3.6 billion) in each four-year period from broadcasting and marketing rights, ticket sales and the licensing of Olympic merchandise.
Thirty years ago, the picture could hardly have looked more different. As Richard Pound, one of the longest-serving IOC members and one of the chief architects of the TOP programme's success, wrote in his book, Inside the Olympics, published in 2004: "The economic model of the Olympic movement [in 1980] was a prescription for disaster. Governments provided almost all financial resources and were not the slightest bit shy about tying such support to their own political agendas... Such private sector support as existed was derived almost entirely from television revenues, and of these, about 95 per cent came from a single source, the United States."
Furthermore, the Movement was also in the middle of a damaging era of political boycotts. The Moscow Games of that year was subject to arguably the most damaging of all such initiatives, the US-led boycott. Into this unpromising situation - likened by Pound to a "political sword of Damocles over the Movement" - walked the new IOC President, a then little-known Spaniard by the name of Juan Antonio Samaranch.
It is not the aim of this article to chronicle everything that Samaranch did for the Olympic Movement in his 21 years in office. Suffice to say that he quickly saw the importance of financial autonomy and, thus, of establishing new sources of income for the IOC besides broadcasting contracts. In 1982, he established the IOC Commission for New Sources of Finance.
At the time, as Pound has observed, the IOC had "not the slightest idea about marketing". Samaranch, though, knew someone who did: Horst Dassler of adidas, the sports equipment manufacturer, whose family also controlled ISL, an entity that bought up and sold marketing and broadcasting rights to the FIFA World Cup, the world's premier football competition.
According to Michael Payne, a marketing specialist who joined ISL in 1983 as Olympic project manager and went on to become the IOC's first marketing director, Dassler submitted his ideas on a new marketing programme with a video to the 1983 IOC Session in New Delhi. As Payne wrote in his book, Olympic Turnaround, a required text for anyone with an interest in the business underpinning the Olympic Games: "The presentation delivered a stark message to the 78 IOC Members in attendance, 'You, the International Olympic Committee, own the most valuable and sought after property in the world. Yet the Olympic rings are the most unexploited trademark in existence. No major corporation in the world would tolerate such a situation.'"
In 1984, the Los Angeles Games underlined the commercial potential of the Olympic Games, generating a surprise profit, in spite of another boycott, this time by eastern-bloc countries. Moreover, corporate involvement with the Movement was long established. Coca-Cola, a TOP partner, traces its involvement back to 1928, when 'a freighter delivered the US Olympic Team and 1,000 cases of Coca-Cola to the Amsterdam 1928 Olympic Games". Six years later, Johnny Weissmuller, a US swimming gold medallist before securing further fame as the best-known embodiment of Tarzan, became the first Olympian to endorse the company's flagship product. Even before that, the 1908 Olympic Marathon race, made famous by the collapse of Italian athlete, Dorando Pietri, had an Official Caterer in the shape of the Oxo Company, maker of meat extract products.
Ironically, though, the tradition of national sponsorships made efforts to establish an international programme all the more delicate. As Pound has written, "the NOCs did not want the IOC to be engaged in marketing or sponsorship programmes in their countries, correctly concluding that this would eat into their own potential revenues."
Accordingly, once the critical idea of bundling rights for the IOC, the Games themselves and the NOCs together into a single four-year package, with exclusivity for partners in each specific product category, had been devised, an arduous succession of negotiations was necessitated to bring NOCs on board. At the time there were more than 160 of them.
From the perspective of the corporations in line to become global Olympic partners, however, this notion of a "one-stop shop" had the potential to make relations with the Movement a whole lot easier. Writes Payne of the old system: "The true complexity of the challenge facing would-be sponsors is hard to overstate. It involved persuading over 160 countries to sign up for a single marketing strategy. In many ways, it was like the political challenge of unifying the members of the United Nations or the European Community around a single policy. Sponsors found this highly complicated structure time-consuming, frustrating and unworkable..."
It is little wonder that Scott McCune, VP Integrated Marketing at The Coca-Cola Company, now observes that the TOP programme "allowed us to step back and look holistically at the Olympic Movement".
Inside the IOC, meanwhile, proponents of the new programme had to overcome reservations from those who, in Pound's words, "thought that it was beneath the dignity of the IOC to get involved with anything smacking of commercialism". Eventually, though, authority to proceed was secured in 1985 at the 90th IOC Session. Somewhat ironically, the setting for this Session was East Berlin.
