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Sponsorship: The Risks And Rewards Of Going For The Gold


Special Report: THE OLYMPICS

SPONSORSHIP: THE RISKS AND REWARDS OF GOING FOR THE GOLD

For host cities and corporate sponsors, the Olympics can be a dicey business

Thanks perhaps to fervent prayers at several Shinto shrines, Nagano has been spared its greatest nightmare--lack of snow. In fact, it looks as if there will be plenty of white stuff to let the Games begin on Feb. 7.

But the worry about not enough snow at the southernmost Winter Olympics in history spotlights the risks to cities and companies that host or sponsor the Games. Insufficient snow would have besmirched Nagano's image for years. The Munich Olympics in 1972 is remembered mainly for the slaughter of Israeli athletes by Arab terrorists. The Atlanta Olympics calls to mind tawdry commercialism, a bombing, and huge snafus in the reporting of scores and other data. Indeed, IBM's reputation took a hit, since its role as font of information was intended to showcase a state-of-the-art computer system.

What's more, some critics charge that the Games are actually more burden than boon to local economies. And now there's a growing fear in some quarters that an outbreak of doping cases, in evidence among Chinese swimmers at Australia's recent world championships, could disillusion corporate sponsors.

So is the glory of hosting and commercially linking up with the Olympics worth the potential downside? In a word, probably. The highly successful 1964 Tokyo and 1988 Seoul Olympics were major nation-building exercises that put Japan and South Korea on the map as world-class countries. With no public financing, the 1984 Los Angeles Olympics generated a surplus of $215 million that the city used to build new facilities and fund economic development programs and youth sports leagues. And most corporate sponsors profess great satisfaction with their Olympic connection.

Now it's Nagano's chance to grab the Olympic gold--or provide grist for critics. Before it won the right to this year's Winter Games, the prefecture and its capital city of 340,000 residents was a backwater little known outside Japan and noted mainly for its hot springs, noodles, and pristine environment. After its Games end on Feb. 22, Nagano will be in a different class, barring a major mishap. And not only in terms of image.

"There's a can-do philosophy that develops in a city, that when people come together they can accomplish so much," says Peter V. Ueberroth, chief of the Los Angeles Olympics.

"TOTALLY POOR." Beyond the touchy-feely, what about the bottom line? "It's hard to allocate the costs and returns, but thanks to the Olympics we got a new bullet train to Tokyo, new expressways, and more sewers," says Shigekazu Nakamura, deputy managing editor of Shinano Mainichi Shimbun, Nagano's biggest newspaper. The new transportation links open up Nagano to more tourism and commercial activity. Indeed, the train, which began operating in October, cuts the three-hour Tokyo-Nagano trip by about half.

To be sure, such improvements don't come cheap. The cost of the new train line, expressways, and other facilities adds up to about $12.1 billion. According to Masao Ezawa, head of the Anti-Olympics People's Network, a grassroots group with a few hundred members, this will mean an increased public debt per household of $15,873 in the prefecture and an additional $12,222 in the city of Nagano. "Taxes will certainly rise," says Ezawa, a weaver, adding that water and sewage rates are already up. "Instead of profiting from the Olympics, we will be totally poor."

But in the din of Olympic anticipation--for new events like snowboarding, for hockey played by pros, for the figure skating face-off between Michelle Kwan and Tara Lipinski--the Ezawas of the world can barely be heard. Corporate sponsors virtually all exude confidence about the payoff from the impending Games. Even the bad press IBM got in Atlanta hasn't diminished its enthusiasm. "We have found no residual [downside] whatsoever," says Eli Primrose-Smith, director of worldwide Olympic and sports sponsorship for IBM. "Our customers and potential customers understood we were working in a high-risk environment." This time, IBM isn't taking any chances: 500 staffers will help make sure everything works. IBM will be responsible for competition schedules and results, athlete information, weather data, an E-mail system, and the Olympics' first Web site: www.nagano.olympic.org.

Eastman Kodak Co., which has an even longer history of sponsorship than IBM, also believes that the cash it shells out to be one of 11 "global partners"--for a minimum of $40 million--is money well spent. "We've always seen an uptick in revenues, in brand awareness [after the Olympics]," says Carl E. Gustin Jr., a senior vice-president at Kodak.

At Nagano, Kodak will run the official "imaging center" for professional photographers and expects to process some 75,000 rolls of film. Kodak figures that winning greater loyalty from pros will spill over to the mass market. And what could be sweeter than making a splash in Fuji territory? But, Gustin concedes, "There are inherent risks in anything you do from a marketing perspective, let alone as huge as the Olympics. None of us were happy about the bombing in Atlanta. But the reaction of the world is not one of criticism of the Games or sponsors. It has been seen as an assault on all of us."

Still, not all corporate sponsors, which are providing 40% of funding for the Nagano Olympics, are so sanguine. Among the 11 global sponsors, U.S. insurer John Hancock Mutual Life Insurance Co. remains cautious. Most sponsors were left with a sour feeling from Atlanta, says Hancock President David D'Alessandro. He says the local organizing committee was combative and many sponsors were insulted by the naked commercialism on the streets of the city. "Both the Japanese and the Australians have gone out of their way to learn the lessons of Atlanta," says D'Alessandro. Sydney will host the Summer Games in 2000.

Despite the risks, the number of sponsors-in-waiting and communities eager to play host is growing. "Our program is full," says International Olympic Committee Marketing Director Michael Payne. "We capped the number of global partnerships at 12 to avoid diluting the brand. Other global marketeers who want in either faced a potential conflict with an incumbent or might have clashed with the local city's sponsorship agenda." Meanwhile, three cities are already bidding for the 2006 Winter Olympics, and three more are expected, says the IOC.

Why the queue of corporate sponsors and host cities when the outcome is often dicey? Simple. A stumble with the world watching can be agonizing. But a flawless performance can be glorious--and well remembered.By Robert Neff in Tokyo, with William Echikson in Lausanne, Mark Hyman in Baltimore, David Greising in Atlanta, and bureau reportsReturn to top


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