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COMMENT

14/4/2015
Tokyo 2020 now setting the pace for domestic sponsorship revenue at an Olympic Games. It was, arguably, London 2012 which really kick started the huge revenues that could be generated by domestic sponsorship of the Olympic Games with more than $1 billion worth of local deals - considerably more than Beijing 2008 and Athens 2004.

Since then Rio 2016 achieved some giant deals with the likes of Embratel (telecoms) and Bradesco (financial services) spending $320 million each for rights to the Games in Brazil. The momentum in the country, however, slowed after some early major successes, whereas Tokyo 2020 has gone from strength to strength.

Tokyo 2020 likely to hit $1.5 billion domestic sponsorship target

Major sponsors now committed include Asics, Canon, Nippon Life Insurance Company, Tokio Marine & Nichido Fire Insurance Company, Mizuho, JX Nippon Oil & Energy, NTT, Fujitsu, NEC, Asahi Breweries, Sumitomo and Nomura Holding in the 'Gold' category estimated to be spending $125 million each. The deals have been negotiated by Dentsu, which has guaranteed the organising committee a minimum of $1.5 billion in domestic sponsorship revenue, a figure that it now looks likely to exceed with some ease.

Shared sponsorship deal

What is interesting is that the latest deals, with Mizuho Financial and Sumitomo Mitsui Financial are for a shared sponsorship between two competitors. Outside the USA, where rights holders have regularly sold to rival brands, especially in the beer and car industries, sponsorship tends to be sold on an exclusive basis.

Does this new arrangement show a way forward for the sponsorship industry or is it a step backwards that will lead to 'clutter' and confusion?

The logic behind selling rights to competing banks is that it potentially allows greater revenues. In the case of Tokyo 2020, the event is so big and prestigious that competing brands were happy to share rights - they were desparate to be a part of the Games and accepted what is effectively reduced status. The organisers were perhaps able to realise considerably more than the going rate for a single deal by selling shared rights and it was seen as worthwhile.

Alternatively, it may be that no one bank was willing to match the fee required for exclusivity and the organisers decided to offer a 'shared' deal instead. Given that there are still five years to go and Tokyo 2020 has been so successful to date, it is likely to be that the organisers saw some benefit in offering shared rights.

Tokyo 2020 president, Yoshiro Mori has stated that: "their addition to the Tokyo 2020 sponsorship programme will enable us to fully realise the message we have been conveying of an ‘All-Japan’ team working as one towards the successful delivery of the Games ever since our bid campaign.”

In other words, he is saying that having more than one Japanese bank involved is a sign of unity within the country - two major competitors are on board and both are working towards making the Games a success.

The world of marketing might argue that this is a fairly normal situation anyway. Switch on the TV and in one commercial break you could see an ad for one bank and at the next break it could well be for a rival. Pick up a fashion magazine and it will be packed with ads for rival clothing groups. Watch a Formula 1 or NASCAR race and the number of competing brands, featured on the cars of rival teams, is huge.

Olympics has history of shared sponsorship

Even in cases where there is a single rights holder there are already competing brands taking top sponsorship rights. The IOC, for example, has both Panasonic and Samsung as partners. It might well point out that the rights for Panasonic are for its audio visual products and for Samsung its mobile  phones and that the respective companies are restricted to promoting such products in their Olympic-related activations. The public, however, arguably doesn't recognise such distinctions and simply sees Samsung (a maker of TVs and smartphones) and Panasonic (a maker of TVs and smartphones) as Olympic partners.

Similarly Toyota has signed a global deal to be an Olympic TOP partner, whereas Nissan has domestic rights to the Rio 2016 Games. This is the first time that such a situation has occured although it is likely that it is down to the IOC offering an automotive TOP category after the domestic deal in Rio was already done. In future Games, the automotive category will probably be removed from the domestic rights offering.

In the Samsung/Panasonic case the situation represents the commercial reality that major companies have wide product portfolios and if a rights holder is offering category rights, it is inevitable that there will be cases where two sponsors will have an overlap in their overall operations.

To sign up with two banks for a single event, however, is different - they are direct competitors in the main area of business operations.

This arguably works for the Olympics because there is virtually no visible branding during the Games themselves (apparel manufacturers are allowed discrete logos on athlete clothing and Omega has traditional rights to display its timekeeping logo), but beyond that the environment is free of commercial messages. It is therefire up to the sponsors to make the most of their rigths through external activation, so Olympic 'clutter' is not a major problem.

What next for sponsorship rights?

Could the approach therefore be workable in other sports? The simple answer is that it is unlikely.

Where widespread brand visibility is available from events - such as the FIFA World Cup or UEFA Champions League, the brands themselves would probably hesitate to commit large sums to shared rights. They'd be less likely to invest huge resources in activating rights where they had an in-built ambusher. Why not simply just ambush instead?

From the perspective of rights holders, likewise it would be difficult. To slice up perimeter board time (or space), for example, would automatically reduce its value and the major activation programmes run by sponsors are often done in partnership with the rights holders. Sponsors do a huge amount to help promote the rights holders and would be much less likely to do so if they felt compromised by having to share space with more brands in general and competitors in particular.

The overall trend in sponsorship, therefore, still appears to be less is more. Major brands and rights holders appreciate the advantages of exclusivity because it enables cleaner communication meaning that activation is likely to be more successful and return on investment higher. Brands quite simply want to 'own' events in their categories.

The only exception is where rights are sold on a regional basis and this is certainly a growing phenomenon. We've seen it with European soccer clubs selling rights to e.g telecoms companies in their domestic markets only and even FIFA has launched a model with regional rights below the top tier.

Shared rights, therefore, are unlikely to be a major issue in the coming years - but the industry will perhaps wach carefully to see what happens when Mizuho Financial Group and Sumitomo Mitsui Financial Group start activating in Japan.

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