Now the plan's authors needed to sell their brainchild to corporate backers and this did not prove entirely straightforward either. Four companies - Coca-Cola, Kodak, FedEx and Panasonic - were fairly swiftly enlisted, but there was disappointment when American Express said no. As Pound has acknowledged, "We had thought that this was as close to a sure thing as Coca-Cola had been."
According to Payne, "By late 1985... we were desperate...Internally, at ISL, it was recognised that if we didn't sign up at least two more partners by the following summer, the TOP programme would probably have to fold - and with it the IOC's attempt to create a marketing strategy."
When Visa was approached to fill the Payment Services category, there was some feeling that its organisational complexity - it was, in effect, at the time a bank-owned association of six different regional companies - might make sealing a deal difficult.
The timing was good though, since Visa had recently launched a new advertising campaign – "It's Everywhere You Want To Be" - and in retrospect this now looks like one of the decisive moments in the history of Olympic marketing.
Visa said yes and its Olympic sponsorship became, in one sense, a particularly eye-catching way of extending awareness for the brand and its advertising campaign on a global level. "We originally bought in for creative content to help reinforce Visa's global acceptance," says Michael Lynch, Visa's head of global sponsorship management. "Visa built its business, in part, on the back of the TOP programme," Lynch adds. "You had the world's greatest sporting event at the time where Visa was the only card accepted." The company has turned out to be one of the programme's most faithful partners and has already confirmed its participation through to 2020.
In the end, nine companies signed up for the first edition of TOP, encompassing the 1988 Calgary Winter Games and Seoul Summer Games, generating $96 million (£60 million/€68 million). Given the pioneering nature of the venture, this was an impressive effort. It is only subsequently that the true value of TOP has become apparent, however. Over the next three editions, the programme racked up growth of 79 per cent, 62 per cent and 107.5 per cent respectively, with up to 12 partners involved. If growth rates have moderated since then, it is largely a function of the sheer scale attained by the programme, which raised $866 million (£543 million/€615 million) in the four years running up to the Beijing Olympics in 2008.
And while TOP has always relied heavily on US companies, in recent years it has gradually become more international, in keeping with the Olympic Movement's global mission. A big step in this regard came when European companies The Swatch Group (which has used both the Swatch and the Omega brands in its association with the Olympic Games) and Atos Origin signed up for the TOP V programme running from 2001-04. Both have now developed into long-term TOP partners. Corporations from a broader range of Asian countries have also joined long-term partner Panasonic in the TOP fold. These include most noticeably Samsung, a member since 1997, Lenovo, which participated in TOP VI culminating with the 2008 Beijing Games and, most recently, Acer.
Arguably the three attributes of TOP that are most valued by the multinational corporations that pay tens of millions of dollars at a time to be partners are its genuinely global scope, the association it provides with the Olympic brand and the overwhelmingly positive values attached to it, and its sheer flexibility.
The Movement has remained true to the "clean venue" policy that helps to distinguish Olympic events from other elite-level sporting activities. So in-stadium or on-athlete advertising is out. But TOP sponsors have used just about every other tool in the marketeer's repertoire. This includes using Olympic trademarks in corporate advertising campaigns, entertaining customers at the Games and using tickets and other rewards in employee incentive schemes and consumer promotions. In any case, as Coke's McCune says: "The lack of signage doesn't bother US...We would rather have everyone in the stadium drinking an ice-cold Coca-Cola than have our logo on the athletes."
"Companies have understood that in today's society, an association with the Olympic Movement would be a positive thing to do," says Gerhard Heiberg, the IOC Member from Norway who chairs the IOC's Marketing Commission. "Some people use it to motivate internally," Heiberg continues. "Some to get a better image. Some, like Samsung, have grown their brand status internationally. Companies see different aspects as valid to them. Different people have different approaches." Heiberg also argues that TOP partners have "brought our message, our ideals to the outside world. Yes, we have helped them, but they have helped us to promote the values in the Olympic Charter. That's why I don't call it sponsorship. I call it partnership.
"Before we start negotiating with companies, we check what are their basic values, how is their corporate governance, how do they treat their people...We have said no to companies where we see our basic philosophy is not the same."
