Torched Values?
Lisa Delpy began hearing from former students of her sports management class at George Washington University soon after reports on the Olympic scandal began to fly last year. “They’re calling me and saying ‘Hey, you were right,'” says Delpy, a professor of sports management who teaches a course on the Olympics at the Washington, DC, school.
Delpy had been telling her students since the early 1990’s that the high-stakes fencing contest between cities competing for the Olympic Games was getting out of hand. Books such as 1992’s Dishonored Games (published in Europe as The Lords of the Rings) described how bid committees – or the sports agents acting for them – were throwing big money and gifts at the grandees of the International Olympic Committee.
“These were substantive allegations of deal-making at various levels that warranted investigating – even if only 10 percent of the stuff being said was true,” says Delpy.
As accounts of lavish spending by bid cities on IOC members seemed to spring forth by the hour last month, and members from Chile to Lausanne began resigning, Olympic watchers said the Games were facing their worst scandal ever. United States Olympic Committee deputy secretary general John Krimsky – in New York City last month to report on the progress of the Olympic’s first branding program – told a standing room assembly at the annual Sports Summit that he was “depressed and revolted” by the charges.
But no one should have been all that surprised. The Olympics have been a big business at least since Peter Ueberroth turned a $220 million profit with the Los Angeles games in 1984, primarily through mass marketing sponsorships and licenses. Salt Lake City and the state of Utah stand to reap $2.8 billion in economic benefits from the 2002 Winter Games, according to the Utah governor’s office.
Rumors have swirled for years that cities’ bid committees were bestowing gifts on IOC members and their families. As one Tokyo newspaper wrote in response to reports that Nagano spent $21,905 on each visiting IOC member in winning the 1998 Winter Games: “It’s not a case of corruption in this business. Just money. Very big money.”
“This is ‘Dog Bites Man,'” says Rod Taylor, senior vp at The Optimum Group, a Cincinnati-based promotion agency which specializes in sports marketing. “It’s exactly the way the IOC has always done business.”
Sponsors stick Corporate sponsors came out demanding swift action and reform as allegations of bribery spread outward from Salt Lake City to Olympic offices around the world. The global schmooze-fest that underlies Olympic politics seems headed the way of the three-martini lunch. If the Olympic movement was a family, as IOC president Juan Antonio Samaranch is fond of saying, sponsors needed to know if it was the Nelsons or the Corleones.
As the IOC announced the steps it was taking toward reform last month, sponsors seemed to feel the property would withstand the scandal providing the Game’s overseers delivered on the promised housecleaning.
“Our commitment to Sydney is solid and we have no plans to scale back our brand programs,” says Susan Rosenberg, spokesperson at UPS, a top sponsor that will be negotiating a new four-year pact this year.
“Public interest in the Olympics is off the radar screen until six months before the games. This is not affecting any of our plans,” says United Airlines manager of promotions and sponsorships Dick Veatch. United is the official airline of the Olympic team and of the USOC for Salt Lake and is a multi-year sponsor of a half-dozen Olympic teams, including skiing and hockey.
“The Olympic committee will overcome this because nothing will get in the way of companies who want to be sponsors,” says Michael Reisman, managing director of Clarion Marketing, a Greenwich, CT, promo shop long involved in sports marketing. “In the final analysis this is a momentary scandal. It won’t take away from the games’ equity and tradition, or their power as a promotions platform.”
Some sponsors did kick up a fuss in the unfolding stages of the scandal. US West Communications, a sponsor of the Salt Lake City Games, initially withheld a fee payment when the charges surfaced. John Hancock Financial Services, a top sponsor negotiating a new four-year pact this year, took the Olympic rings off its annual report. Holder of the U.S. rights to broadcast the Olympics through 2008, NBC told its stations to remove the rings from the NBC logo during news broadcasts “to avoid any confusion among our viewers while we are in the course of reporting this story,” says NBC spokesperson Alexandra Constantinople.
Some bargains may be in the offing as sponsors negotiating new quadrennium pacts this year use the scandal as a lever on fees if sweeping change doesn’t materialize. “They will argue the scandal has tarnished the brand at some level and use that as a negotiation point. The sponsor is going to set the value ultimately,” says IEG Sponsorship Report managing editor Lance Helgeson.
Yet by month’s end sponsors – and the public – seemed to feel the IOC was moving in the right direction. A USOC poll in the last week of January found that 73 percent of adults said there should be significant changes in the selection process for the host city. Despite the scandal, 83 percent said they had positive feelings about the games.
“In the long run, this affair will not cause the luster to wear off the Olympics,” says Helgeson. “The public understands the business of putting on a huge game. People know it’s a marketing opportunity.”
Early disclosure It helped that Olympic officials acted in a timely fashion and made a point of reaching out early to sponsors.
IOC marketing director Mike Payne met with top sponsors in Atlanta in January providing information on the committee’s “detailed investigation,” says UPS’s Rosenberg.
“The USOC has been very diligent in keeping us informed on everything. We get an e-mail within minutes when anything happens,” says United’s Veatch.
