What Will Olympic Sponsorship Look Like In 2020? The Istanbul, Madrid and Tokyo Bids Compared

 

2020 Bid City LogosOn 7 September in Buenos Aires, the IOC will elect the host city for the 2020 Olympic Games. Ahead of the election, I’ve taken a look at the Istanbul, Madrid and Tokyo 2020 bid proposals for their domestic sponsorship programmes, to see what they tell us about the next evolution of the Olympic sponsorship model.

The Rival Bids

The three candidate cities’ bids present three very distinct overall visions, each of which naturally influence their sponsorship proposals – in particular those of Istanbul and Tokyo.

Istanbul’s ‘Bridge Together’ is the most ambitious bid, with a huge $20 billion infrastructure budget and a compelling narrative that blends the repositioning of Turkey, the business potential of a youthful growth market that spans Europe and Asia, and the opening of a new frontier for Olympism in the Muslim world. As the most exotic and (in budget terms) riskiest choice, it has strong echoes of the Rio 2016 bid.

Madrid’s ‘Illuminate The Future’ is in many ways the absolute opposite of Istanbul, with a minimalist $2 billion budget based on using existing infrastructure, and a focus on using the Games as a catalyst to regenerate and rejuvenate Spain.

Tokyo’s ‘Discover Tomorrow’ offers the best of both worlds, with its established infrastructure and modest $4 billion budget counterpointing Istanbul, and the strength of its giant economy contrasting strongly with Madrid. It also plays hard on its reputation as a global centre for innovation, exemplified by Zaha Hadid's futuristic Olympic Stadium design (pictured below) and on its vision of staging the first-ever ‘downtown Games’ in the heart of a city.

 

Tokyo Olympic Stadium

The Bids’ Sponsorship Philosophies

Each of the three candidate cities preface their domestic sponsorship revenue projections with introductory statements that make interesting reading.

Taking a lead from its overall bid vision, Istanbul leads on the ‘premium value’ of hosting the Games ‘in a new and vibrant region’, ‘the momentum created by the…strength of the Turkish economy’, and ‘the size and youthful demographic of the population’. It also plays to the IOC and its global sponsorship partners with the statement that Istanbul is ‘the regional hub for about 90 countries in the Coca-Cola empire’ - Coca-Cola, of course, being the IOC’s longest-established global partner.

Madrid and Tokyo both take more pragmatic approaches. Tokyo borrows from its overall bid vision by stressing the size and strength of both the Japan and Greater Tokyo Area economies, whereas Madrid sidesteps its economic woes by leading on the size and sophistication of its advertising and sponsorship markets. And both cite (without naming any names) their world-leading brands and their longstanding commitment to domestic and international sponsorship, with Tokyo inevitably adding that this has included TOP sponsorship by Japanese companies – Panasonic is a current TOP sponsor, with a contract through to Rio 2016.

Little Sign Of Innovation

Fairly standard stuff. But what about innovation? I was hoping to see proposals by each of the three candidate cities for how they intended to innovate the Olympic sponsorship model. Sadly, there’s little of this to report.

Extraordinarily, given that the Tokyo bid counts innovation as one of its defining characteristics, there’s absolutely nothing at all about sponsorship innovation in Tokyo’s proposals.

Madrid proposes two, although neither feels fully thought through.

The first is to ‘promote agreements with the main Social Networks…to counter the effects of ambush marketing [by preventing] non-sponsor brands from using hashtags, profiles, etc., which employ Games-related content and concepts.’ Fine, but what about partnering with the networks to create opportunities for Games sponsors?

The second is set out in a long and rambling paragraph which proposes ‘…an innovative marketing plan which will go beyond mere brand promotion. [It] will help sponsors to strengthen their ties with consumers through a 360-degree focus involving short-, medium- and long-term strategies and specific actions during the preceding years and the Games themselves.’ And so it continues, without providing any substantive details.

But in terms of innovation, comfortably the best of the three bids in my view is Istanbul.