Ever since TOP I, when it ran a programme supporting the US ski team athletes, Visa has used athletes to provide a local slant to its Olympic-related campaigns. "The beauty of the Olympic Games is that it has global reach, but local relevance," says Lynch. "In Vancouver we had roughly 34 different countries and nearly 1,700 clients/members activate against Visa's Olympic marketing campaign which included a very popular 'Go World' Facebook page featuring Visa sponsored athletes...In most cases markets are looking for that locally relevant content and that's what the athletes deliver for us."
He continues: "We don't talk about athletes' use of Visa. We talk about the Olympic ideals and the celebration of human achievement. We have found that through these compelling Olympic and Paralympic athlete stories, all we really need to say is, 'Visa is incredibly proud to be a sponsor of the Olympic Games' and this affiliation delivers a powerful impact around the world for our brand equity.
"We can conclusively say that the Olympic Games have had a positive impact on our brand and our clients' and partners' businesses over the past 24 years. We will spend money on activation as long as it is going to generate the appropriate returns."
Coca-Cola's McCune explains how the company's marketing model has evolved over the years through four stages. First there was Availability - simply getting the product to the right place, as on that freighter to the Amsterdam Games in 1928. Then came Exposure, through well-placed signs and television advertising. Then Experience: McCune gives the example of Coca-Cola Olympic City at the 1996 Atlanta Games, where visitors could compete with holographic images of Olympic athletes, as well as seeing Olympic medals and the Olympic torch. "So few people have the opportunity to experience the Olympic Games," McCune says, "we feel it is almost an obligation for us to take the Games to the people." He also mentions a programme under which ordinary people can be nominated to run a leg of the torch relay that precedes each Games, based on how they embody some aspect of the Olympic values.
Now, he says, from Experience, the company is trying to move on to Engagement. The new possibilities opened up by digital technology are playing an important role in this. "We had 46 million people who virtually passed the Olympic flame to each other," he says. The Olympic Games "allows our brands to create a global platform that drives our business. It allows our bottlers and employees to feel proud about working for the company. Employee engagement goes up exponentially in the run-up to the Games."
Though TOP is an IOC-administered programme, the vast majority of the cash, goods and services it brings in are distributed around the Olympic world. Approximately 50 per cent of the total raised in any Olympic quadrennium goes to the Organising Committees of the two editions of the Games - one Winter, one Summer - due to take place during that four-year period, along with the hosting NOCs. The present quadrennium takes in the Vancouver Winter Olympics last year, the inaugural Youth Olympic Games in Singapore and Innsbruck and the London Summer Games to be held in 2012; the next will compose the 2014 Winter Games in Sochi, Russia, the Youth Olympic Games in Nanjing and the 2016 Summer Games in Rio de Janeiro, Brazil.
Around a further 40 per cent of the sums generated by TOP go to the NOCs across the globe. Less than 10 per cent is retained by the IOC to help meet the costs it bears. A high proportion of the so-called "value-in-kind" goods and services contributed by TOP partners are passed on to the Olympic Games Organising Committees (OCOGs), since this often takes the form of infrastructure vital for staging the Games. Examples include Omega, the exclusive TOP partner in the Timing, Scoring and Venue Results Service category, and Atos Origin, whose exclusive category is Information Technology.
Two years ago, I was given an insight into the full extent of Atos' contribution, with a visit to the Technology Operation Centre for the Beijing Games, located on the 11th floor of a building near the famous Water Cube, venue for the aquatics events. There, as around this vast city, the cream of the world's athletes strained every sinew in pursuit of Olympic gold, row after row of computer screens glowed behind a transparent glass wall. It was explained that the systems monitored there, designed and built by Atos, fell into two main categories: Games Management Systems, such as accreditations, transport and accommodation schedules and VIP protocols; and Information Diffusion Systems carrying the timing and scoring data recorded by Omega to international media at lightning speed. As I listened, a figure on the wall signified that 343,848 people, the equivalent of a good-sized town, had so far been issued with an accreditation badge. Why do Atos and other similarly minded partners go to all this trouble? What better way can there be of demonstrating their ability to successfully undertake complex projects in a high-pressure environment with the eyes of the world upon them? As Philippe Germond, Atos' then chief executive, said "I believe it will just provide a good platform for Atos Origin to demonstrate its technological strength to the world and especially its customers in China. The expertise that we gain from delivering this complex and time-critical project will be transferred to other global clients that are looking to us to deliver similar high-performance IT infrastructures where real-time data is paramount."
