Sponsors Win Big With Coveted Olympic Partnerships

Aug. 7, 2008— -- When millions of people around the world tune in to the Beijing 2008 Olympic Games starting tomorrow, they will be watching more than just basketball, swimming and gymnastics.

Thanks to millions of dollars in sponsorships and aggressive marketing campaigns, Coca-Cola, Visa, McDonald's and a slew of other global and Chinese sponsors will also be the face of the Olympics and are expected to win big when it comes to attracting viewers' attention.

On the other hand, those who don't hold the coveted sponsorships -- such as Pepsi, MasterCard and American Express -- to name a few -- will be on the back burner, at least for the next two weeks.

"Essentially they are sitting on the sidelines while their competitors are getting all the glory," said Jed Pearsall, president of Performance Research, which conducts sponsorship marketing research.

Sponsorships for the summer Games are highly prized. And it's not just because of the worldwide audience. China has one of the largest and fastest-growing economies in the world, and the Olympics provide a unique opportunity for brands to tap into that lucrative market. Consider this: Beijing has more than 17.4 million residents -- that's more than the populations of New York, Los Angeles, Miami and Boston combined.

That type of exposure doesn't come cheap.

The top 12 Olympic partners paid a total of $866 million to the International Olympic Committee for global sponsorship rights at the 2006 winter Games in Turin, Italy, and for the Beijing Games, according to Chicago-based IEG, a sponsorship tracking firm.

Those millions are paid by companies just to have their names at the Games and to be able to use the Olympic name and logo on their advertising.

The Beijing organizing committee collected another $740 million for local sponsorship deals, estimated IEG. The International Olympic Committee sells international sponsorships while the host country arranges national deals.

Snatching Olympic sponsorships is not an easy task, especially for those who have not been previously involved. Under the contract terms, existing sponsors get the first shot at having their name associated with the next Olympic cycle.

For example, Coca-Cola has been associated with the Olympics since 1928 and has a long-term commitment through 2020. Since it gets the first shot at buying future sponsorships, the soda giant can essentially shut out rival Pepsi altogether.

Similarly, McDonald's has been the official restaurant of the Olympic Games since 1976 and is likely to keep its spot in the future.

"As long as those incumbent sponsors continue to put up the dollars, they can lock these other competitors out," said Jim Andrews, senior vice president at IEG.

Pepsi refused to comment about the Olympics. American Express and Burger King did not return calls from ABC News. A MasterCard spokesman would not say if the company had pursued the sponsorship but said it routinely reviews sponsorship opportunities.

But every once in a while, there is room for a change in the sponsorship lineup. Kodak has been a partner in the Games since 1986, with the exception of one game, according to a spokesman. But last year, Kodak announced that it was not longer feasible to continue its sponsorship. That means that some other film or camera company will have a shot at Kodak's sponsorship slot.

Overall though, these opportunities are rare.

"In the international level, there is not much turnover in that group of 12," Andrews said. "Olympics are a very powerful tool for marketers to use."

What makes the sponsorship so significant is that there are few events where companies can get this kind of international exposure.

China has been a hotly contested arena because of its fast-growing economy and consumer base, and companies believe there is a niche to fill, unlike the saturated Western markets.

Both Coca-Cola and Visa have claimed in the past that their association with the Olympics has helped raised their sales and market share.

However, lack of sponsorship does not mean that competitors still can't get in the game. In the past, companies have employed a tactic called "ambush marketing," an attempt to associate themselves with the Olympics even if they are not official sponsors.

The red tape and stringent regulations in China have made it difficult for companies to employ those tactics, but that does not mean that companies cannot find creative ways to establish some sort of connection. One way is to buy television advertising space specifically for Games where companies believe they will reach their target audience.

Advertisers that have lost out on the Olympics can also find marketing opportunities in other sports events, such as MasterCard, which is heavily involved in the World Cup.

FedEx, which is being sidelined by competitor UPS in the upcoming Olympics, said it has marketing arrangements with NFL, PGA Tour and several other sporting events.

One company that is not losing out and has been able to connect itself with the Olympics despite the fact that it is not one of the top 12 sponsors is Nike. Rival Adidas is the top sponsor of the summer Games.

By sponsoring athletes, Nike has been able to penetrate the Olympics despite Adidas' large presence, to the point where many consumers associate Nike more closely with the Olympics than its competitors.

For example, Yao Ming, China's most popular basketball player, is sponsored by Nike even though rival Adidas sponsors the rest of the team. Although the star player is barred from wearing his Nike uniform or logo on the podiums or press conferences, it is unlikely to hurt Nike.

Olympic branding can both be a benefit and a curse.

Given the international uproar against China's human rights record, sponsors like Coca-Cola have had to work extra hard to balance their image in the consumers' minds.

At the same time, being associated with the Olympics is not all bad.

Chris Console, managing director at New York-based Steiner Sports Entertainment and Marketing, said the association with the Olympics is not any more risky than connections with other sports. Sponsors try to play up their association to the fullest extent.

"Coke, Visa and McDonald's are known as Olympic brands and it's embedded in people's minds," he said. "It's not like some of the messages they are conveying are subtle. They will capitalize off of each activity so people are thinking of their brands when they think of the Olympics."

Perhaps the biggest corporate winners will be those firms that are able to carry their message beyond the Games.

The IOC is already in talks for future sponsorships. Russian energy firm Gazprom has already shown interest in the 2014 Games and beyond, said Rowland Jack, a senior bid consultant in the sports marketing and sponsorship team at Hill and Knowlton.

Jack foresees more firms from outside the United States and Western Europe entering the Olympic sponsorship arena.

That means more brand awareness for them but less for Western firms.