Istanbul 2020 plans to leverage its spectacular cityscape

 

I like Istanbul's commitment, for example, to a ‘new, broad approach to activating the whole city across the sport, entertainment and cultural programmes, creating many new opportunities for partners’. And in parallel with its groundbreaking vision of seating 500,000 people along the Bosphorus for the Opening Ceremony, I also liked Istanbul’s proposal to re-imagine corporate hospitality at the Games by ‘leveraging the city’s spectacular geographical and historical assets’. There’s also a vague but intriguing idea about creating ‘a consolidated bank of media properties’, which I assume includes social media integration - Istanbul makes much more of its social media potential for sponsors than the other two bids, in particular the fact that Turkey is the world’s fourth largest user of social media.

Tokyo Leads The Revenue Projections

 

Revenue Projections

Confirming the economic power that underpins the Japanese bid, at $958m Tokyo projects comfortably the largest domestic sponsorship revenue of the three 2020 candidates - over $250m more than Madrid, and almost $300m more than Istanbul.

Tokyo’s revenue forecast is also over $200m more than the $725m London projected in its bid for the 2012 Games, and almost double Rio’s $570m projection for 2016.

Given that London 2012 ultimately secured $1.197 billion from domestic sponsorship, and that Rio 2016, despite a struggle to sell sponsorships in the last two years, rapidly (reportedly) hit the $500m mark, Tokyo’s forecast not only highlights the conservativism of its two rivals’ forecasts, but also that Tokyo is taking the same approach. I have no doubt that Tokyo would sell well over $1billion of domestic sponsorship, and perhaps as much as $2billion given favourable economic conditions.

It’s also interesting to compare the three 2020 bids’ sponsorship revenue forecasts in the context of their estimated contribution to their respective organising committee’s overall budget.

At 28 per cent, Tokyo is five to six percentage points higher than Istanbul and Madrid, and almost eight per cent higher than Rio 2016. But it’s much closer not only to London 2012’s bid figure of 29.4 per cent, but also to London’s final actual figure of 31 per cent.

Given this, and the fact that Rio 2016’s budget is already under severe pressure, it seems Tokyo is being much more realistic than its competitors about the contribution of sponsorship to its budget.

Value In Kind – Finally In The Spotlight

As I’ve written before, Value In Kind (VIK), despite being habitually overlooked by the media, is fundamental to Olympic sponsorship. Because the Games are the world’s biggest and most complex peacetime operation, it takes far more to deliver them than pure cash. The Olympic sponsorship model is like a giant joint venture, with both the IOC and the local organising committee outsourcing critical products and services from sponsors, without which the Games couldn’t happen - and that’s why the majority of Games sponsorship in the modern era is delivered in the form of VIK. For London 2012, for example, VIK accounted for 55 per cent of domestic sponsorship, and 66 per cent of IOC sponsors’ contribution to the LOCOG budget.

Not before time given this background, for the first time in the history of Games bids, the IOC asked the three 2020 candidate cities to estimate the proportion of VIK they would source as part of their domestic sponsorship revenue, and it makes for very interesting reading.

VIK Comparisons

At 50 per cent, Madrid’s is the highest of the three and the closest to the modern norm of 50 to 60 per cent, whereas Istanbul at 40 per cent and particularly Tokyo at 34 per cent are much lower than a modern Games requires.

Madrid’s realism would seem to be the product of their long experience of Games bidding and budgeting - this is Madrid’s third consecutive bid for the summer Games - as well as a recognition of the lack of cash likely to be available in the struggling Spanish economy. Whereas conversely, I assume that both Istanbul’s and Tokyo’s optimism springs from their stronger economies, although I do question whether Tokyo can deliver to only 34 per cent VIK, of which more below.

Only time will tell which of the three cities get to test their VIK estimate, and how it ultimately compares with the much higher VIK norms of the modern Olympic era. But it is good to see the IOC finally shining a light on an overlooked but fundamental element of the Olympic sponsorship model.

