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Aug.06

11:35 AM ET

Wednesday, 6 Aug 2008

Beijing Olympics: Payoff for Sponsors

Posted By:Yolaiki Gonzalez | Sean Entwistle | Ariel Nelson

Topics:Olympics | Stock Market

With the 2008 Beijing Olympic Games commencing on August 8th, the International Olympic Committee (IOC) is seeking to raise top money from its 12 global industry-diverse Worldwide Sponsors, requiring four years of commitment. This year’s 12 Olympic “proud partners” will be predominantly American companies including Coca Cola (KO), Johnson & Johnson (JNJ), General Electric (GE), McDonalds (MCD), Visa (V), and Kodak (EK), followed by new local supporters such as personal computer maker, Lenovo, and Life Insurer-Manulife.

Partners such as the French information technology firm Atos-Origin, timekeeper Omega, and electronics companies like Panasonic and Samsung are also amongst the high-end marketers making “second round” appearances at the Beijing Olympics.

Olympic Ad Spend

According to the IOC, Worldwide Sponsorship generated $663 million revenue for the 2001-2004 Salt Lake City / Athens Olympic cycle from its 11 multinational partners during that period. So what are these multinationals entitled to with an Olympic sponsorship? Each global sponsor has the marketing rights to the all-inclusive use of the Olympics images and logos. For the current Torino / Beijing cycle the revenues have jumped 31%, with the 12 partners paying a total of $866 million, an average of roughly $72 million each. Don't forget these numbers are just the fees for sponsorship rights. They still have to pay for the advertising itself. Estimates put the total Olympic ad spend at an additional $1.5 billion.

In addition to the top 12 multinational sponsors, the Olympics is supported by a domestic commercial partnership managed by the Organizing Committee for the Olympic Games (OCOG), under the reigns of IOC. Many major businesses use the Games as an advertising opportunity. This year, there is an extensive list composed of big American names like United Parcel (UPS), Anheuser-Busch (BUD), Staples (SPLS), Nike (NKE) and its rival Adidas (ADDYY) to name a few. Other local marketers making their entrance in the Olympics are Chinese internet-provider Sohu.com (SOHU) and petroleum products company Sinopec (SHI).

Unlike, the Top 12 global supporters, the domestic partners have limited marketing rights within the host country (China). Nike for example, sponsors individual athletes and teams such as the U.S. basketball team, not the Olympics itself. Nevertheless, domestic partners are also shelling out a pretty penny in order to receive special treatment from the Chinese government. Adidas alone spent an estimated $80 million for the rights to use Olympic logo on its product within China, per The Oregonian newspaper. Also according to OCOG, 38 domestic partners spent roughly $302 million in support of the Summer Games of the 2004 Athens Olympic, while 57 sponsors shed $348 million during 2006 Turino Winter Games.

Payoff?

Does all this advertising spend generate a sufficient return on investment? From the table below, all of the Worldwide Sponsors saw a lift in their share price during the 2004 Summer Games and 60% of them saw a gain during the 2006 Winter Games. In the month leading up to this year's Beijing games, 75% of the sponsors are up led by Kodak.