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Volume 20 No. 42


Visa is pulling back on its Olympic spending in the U.S.

The company, which made a name for itself in the Olympics by sponsoring and marketing heavily around sports like gymnastics, swimming and track and field year-round, recently offered USA Gymnastics, USA Swimming and USA Track & Field deals that were a fraction of what it paid in past years.

Visa has marketed heavily around Olympic sports like gymnastics.
The offers are the first indication of how Visa’s Olympic strategy will change following the departure last year of Michael Lynch, the company’s longtime global sports marketing head, and they have the potential to damage the national governing bodies’ bottom lines by cutting as much as 5 percent from their annual revenue.

Sources familiar with Visa’s proposal said the company was paying USA Gymnastics as much as $3.2 million over four years to be title sponsor of the organization’s national championships. After that deal ended last year, Visa offered USA Gymnastics a renewal of just $375,000 for 2013-16, or $75,000 in non-Olympic years and $150,000 in an Olympic year. The proposal was just 12 percent of what Visa previously paid, and USA Gymnastics rejected the offer.

The organization declined to speak about the proposal. In a statement, it said, “We appreciate everything Visa has done for gymnastics and the Olympic movement. At this time, we do not have an agreement in place with Visa for this quadrennium. USA Gymnastics remains on target to achieve its sponsorship objectives through other renewal efforts and additional partners.”

Sources said USA Swimming and USA Track & Field received comparable proposals. USA Swimming, which had a deal with Visa that sources valued in the low six figures annually, ultimately accepted the company’s reduced offer but dropped Visa from a sponsor alongside AT&T and BMW to a supplier alongside Got Milk?, Master Spas and USA Track & Field, which has had Visa as a sponsor for more than 20 years, is still in negotiations with the company.

Visa declined to make an executive available to speak about its proposals, saying that the company doesn’t comment on ongoing negotiations. But Olympic marketers say the offers underscore a shift in strategy at the payment services company, which is a founding member of the International Olympic Committee’s The Olympic Partner program.

For years under Lynch’s guidance, Visa’s Olympic marketing in the U.S. centered on a mixture of athlete endorsements and national governing body sponsorships. The company sponsored USA Track & Field, USA Gymnastics, USA Swimming and the U.S. Ski & Snowboard Association because it believed that doing so helped connect Visa to the Olympics year-round and allowed it to avoid the trap of only having that connection during the 17 days of a summer or winter Games. It leveraged the relationships with the national governing bodies for tips on athletes it should endorse and has credited its ties with USA Swimming for helping it sign Michael Phelps when he was just 15. The deals also helped Visa block competitors MasterCard and American Express from tying themselves to major Olympic sports.

But in recent years and under the leadership of chief marketer Antonio Lucio and head of global sponsorship marketing Ricardo Fort, Visa’s Olympic strategy has taken on more of a global focus. The company used a single tag line, “Go World,” in 70 markets worldwide during the London Games and developed just 10 original creative spots that were adapted for the markets where they ran. It also worked with Facebook and Google on a social media application that ran in 36 countries.

Visa made a name for itself by marketing around gymnasts, swimmers and track and field athletes year-round.
Sources familiar with the company’s marketing strategy said it plans to continue to use the Olympics globally but made the decision to reduce its spending on national governing bodies because it wasn’t seeing the return on investment it wanted from those sponsorships. The company also is watching its bottom line because it may acquire its sister company, Visa Europe, which reports last week said could cost more than $3 billion.

The company’s decision could open the door to competitors at least in the world of gymnastics. USA Gymnastics is expected to open the financial services category and look for anyone from a competing payment services partner like MasterCard to a large financial institution like JPMorgan Chase to fill the void left by Visa.

USA Swimming ultimately accepted Visa’s offer but only if the company would agree to being downgraded from a sponsor to a supplier. The organization’s leadership saw value in keeping the company involved because it had a track record of activating at its Olympic trials, but it felt that it was only fair that its sponsorship status reflect the size of its financial commitment.

USA Track & Field, which sources said Visa paid more than $800,000 a year through 2012, will have to make a similar decision. As title sponsor of the organization’s Championship Series, Visa has one of the most visible assets in the sport. It receives signage during three major meets and broadcast exposure on NBC. Event winners hold up large Visa cards with $25,000 after races. The organization will have to decide to either take Visa’s reduced sponsorship offer for the same assets, negotiate a new sponsorship deal with other assets, or forgo a deal altogether.

The USSA is the only national governing body that will be spared by the cuts for now. The organization’s deal with Visa was up after the 2010 Vancouver Games and it signed an eight-year extension in 2011 before Lynch left the company. Sources valued the deal at roughly $1 million a year.

The 18 Olympians who sued Samsung last year have decided not to appeal a judge’s ruling that the electronics company didn’t misappropriate the names and images of the athletes for a London Games marketing program.