Three Tiers Remain Standard

Tier Comparisons

All three 2020 bids use the familiar three-tier Partner-Sponsor-Supplier Olympic sponsorship hierarchy in their projections, along with the usual number of brands in each tier - around ten in tier one and two, and around twenty in tier three.

Unsurprisingly, given the closeness of their total revenue projections, Istanbul’s and Madrid’s revenue projections for each tier are very similar. It’s equally unsurprising that Tokyo’s bigger overall revenue projection is reflected in its much bigger revenue forecasts for tier one (in particular) and tier two.

In contrast, it’s odd that Tokyo projects such a small figure for tier three. At $108m this is only $4m more than Madrid and $10m more than Istanbul, which is very much out of kilter with the rest of Tokyo’s revenue projections, but perhaps explains why Tokyo’s VIK figure is also so low – usually, tier three deals are predominantly VIK. This minimalist approach to tier three as well as to VIK suggests that Tokyo intends to rely more on cash than VIK than recent Games hosts, but as I stated above, only time will tell.

Also worth noting here are the IOC Evaluation Commission’s comments, which suggest that, in sponsorship terms at least, Tokyo is ahead of Istanbul with Madrid third.

Tokyo’s projections get, by IOC standards, a glowing report: ‘Given the scale of the Japanese economy and the support for sport…demonstrated by the corporate sector, the overall revenue target is considered achievable.’

Both Istanbul and Madrid are called out for projecting ‘average values for each tier…lower than recent summer Olympic Games.’ But whereas the IOC believes that in Istanbul’s case this is because of ‘a careful approach to budgeting’ and that Istanbul’s overall estimate is ‘conservative’, with Madrid it states that it ‘remains cautious about the achievability of domestic sponsorship targets’ owing to ‘the Spanish economic environment.’

Tokyo’s Idiosyncratic Categories

Category Comparisons

As the 2020 Games will mark a natural end to the current cycle of IOC global sponsorships – seven of the ten global category deals currently run to 2020 – the primacy of the TOPs continues to dictate the categories which local organising committees can sell. As a result, the three 2020 bids’ proposals for the categories they will tender domestically all strongly resemble previous recent Games, although there are some intriguing nuances.

Tokyo is the most idiosyncratic, in two ways: the influence of Japanese culture in the inclusion of a broad Food category led by rice in tier one, Cooking Oil and Noodle categories in tier two, and Kimono in tier three; and Tokyo’s tier three is very different to its bid rivals in envisaging six categories with more than one supplier.

The weakness of Spain’s economy is arguably evident in Madrid stating that it will tender one of three categories (Fuels, Professional Services and Web) without stating which one or what will happen to the other two, and also in Automotive appearing in Madrid’s tier two; Automotive was tier one in Beijing, London and Rio, and is tier one in both Istanbul and Tokyo.

It’s also interesting to see that Istanbul and Madrid both make Sportswear tier one whereas Tokyo make it tier two: that the Alcohol category, which bounces around the tiers from Games to Games like a pinball, is tier one for Madrid and Tokyo but tier two for Istanbul; and that the web, the most problematic category in the IOC’s rights bundle, appears as ‘Internet Providers’ in Istanbul tier two, ‘Web’ (as discussed above) in Madrid tier one, and ‘Internet Search Engine’ in Tokyo tier one.

Paralympics Sponsorship Still A Footnote

After the enormous success of the London 2012 Paralympics, one would be forgiven for expecting to see much more emphasis being given to Paralympics sponsorship. Surprisingly, this isn’t the case.

Both Istanbul and Madrid attribute no incremental value directly to Paralympics sponsorship, stating simply that the Olympics and Paralympics will be sold together.

Tokyo, however, states that it expects to generate a minimum additional $26m from domestic Paralympics sponsorship, which earned it qualified praise from the IOC Evaluation Commission. As such I can’t help but feel that Tokyo has stolen a march on its rivals by looking at the Paralympics separately.