(the following article can be downloaded from http://www.sponsorshipconsulting.co.uk/_documents/pdf/logoc.pdf)
This article is not written by me - authors
Whilst LOCOG is regularly reported as insisting that there is a healthy appetite for their top-tier sponsorships, their inability to address lower-tier partnerships is resulting in several sponsors taking their monies and investing them elsewhere.
In the last six months alone a significant number of corporations have signed up to sponsor UK sports governing bodies and other Olympic related organisations, including Corus (British Triathlon), Lucozade Sport (British Canoeing Union), Scholl (British Athletics), Scottish and Southern Energy (Weymouth and Portland National Sailing Academy), Siemens (GB Rowing) and Man Group (England Hockey). The specific objectives of each partnership will differ, but they are united by one common theme: a desire to “get involved” in the push towards London 2012.
Clearly, these companies were not willing or able to wait for LOCOG to go public with lower tier opportunities. As Wendy Stephenson, Chief Executive of Sponsorship Consulting, which facilitated the Corus and Siemens deals, attests: “There is a huge amount of interest in the Olympics across the board. Our clients, recognising the long lead times required to optimise returns from their sponsorship investments, wanted us to help them find opportunities that would get them started as soon as possible. It is very unfortunate that LOCOG sponsorship packages could not be part of the selection process.” So why is LOCOG playing the tortoise in a race apparently full of hares? Well, like the tortoise’s “slow but steady” race-winning strategy, LOCOG’s revenue generation approach is based on the premise that the higher the value it can negotiate for the top-tier national sponsorships, the more it will be able to demand for lower tiers.
LOCOG has to find a £2 billion budget, with sponsorship, ticket sales and merchandise being the main contributors. Recent research by Millward Brown suggests that ticket sales to British fans might top £278 million. This is more than double the 2004 Athens Olympics ticket revenue target of €176m (£120m). The most recently published target for sponsorship revenues is £750 million, nearly double the £450 million in the original London bid. Even allowing for foreign ticket sales and merchandise royalties, estimated at €76.5m (£52.2m) for Athens, there is still a huge financial gap for LOCOG to close.
With this in mind, it is hardly surprising that LOCOG is pinning its hopes on securing its first six sponsors at an eye-watering £100m each over 6 years. Automotive, Banking, Insurance, Oil & Gas, Telecoms and Utilities are the first sectors to be honoured with the offer of becoming official partners for the 2012 Games. And what benefits are being offered in exchange for £100m of cash and in kind? Bearing in mind that the Games is a “clean stadia” event, these sponsors will not be able to write off their investment against free media exposure.
In fact, LOCOG sponsorship is being positioned as a game-changing opportunity that top-tier sponsors can leverage across their business for competitive advantage in their sector. This is quite a clever idea, but £100m worth of value creation is going to be challenging for even the biggest businesses to identify.
Perhaps this is why the timetable for announcing first sponsors appears to be slipping. Original predictions were by July this year, then before Christmas 2006, with Spring 2007 now being suggested, a euphemistically broad catogorisation that could take us past the second anniversary of winning the Bid. But it is not only the timetable that is slipping; several corporations are “slipping” out of the race. In the banking sector, HSBC and Barclays have publicly declared they have excluded themselves, so all eyes are now on Lloyds TSB as the front runner. In Utilities, British Gas are going to struggle to justify the spend whilst also announcing £100m worth of restructuring (is the figure coincidental?) and EON is clearly focusing on football.
LOCOG is caught between the proverbial rock and a hard place. If it rushes its top-tier negotiations in order to move on to capture second- and third- tier funds, it risks sub-optimising its income. However, it cannot wait forever whilst these large corporations, not known for the speed of their decision-making processes, undertake exhaustive and interminable rounds of business case development.
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