TOP, of course, does not preclude NOCs and OCOGs from finding their own sponsors in product categories not reserved for the TOP partners. And indeed the Beijing Games broke all records for these domestic sponsorships, generating well in excess of $1 billion (£622 million/€714 million). This structure can be confusing for those not familiar with the Olympic Movement's organisation and working methods. It can even create internal friction if a Games organiser has its eye on a product category usually reserved for TOP. But, as Timo Lumme, director of IOC television and marketing, argues, the existence of TOP has also had significant spin-off benefits for those seeking partners for other Olympic sponsorship programmes.
"TOP is very much the pole that holds up the Olympic revenue tent from the sponsorship side," Lumme says. "I am not sure that all the growth we have recently seen in national sponsorship would have been possible without a successful and vibrant TOP programme. When you have companies of this stature involved in TOP, it makes it easier for other marketers to say, 'Hey it works for them, it will work for us'."
He goes on: "When an OCOG comes on board, we spend a lot of time bringing them up to speed on Olympic marketing. We sign an agreement called a Marketing Plan Agreement with the OCOG. That sets out the rules of the game for marketing activities in the host territory. As a by-product of that, we do have lively conversations about product categories. We also get a lot of inquiries from potential sponsors. The majority are not suitable for TOP, so we pass them on."
The international financial crisis had an Impact on TOP, slowing down the progress of negotiations in the period between the Beijing and Vancouver Games. Did this slowdown also suggest that the programme, which has served the Movement so well for a quarter of a century, is ripe for reform? Few of us, after all, are driving around in motor cars designed as long ago as 1985. Heiberg thinks not, arguing that any difficulties encountered over the past two years are: "100 per cent based on the financial crisis. Nobody has said this programme is outdated or doesn't work anymore."
Procter & Gamble's (P&G) decision to become a TOP sponsor followed its partnership with Team USA at last year's Vancouver Games. The company said this "resulted in increased favourability ratings, greater market share and nearly $100 million (£62 million/€71 million) in incremental sales". As Marc Pritchard, P&G global marketing and brand building officer, explained in London: "What Vancouver represented for us then was essentially a pilot to see whether we could take all of our brands and really make something out of that...It just became obvious for us that the next step was to expand that to other markets around the world." Like Dow, P&G has signed up until 2020.
So is the TOP model good for another 25 years?
"We have asked ourselves that question many times and talked to a lot of people outside the Olympic Movement," Heiberg replies. "We always wind up with, yes, small changes, but the basic idea is still a very, very good one." He explains that while Olympic decision-makers are making room for a possible reform by not, for the moment, concluding deals that extend beyond 2020, this should not be interpreted as a signal that major surgery is likely.
"We are making deals up to 2020," he says. "Some companies want to go further and we have said, 'No'. "We will see whether we make changes or continue. So far we have decided it is still basically a good model maybe with one or two changes."
Lumme adopts a similar line. "Sponsorship has been a tough sell for everyone In the last couple of years. I feel pretty comfortable about the next 25 years of TOP." He continues: "It's a value-based programme, not an exposure-based programme. Sponsors are buying association with one of the most valuable and well-known brands in the world - the five rings. We know from our research that across the world at least 96 per cent of people recognise the five rings and know what they stand for." As Lumme acknowledges, however, "You are only as strong as the property you are representing". So for Olympic sponsorship to remain as powerful and valuable a tool as at present, the Olympic Games must remain "relevant and exciting". One area where Lumme concedes that there could be change is the categorisation of technology products. These continue to evolve with extraordinary speed and to converge, with the result that ostensibly very different products can be used for the same functions. "With technology changing every day, it is quite clear there will be some challenges with traditional categorisation by product category," Lumme says. "I do foresee having to have a pretty good review of how we keep clear daylight between the partners in this area."
The former marketing commission chairman Pound, for his part, warns against something called "category creep". This is not a reference to 1930s horror movies, but marketing jargon for the way in which product categories can have a tendency to expand. These, though, are matters for another day. As TOP marked its first 25 years in 2010, it is fitting to raise one's hat to a programme that transformed the IOC's financial fortunes and, in the words of President Rogge, enabled the promotion of the Olympic ideal around the world to "really...take off". A TOP hat, of course.
David Owen worked for 20 years for the Financial Times in the United States, Canada, France and the UK. He ended his FT career as sports editor after the 2006 World Cup and is now freelancing, including covering the 2008 Beijing Olympics and 2010 World Cup. Owen's Twitter feed can be accessed here. This article first appeared in the Olympic Review, the IOC's official magazine