SCC Blog
Olympic Thoughts
March 3rd, 2010
Another Winter Olympics has come and gone, generating a lot of news worthy of discussion along the way. Our interest, as always, is focused on a sports business perspective and the lessons the Games provide that can be shared in the classroom.
While there are a number of highlights from the Games worth recapping, we will focus specifically on those lessons that will translate to topic areas you are likely covering in class.
Broadcast rights
NBC paid a record $2.2 billion for U.S. broadcast rights to the Beijing and Vancouver Olympic Games. Prior to the Vancouver Games, NBC publicly suggested they would lose $250 million on the games thanks in large part to a struggling economy. Clearly the Games provide a valuable property for any broadcast company, but at what cost? It will be interesting to see what type of rights fee the IOC will fetch for the 2014 and 2016 Games. For more perspective on the upcoming bidding process, the Washington Times has a great piece on that.
The Vancouver Games were also expected draw a significant multi-platform audience, yet NBC online coverage of the Vancouver Winter Olympics drew just 33 million viewers (according to Reuters), far fewer than initially anticipated.
Media
While much was made of the ratings bonanza for the men’s hockey gold medal game between the USA and Canada, the rest of the ratings proved to be much more moderate. The Sports Business Journal reports that “NBC averaged a 13.8 final Nielsen rating (24.4 million viewers) for its primetime Vancouver Games broadcasts, up 13% from a 12.2 rating (20.2 million viewers) for the ‘06 Turin Games in ‘06, but down 28% from a 19.2 rating for the ‘02 Salt Lake City Games.”
That said, NBC has a lot to be excited about. Mediaweek.com reported that prime time coverage of the 2010 Vancouver Olympics averaged 24.4 million viewers on NBC, up 21 percent from the 20.2 million the broadcaster averaged during the Torino Games. According to the same article, the popularity of the Games drove down the ratings for cable programming throughout the Olympics by a “significant margin.”
The numbers for the gold medal game, however, were stunning. The game was the most watched hockey game in 30 years, drawing 26 million viewers. Consider the following:
- Ratings for the game were up a whopping 46% from the 2002 USA/Canada game
- It was the highest rated hockey game since the 1980 gold medal finale
- 1 in every 3 Americans who owned a TV tuned in to watch
- The game’s overnight rating was higher than ever World Series game since 2004, every NBA Finals telecast since 1998, and every NCAA Men’s Basketball Final Four game since at least ‘98 (source: sportsmediawatch)
Merchandise
Sales of licensed merchandise for the Games were through roof, far exceeding initial forecasts. Over $87 million in licensed Olympic merchandise was sold, nearly double the sales total projected by VANOC. In fact, by midway through the 2010 Games, VANOC reported that it had already hit its $50 million sales goal, double the amount that merchandising brought in through the entire 2006 Winter Olympics. (source: backofthebook.ca)
This year’s hottest item? A pair of $10 mittens, produced by Hudson’s Bay Co. Throughout the games, the company sold more than 3 million pairs of the red, Canadian themed hand warmers. On the day of the closing ceremonies, eBay already had 2,154 pairs of Olympic mittens for sale. (source: backofthebook.ca)
Economic impact
The Vancouver Sun suggests the economic impact of the 2010 Games, based on previous economic impact studies, will provide payback in gross domestic product of anywhere from $2 billion to $10.7 billion for the area. An initial estimate of the total cost to be incurred by the city, however, was over $6 billion.
Branding
While you could argue that any number of brands gained a lot of exposure throughout the games, ranging from USA Hockey and the NHL to sponsors like P&G and Visa, perhaps no brand made a bigger impact during the 2010 games than the city of Vancouver. Longtime sports business executive Joe Favorito asks on his blog “Can a city known for its beauty and with a well established resort as a host (Whistler) find a way to push itself into the consciousness of the American sports fan, the global sports fan, and with that the branding and event world with a successful games?” Perhaps the question is best answered in this article from the Vancouver Sun, “More than 3.5 billion people have viewed some part of the Games. That includes more than 185 million Americans — that’s well over half of the population of the United States. In Canada, the proportion who watched at least some part of the Games was even higher: an incredible 99 per cent. What they all saw was Vancouver, consistently rated one of the best places to live on the planet, throw what is probably the most successful Winter Games in history.”
