Home Business Money Matters Owen: Takeaways from IOC’s Flip from Burger-Maker to Chipmaker

Owen: Takeaways from IOC’s Flip from Burger-Maker to Chipmaker

Owen: Takeaways from IOC’s Flip from Burger-Maker to Chipmaker
Photo: https://twitter.com/iocmedia

The great cities of the world might have fallen out of love with the Olympics; but there is little sign of the great sponsors of the world doing so.

Yes, okay, McDonald’s just walked out the door, curtailing its worldwide sponsorship three years early by mutual agreement with the International Olympic Committee (IOC), though it retains domestic marketing rights in South Korea for the Pyeongchang 2018 Winter Games.

But with another giant US company, Intel, now, well, inside, I have no doubt that the IOC is relatively content to have – as more than one wag has quipped – swapped burgers for chips in its portfolio of corporate partners.

Isn’t it striking, by the by, how in our increasingly globalized world, Britain and the United States remain two nations divided by a common language, in this case chips versus fries?

With Tokyo 2020 generating huge sums from its local sponsorship program, the 2017-20 quadrennium is going to see the IOC and Olympic Games Organizing Committees raise a record amount – comfortably – from sponsorship, aggregating both local and worldwide deals.

The timing is welcome, since growth in broadcasting revenues has slowed after the spectacular advance achieved in 2009-12.

A word on valuations though: the impression seems to have crept out there that the going rate to become a TOP, or worldwide, sponsor of the IOC is about $200 million.

First of all, a large chunk of what most TOP sponsors pay tends to be not cash, but value-in-kind (VIK) goods and services which contribute to putting on the Games. The proportion will vary from deal to deal.

Second of all, the most up-to-date hard data we have from the IOC is that the 2009-12 TOP program generated $950 million and involved 11 companies.

I make that an average valuation of $86.4 million.

Now, I have also been told that 2013-16 should see the TOP total exceed $1 billion for the first time, but not, I think, by all that much. I would expect the final figure to be published before the end of this year.

It is in 2017-20, i.e the present quadrennium, when the big jump should materialize.

It is nearly two years now since Timo Lumme, the IOC’s managing director for television and marketing services, hinted to me that TOP could conceivably generate $2 billion in 2017-20.

Athletes show off their large order from McDonald’s at the Rio 2016 Olympic Games. Photo: Twitter

That was “if things go well”, which it looks like they have.

It is worth noting, though, that there are now 13 TOP sponsors; so either that $2 billion figure will prove an underestimate – even if it would amount to a near doubling of the 2013-16 total – or the average contribution per sponsor is closer to $150 million than $200 million.

Since we have been talking burgers and chips, I make no apology for offering four further takeaways from this week’s Intel deal.

1. There was lots of talk at the press conference of landmarks and cutting-edges and digital ages and the future, but on one level this seems a fairly typical tech partnership for the IOC.

The Olympic Games offers both a high-profile showcase and a hugely demanding stress-test for new technologies and their associated products, raising awareness and, if all goes well, demonstrating reliability.

This has been the case since the first TOP program, covering the late-1980s; it remains so today.

2. Intel chief executive Brian Krzanich did a good job of explaining how the group’s 3D and virtual reality-based products could transform and enrich the viewing experience, offering a “best-seat-in-the-house”, or a competitor’s, perspective.

Intel’s goal, he said, was to bring the experience of going to the Olympics to anyone on the planet who wants it.

Standing this on its head, I wonder what the spread of this sort of technology will mean for actual live audiences.

When the Olympics was revived, going along and sitting in the stadium was, of course, the only way to experience the event in real time, a state of affairs transformed by television.

As broadcasting rights fees spiraled and sponsorship took off, the importance of the financial contribution made by ticket sales tended to dwindle.

Meanwhile costs incurred as a consequence, partly or solely, of attracting large live audiences – security, capacious venues, public transport infrastructure to service said capacious venues – have become more and more of an issue.

Into this mix now comes the dramatic enhancements made possible by digital technology to the live viewing experience of those watching from tens, hundreds, thousands of kilometers away.

Bluntly speaking, a remote viewer with all the gear can now, or at any rate will soon, expect an infinitely better window on the action than the punter in row ZZ of the stand – though presumably this technology can be made available to the live spectator too.

Nor will the viewer sitting at home have had to stand in line for the tube or bus, or to eat, or to have her bag x-rayed.

Clearly athletes and producers will not want events taking place in empty venues, but all the signals seem to me to be pointing towards average venue sizes being reduced in terms of audience capacity, and the role of the live spectator increasingly resembling that of an unpaid extra, injecting atmosphere for the sake of competitors and TV cameras.

It seems too logical, too inevitable a development frankly to actually happen: who would have predicted, after all, that the availability of almost unlimited free audio and video would have sent demand for, and hence prices of, live concert tickets skyrocketing?

But it is an area that the lightning speed of technological advance, I think, makes fascinating to monitor.

From left: Claudia Bach, wife of IOC President Thomas Bach; POCOG President, Lee Hee-beom; and IOC President, Thomas Bach; along with PyeongChang 2018 Olympic and Paralympic Mascots. Photo: PyeongChang 2018 © POCOG

3. The 2024 end-date for the Intel deal is intriguing in the context of the probable award of the next two editions of the Summer Games after Tokyo 2020 to Paris and Los Angeles.

Should it prompt a revision of increasingly confident projections that the French capital will get first bite at the cherry?

Krzanich’s take on the 2024 location when asked was to say that “no matter where it is, we are going to be there” while underlining that Los Angeles would be “a prime location for us”.

Actually, now that the chipmaker has signed on the dotted line, it seems to me that, if anything, the deal makes it marginally more likely that Paris will go first.

When renewal time comes around, you would have to think that the certainty of a 2028 Summer Games in its home state would act as quite a carrot in Intel’s assessment of whether an extension is desirable.

In one of those small ironies that history sometimes throws up, it is worth noting that a significant, even historic, international multi-sports event did once take place almost literally in Intel’s backyard.

In 1981, the company’s Silicon Valley home town of Santa Clara hosted the inaugural World Games, whose next edition takes place next month in Wroclaw.

All in all, it was a fairly low-key event, and I tend to doubt either that Games organizers knew much about Intel, or that Intel bosses knew much about the Games.

The IOC, at the time, was pretty standoffish, mainly because it did not want Olympic events to be included.

Now, more than three and a half decades later, here we are.

4. South Korea has endured much criticism during the long countdown to next year’s Winter Olympics and Paralympics in Pyeongchang. But the decision to try to use the Games as a shop-window for advanced 5G mobile communication technology looks to have been well-timed.

Three decades ago, as Seoul 1988 approached, many wondered whether a developing country on the Cold War’s front-line could really make a success of hosting the Olympic Games.

In this respect at least, Pyeongchang 2018 may underline the extraordinary rate of progress achieved in a single generation.

By David Owen

Republished with permission from insidethegames.biz.


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