SBD/Issue 15/Olympics

Rio De Janeiro Defeats Madrid To Become Of Host '16 Olympics

Rio de Janeiro today won the right to host the '16 Olympics, following a first-round vote that eliminated Chicago, a second-round vote that eliminated Tokyo and a final vote that eliminated Madrid. The victory gives South America its first ever Olympics Games and offers the IOC a chance to expose an entire continent to the Olympic ideals. It also showed that the IOC is confident that Brazil can not only execute the '14 FIFA World Cup and '16 Olympics, but also keep the marketplace uncluttered enough for sponsors to derive value from associating with the '16 Olympics. Chicago's first round exit shocked U.S. Olympic insiders who considered it the best bid in the nation's history. Many took it as a sign that Anti-American sentiment is still strong internationally, especially within the ranks of the IOC. Olympic sources said that Chicago's early exit stemmed from a concerted effort by Madrid and Rio to steer votes to Tokyo in order to push Chicago out in the first round. There also was a lot of buzz inside IOC circles that working with a Chicago organizing committee would have been more difficult than it was worth. USA Track & Field CEO Doug Logan said, "If they decide to go with a different city, it will mean that the hate and distaste for our country and our arrogant manner of conducting business will have trumped a financial bonanza for all Olympic sports. It will not mean a vote for someone else but rather a vote against us." The decision also kills the USOC’s hopes of bringing the fourth Summer Games to the U.S. and the first since the '96 Atlanta Games. Had Chicago won, the '16 Olympics promised to be a boon for not only U.S. Olympic stakeholders but also the U.S. sports business industry. Chicago’s loss raises questions for everything from the future of IOC television rights to the future of the USOC.

MISSED OPPORTUNITY: Chicago’s loss promises to leave both the city and the sports industry with a hangover. SportsCorp President Marc Ganis, who is based in Chicago, said, “I’m concerned the city is going to have a major hangover because expectations have been raised so high. It will manifest itself in people being down and depressed, optimism waning and government and business not having any great events to look forward to.” Rio expects to generate $2.8B in revenue, which includes $570M in domestic sponsorships. The sponsorship figure is half as much as Chicago expected to generate. Chicago’s bid team expected the Olympics to generate $3.8B in domestic revenue, including $1.2B in sponsorships. All of the sponsorship revenue offered an opportunity for sales and consulting agencies to provide corporate partners with sponsorship analysis and activation planning. But those opportunities will never come to fruition. As a developing country, Brazil still represents an intriguing sponsorship opportunity for global corporations. Helios Partner Chris Welton said, “Brazil is a growing economy and sponsors want to go places where they can grow their business. You’re not going to get a whole lot of money out of Brazilian companies, like in Russia (for Sochi) and China (for Beijing), which leaves you with a lot of opportunity for non-Brazilian companies that want to grow their business there.” Former USOC President Harvey Schiller said, "From some of the action in these past months, it's clear the IOC is showing more direction than they have in the past. It was clear to everyone that it was for Rio."

FOR TELEVISION: The selection of Rio was the second-best option for the IOC on the TV front. The city is one hour ahead of the East Coast, which will allow broadcasters to air many of the marquee events, like swimming and track and field, in primetime. The IOC is expected to go to market with the U.S. television rights to the '14 and '16 Olympics within the next year. NBC is paying $2.1B for the rights to the '10 and '12 Olympics, and U.S. television rights currently account for half of all IOC revenue. Rio offers the IOC a chance to increase those rights in the next quadrennium. 21 Marketing founder Rob Prazmark said, “Everyone is worried about the next negotiations, but for television Rio’s almost as good as Chicago. You’re selling for U.S. television a great time zone.” Neal Pilson, president of Pilson Communications, said, “Rio’s an attractive location. It probably will be a costly Olympics because you have to bring a lot of equipment with you, but the time difference is very attractive to U.S. television.”

Baird Faces Tall Task Of Selling
Sponsors On Another Non-U.S. Games
FOR THE USOC: The IOC’s decision creates a new challenge for the USOC, which has been plagued by leadership turmoil and considerable economic pressure over the last year. The organization relies on sponsorship to fund the bulk of its operations, and it recently lost a host of key corporate partners, including General Motors, The Home Depot and Bank of America. The departures cost the organization more than $10M a year, and the USOC only managed to add Proctor & Gamble in a deal valued at $3.75M a year. The Chicago Olympics promised to be a magnet for new corporate partners over the next seven years. Now the organization will have to figure out how to sell sponsorships to three consecutive international Olympics where USOC partners won’t be able to activate on the ground. 21 Marketing Founder Rob Prazmark said, “They’ve got to reinvent themselves. Chicago would have been that reinvention tool. This is going to be (USOC CMO) Lisa Baird’s number one challenge.” But IMG’s top Olympics marketer, Kristina Schaefer, disagreed, saying, “To me, the value proposition is still about the Olympians, the athletes, their journey, the passion it takes to get there. That still rings true to consumers out there.” The decision will cost NGBs as well. A victory for Chicago would have delivered $10M in new revenue to USA Track & Field, said Logan. Instead, the NGB will have to look elsewhere to generate new revenue. USA Swimming CEO Chuck Weilgus said, “We have the right to be depressed for 24 hours, and then we have to pick ourselves up and figure out how we charge forward. On the business side, it doesn’t make things easier.” USA Gymnastics CEO Steve Penny added that his organization’s business won’t change. He added, “Our business is a 365-day-a-year business where we’re doing everything we can to promote our sports, to put athletes on the podium and grow our sports. Hosting the Games makes that job a little easier, but anyone in my position knows you have to come to the office every day to go to work.”

BLAME GAME: Considering the bid was regarded as the best ever put forward by a U.S. city, Chicago’s loss also calls into question the degree to which the USOC might be to blame. The organization took several months to resolve a dispute with IOC members over the amount of revenue it receives from the IOC. It later faced heavy criticism and charges of arrogance when it announced its plan to launch a U.S. Olympic network. Though it temporarily resolved the revenue dispute and shelved the network proposal, both disputes elicited considerable criticism from IOC members and could have affected Chicago’s chances. Compounding those issues, the USOC made a leadership change earlier this year, as well, replacing longtime CEO Jim Scherr with board member Stephanie Streeter. A number of NGBs were critical of the change. Since then, Streeter’s compensation package has been reported by the Chicago Tribune to be valued at more than $1M, nearly twice as much as Scherr’s compensation before he left. Olympic sources say all of those issues could boil to the surface in the wake of Chicago’s loss. USA Triathlon CEO Skip Gilbert said, “They’re going to have to look internally to see what they might have been able to do to better support the bid. Good, bad or indifferent, there’s going to be a lot of finger-pointing at them. If they use it as a learning exercise to make the USOC better and stronger, I think it will be OK.” Schiller summed it up this way: “Tough times for USOC across the board. Lots of finger-pointing.”

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