The decision brings an end to the lawsuit, which was considered to be a test of a company’s right to use athlete or celebrity imagery in digital marketing efforts. Rich Foster, the attorney who represented the Olympians, said they arrived at a settlement with Samsung two weeks ago. He declined to define the terms of the settlement. In cases like this, plaintiffs often drop their right to appeal in exchange for not having to cover legal expenses of the defendant.

An appeal held risks for both parties. If a trial court upheld the judge’s decision against the Olympians, it would set a precedent that companies could use celebrity and athlete images without their permission in some cases. If a trial court reversed the judge’s decision, it would allow every Olympian featured in Samsung’s Genome Project, a Facebook application developed with the U.S. Olympic Committee and marketing agency Team Epic, to seek damages from Samsung.

Team Epic Principal Mike Reisman said the plaintiffs’ decision to drop their appeal and the judge’s decision showed that the lawsuit was “frivolous.”

“The California court shut it down, saying it had little to no chance of gaining traction,” Reisman said. “It vindicates the legal teams at Samsung, the [U.S. Olympic Committee] and [Team] Epic that saw this as a trailblazing marketing program that met all intellectual property rights and litmus tests.”

Foster disagreed, saying, “We would have liked to have appealed. The judge was dead wrong.”

The lawsuit was filed last spring after Samsung unveiled the Genome Project. The application allowed users to see how they were connected to past and present Olympians. It evaluated such biographical elements as where people are from and where they went to school and matched that information with Olympians who had similar connections. For example, users who attended Brandeis University would see that fencer Tim Morehouse also attended the college and, ideally, become interested in following him during the London Games.

After the site went live, a group of Olympians that included Dara Torres, Mark Spitz, Greg Louganis, Jackie Joyner-Kersee, Aaron Peirsol, Cullen Jones and Jessica Hardy sued Samsung for using their image and information commercially without their permission. Some athletes had endorsements with Samsung competitors; Torres, for example, had a deal with Hewlett-Packard.

Olympic agent Evan Morgenstein represented a majority of the athletes in the lawsuit when it was filed. A month after the London Games, Ralph Santana, Samsung America’s chief marketing officer, left the company. The marketing initiative was the first that Samsung had run around the Olympics in the U.S., and Santana had overseen its development and championed it in the press.

Samsung and Team Epic, which was a party to the lawsuit, claimed that the Genome Project was protected by the First Amendment and filed a motion to have the lawsuit dismissed. A Los Angeles Superior Court judge sided with them late last year and dismissed the case, saying the Facebook application wasn’t commercial speech.

Foster said the athletes would appeal the judge’s decision but later agreed with Samsung to drop its appeal.

The U.S. Olympic Committee plans to forgo a formal domestic bidding process for the 2024 Olympics and select a potential bid city by the end of 2014, CEO Scott Blackmun said.

“We want it to be as informal and efficient as possible,” Blackmun said, noting that Chicago spent more than $10 million organizing a domestic bid to beat out Los Angeles as the U.S. bid city for the 2012 Games. “We’ll be as open and transparent as possible, but we really want to minimize the costs for the city and pick a partner that we can really work together with.”

USOC CEO Scott Blackmun wants to cut costs for U.S. cities seeking the 2024 Olympics.
The USOC last month mailed letters to 35 cities in an effort to gauge those municipalities’ interest in bidding on the 2024 Summer Games. The letters went to cities ranging in size from Rochester, N.Y., and Tulsa, Okla., to Los Angeles and New York.

Several cities, including Los Angeles, Dallas, Boston and San Francisco, have publicly expressed interest and formed exploratory committees to determine whether they would be interested in hosting the 2024 Olympics. Blackmun said several other cities have held informal discussions with the USOC. He added that the USOC won’t publicly disclose the conversations it’s having with cities and will allow cities to determine whether they want to publicly express interest.

“Some cities don’t want to be disclosed,” Blackmun said. “Some cities don’t want to say they’re interested if it’s not feasible. They’d prefer to learn more about the process first.”

The USOC plans to meet with interested cities this year and narrow the list of potential cities to two or three candidates by the end of the year. The cities will be selected based on whether the USOC believes they would stand a chance of winning the 2024 Summer Games. It would then select a bid city by the end of 2014 using criteria ranging from the city’s international appeal and its infrastructure to its case for hosting the Games and its ability to work with the USOC. The city and the USOC wouldn’t have to commit to bidding for the Games until the third quarter of 2015.

“The question will be: Do we bid for 2024 based on what we think our chances are?” Blackmun said. “If we decide not to bid on 2024, then we’ll look to 2026.”

The IOC will select a 2024 host city in 2017. The 2026 Winter Games will be voted on by the IOC in 2019. Denver, Reno-Lake Tahoe and Salt Lake City have expressed interest in bidding on the Winter Games.

Chris Sullivan, USOC chief bid and protocol officer, is leading the bid process and handling the bulk of the communication with the cities.

Blackmun said he is putting 20 percent of his time into a potential bid for the 2024 Games, and he expects that time commitment to increase as the process evolves.

“We’re at a gating stage right now,” he said. “Once we have a shorter list of cities with capacity for bidding, it will take more of my time.”