Group Created with Sketch.
Volume 21 No. 34
  • Created with Sketch.
  • Created with Sketch.
  • Created with Sketch.

IOC’s Rule 40 has potential to be sponsorship game changer

Ever wonder if the world’s biggest sports properties are capable of change? Can the sports world leopards (i.e., the International Olympic Committee, FIFA, NFL, UEFA, NBA, etc.) alter their spots?

We pondered that conundrum early in the New Year because we’re predicting much more will be written concerning the IOC’s new Rule 40. Indeed, by late September, when the 2016 Rio Olympic and Paralympic Games wrap up, we think this legislation will have created the most discussed sponsorship rule in the world.

That’s because Rule 40 could produce a significant “disturbance in the force” especially among various stakeholders in the Olympic sponsorship world.

Some pundits have glibly suggested it will have far-reaching benefits for athletes (i.e., help Olympians produce more individual revenue), for sponsors of athletes (i.e., generate increased activation possibilities) and for national governing bodies or federations (i.e., an ability to better leverage their most prolific athletes and sponsors).

Critics of Rule 40, however, suggest the IOC’s decision will diminish the value of its highly valuable (and pricey) exclusivity partnerships, long known as The Olympic Programme (TOP). Further, massive sponsor ambushing could take place in 2016 with the toxic fallout lasting for years.

So, while we’re not sure who the biggest loser will be, it’s likely we’ll see blood on the proverbial tracks before Rio’s Summer Games are finished.

What is Rule 40?

Prior to February 2015, a relatively new IOC guideline did not allow any athlete to mention or reference a corporate entity that was not an official Olympic sponsor. That included verbal mentions on TV, via social media, in print interviews or any other communications medium. Shilling for a personal sponsor was strictly verboten and strongly enforced as part of the IOC’s promise of exclusivity to its sponsors.

Not surprisingly, during the London 2012 Summer Olympic Games, the IOC was criticized for the draconian restrictions placed on athletes, particularly as it related to social media messaging via Twitter, Facebook and Instagram. This was the first battleground for Rule 40, and the Olympians responded with guerrilla hashtags such as “#WeDemandChange” or “#Rule40.”

Will Rule 40 weaken the value of exclusivity sponsorships like Coca-Cola’s with the IOC?
Photo by: GETTY IMAGES
Interestingly, the IOC acknowledged the skirmishing and the new Rule 40, in effect from February 2015 onward, now greatly reduces the limitations on athletes and the delegates of national Olympic committees. In other words, there is suddenly much greater freedom for athlete self-expression. And, that expression may include acknowledging an association with non-TOP brands such as Pepsi, MasterCard, Burger King, Subway, Adidas and Li-Ning. It is certainly an athlete-centered decision (a good thing for most), but is it sponsor-centered?

Granted, Olympic athletes will still need to apply for waivers “if they are part of a continuous [ad] campaign with an unofficial brand,” but non-TOP sponsors may finally have the loophole they’ve long sought for countering McDonald’s, Coke, Visa and the other major investors of the Games. The chance to push back during the 17 days of the Games, when non-TOP sponsors have traditionally held tight and hoped for the best, is finally here.

How so? Imagine MasterCard, Burger King or Pepsi creating a stable (think of the old NFL Quarterback Challenge or the Game Boy NFL Quarterback Club) of Olympians who suddenly are shown (out of uniform) promoting their new favorite sponsor.

What impact will it have?

Could Rule 40 represent the game changer a select few are suggesting it is (or will become)? Will every athlete who qualifies for Rio’s Olympic Games now actively pursue sponsorship dollars that previously were limited to the Usain Bolts and Michael Phelpses of the world? Could this signal the beginning of the end of the TOP program as we know it? Can governments (like Canada, Australia and England) think about cutting funding to athletes at the Olympic level if the corporate sector will now provide the resources they need?

Our answers to these questions seem quite clear (at least to us):

Rule 40 will have an impact, no question. This modified rule helps athletes, athlete sponsors (both TOPs and ambushers) and NGBs/federations. That’s undeniable. Further, social media will continue to facilitate new forms of endorsement.

Not all athletes will benefit. Athletes still must provide value to a sponsor and wide/viable reach to touch potential customers and drive brand recognition, sales or promotional excitement.

Discussions of antitrust aside, TOP will survive but foreign governments could suddenly place more onus on NGBs to become self-supporting. More interestingly, the value of a TOP deal could go down as the IOC loses leverage in charging an exclusivity premium.

One certainty of the Olympics was that previously only a very few sponsors were allowed to use the sacred rings and everyone else was hounded away from the world’s most expensive sandbox. But Rule 40, if waivers are allowed, could open doors — creating much mayhem — and upset the corporations whose collective egos have long enjoyed true VIP status. Take away the exclusivity shroud and suddenly one sponsor may look the same as the next. The IOC could look like an NBA or NHL arena.

That’s good for some, but we predict hell hath no fury like a major sponsor spurned. For brands that have been loyal to the IOC since 1928, or since the last TOP contract was signed, this may be an Armageddon moment.

Said another way, marketers have asked for a long time that legal barriers tied to exclusivity come down (or be reduced) and that market forces take over. Mission accomplished.

But this introduces a dangerous minefield for the IOC. It may be cheeky of us to write “may the best marketer win,” but one thing is for sure, Rule 40 will make things feisty.

Rick Burton (rhburton@syr.edu) is the David B. Falk Professor of Sport Management at Syracuse University and former chief marketing officer for the U.S. Olympic Committee. Norm O’Reilly (oreillyn@ohio.edu) is the Richard P. & Joan S. Fox Professor of Business and chair of the Department of Sports Administration at Ohio University and is deputy chef de mission for the Canadian team at the 2016 Paralympic Games.