Endorsement
Previous medal winners like Apolo Anton Ohno, Shaun White and Bode Miller will likely bask in the glory of endorsement gold yet again, their success during the 2010 Olympic Games will only enhance their existing commercial appeal. That appeal will likely open the door to even more future endorsement opportunities. For athletes already enjoying success as product pitchmen (Ohno and Miller raked in more than $1 million last year while White, according to Forbes, earned $8 million in 2009), the payout could provide a significant boost in overall earning potential.
In an ironic twist, of all the new stars making a name for themselves this year, perhaps nobody gained more than a professional athlete. Ryan Miller, the goalie for the US men’s hockey team, is a star in his own right for the NHL’s Buffalo Sabres. Yet, prior to the Games, Miller was far from a household name outside of the hockey community. After a brilliant performance throughout the Olympics, arguably most responsible for the USA’s successful run to the gold medal game and later named tournament MVP, Miller may soon become the target of companies looking to attach their brand to a newly minted American sports hero.
Lindsey Vonn is clearly an example of one athlete who stands to capitalize on success at the Winter Games, although the ceiling for endorsement earnings for winter athletes can be lower than summer athletes. James Anderson, senior vice president of IEG, a Chicago corporate sponsorship consulting firm, tells the Boston Globe that “Vonn is really hot right now, (but) in April, people may not remember who she is.” It should be noted, however, that Vonn ranked third in the Forbes list of top earning Olympic athletes competing in the Vancouver Games, making $3 million in 2009.
Sponsorship
According to allbusiness.com, more than half of the money needed to fund the Olympic Games came from the sale of broadcasting rights, but 34% of the financing was derived from sponsorships. The site also identified the top corporate supporters of the Games, suggesting that the IOC pulled in more than $860 million from its nine “TOP Partners” and hoped to pass a billion in overall revenue.
As identified by allbusiness.com, here are the TOP Partners for the current Olympic cycle include (read the article here for an explanation of “TOP Partners”:
1. Coca-Cola
2. Acer
3. Atos Origin
4. General Electric
5. McDonald’s
6. Omega
7. Panasonic
8. Samsung
9. Visa
Why do companies invest millions in an Olympic Games sponsorship? Look no further than Visa for a case study in sponsorship success. The “official card of the Olympic Winter Games” cashed in, beginning with the opening ceremonies where the Games helped Visa enjoy a 46% increase in spending from the same day last year. Overall, spending on the company’s debit and credit cards increased an incredible 93% in B.C. and topped $115 million US throughout the Games. When all was said and done, Visa recorded more than 1 million visitor transactions. (source: Toronto Sun)
Looking ahead, the 2014 Games in Sochi are already off to a great start in terms of attracting corporate partners. It was announced this week that they already hit $1 billion in sponsorship revenue.
Ambush marketing
As always, several examples of ambush marketing were publicly scorned by VANOC and representatives for those that invest in the Games as corporate partners. Companies like Lululemon, Subway, Pepsi and Verizon were criticized for their efforts to capitalize on the Olympics without any official affiliation.
Lululemon, a sports apparel company, launched a line of T-shirts, hoodies and mittens during the 2009 holidays in honor of a “Cool Sporting Event That Takes Place in British Columbia Between 2009 & 2011.”
Bill Cooper, 2010’s director of commercial rights management, had this to say when the line was released in mid-December (as told to the Montreal Gazette): “We expected better sportsmanship from a local Canadian company than to produce a clothing line that attempts to profit from the Games but doesn’t support the Games or the success of the Canadian Olympic team.”
Social marketing
For the first time, a number of Olympic sponsors dedicated resources to leveraging their affiliation with the Vancouver Games through social platforms. Companies like Visa, P&G, McDonald’s, Coca-Cola and GE all came to the Games armed with social media strategies which launched just prior to the Games (40% of Visa’s Olympic spending was dedicated to digital according to the USA Today).
Coke created a virtual snowball fight and encouraged consumers to participate virally and GE tweeted messages about healthier lifestyles. McDonald’s tied a sweepstakes promotion (an opportunity to win a trip for two to the 2012 Games) into their social strategy, launching a “How do you McNugget?” campaign online. The contest concluded after the Games’ closing ceremonies.
Ticket sales
The Vancouver Games generated more than $252 million in ticket revenue, exceeding the expectations of the event planning organization. According to Dave Cobb, VANOC’s executive vice president, every ticket that was available for events was sold (source: washingtonpost.com).
*** Teacher’s Note ***
Chalk Talk
SCC Brochure