At the New York City Sports Summit, an annual convocation of sports executives and marketers, Krimsky addressed the branding question and the scandal in a forthright manner, updating attendees on the progress of a planned branding campaign by Olympic Properties of the U.S. (OPUS).
“We have serious work to do to restore the brand,” said Krimsky, adding that a goal in the first phase of the branding program leading up to Sydney will be to “rebuild the brand’s damaged value platform.”
OPUS research found consumers exhibit “a high degree of agreement on what the brand represents.” They see it as “an event based on ideals” and as “a showcase of noble aspirations and dreams of peace,” Krimsky said.
Noting that the American dream of working hard to achieve one’s dreams “parallels the Olympic dream,” Krimsky said the games’ marketing will seek to “brand the values of the movement in an American context” and “highlight the timeless values of the games” in the context of the millennium leading to Sydney.
Reckoning time The Olympics were clearly heading for some kind of end-of-millennium reckoning as a half-dozen agencies investigated claims that lavish inducements of gifts, cash, health care, tuition, and travel flowed from bid cities to the IOC. Although IOC directors suggested members were guilty only of violating their Olympic oaths, the United States Justice Department initiated criminal probes. The Utah attorney general’s office plans to join the chase, focusing on possible violations of state bribery, public corruption, and fraud statutes, says office attorney Palmer Depaulis.
Perhaps it was the size of the transactions that finally elicited a collective gasp from Olympics-watchers, as if watching Franz Klammer on his legendary downhill run. Of the $800,000 the Salt Lake Olympic Committee reportedly paid out to 14 IOC members, $216,010 was funneled to Jean Claude Ganga of the Republic of Congo to enhance his bank account and pay for gifts and medical care. “People have pushed the envelope too far,” said IOC vice president from Canada Dick Pound, who was named to head the internal investigation committee.
Maybe the Olympics had lurched into a fin de siecle housecleaning after being tarnished by the introduction of vainglorious pro sports teams, performances freakishly enhanced by drugs, and the return of terrorism at the 1996 Atlanta games after a 25-year absence.
“This is the first time there has ever been any really hard evidence,” said USOC executive director Dick Schulz, explaining the scandal’s genesis. It began when an anonymous individual sent a copy of an unsigned letter purporting to be from an SLOC vp to a Salt Lake TV station. The missive detailed the status of tuition payments for the daughter of an IOC member.
Worldwide sponsors including Coca-Cola and UPS voiced approval after the IOC – in the first step of its investigation – called for the expulsion of six members it said had accepted more than $440,000 in cash. The IOC said it will change how host cities are selected, and scheduled a March meeting to continue making reforms.
“We are encouraged by the swift manner in which they have acted thus far,” says Ben Deutsch, Coke p.r. manager, worldwide sports. “We want the issue put behind us and we are entrusting that upon the IOC. It is critical to correct the past but it is equally important to protect the future.”
A sponsor through 2008, Coke is finalizing its marketing strategy for Sydney’s 2000 games. Coke conducted marketing programs in 135 countries for the Atlanta games, boosting worldwide case sales by 8 percent in the process.
“Even if there is just the perception of impropriety, this calls for change on the part of the IOC. We think they are stepping up to that challenge,” says UPS’s Rosenberg. UPS is a deep-pockets Olympic sponsor with plans to negotiate an estimated $40 to $50 million quadrennial pact with the IOC, Salt Lake City for 2002, and Athens for 2004. UPS spent $100 million in sponsors fees and marketing programs for the Atlanta games, a base from which it staged 20 employee and consumer marketing programs. It teamed with fellow games sponsors IBM, Swatch, and Panasonic to offer prizes in direct-mail promotions. UPS envelopes, uniforms, and delivery vehicles carried the company’s Olympic rings insignia through the Nagano games.
The scandal as yet has produced no corporate defections for the 2000 summer games in Sydney or the 2002 winter games in Salt Lake City, but U.S. Olympic officials said the imbroglio will set fundraising for the Salt Lake event back a year as potential sponsors wait to see how the IOC responds.
Three worldwide partners – Coke, Time Warner’s Sports Illustrated, and Sema Technology – are signed for the winter games. Eight of the remaining top sponsors – including Kodak, Xerox, and Panasonic – have yet to negotiate new four-year pacts to cover Salt Lake City and Athens.
“People will be waiting to get the full results of the investigation,” says Rosenberg.
The delay seems unlikely to cripple the SLOC’s fundraising, which it needs to pay for a $1.45 billion budget. Two-and-a-half years before the event, OPUS is way ahead of Atlanta’s fundraising pace. It has collected 75 percent of the $850 million slated to be raised from sponsors, having signed up Anheuser-Busch, Blue Cross & Blue Shield, and General Mills, among others. Looking for “30 or 40” licensees to pony up a total of $51 million, it has already signed 17, says SLOC spokesman Frank Zang.
Future fallout The Olympics appear to be in for at least several more months of negative publicity. Pound in late January said “an indefinite number’ of new targets had been added to the investigation since the initial phase, when the six members were identified for expulsion. Salt Lake City and Sydney were still under investigation, and Pound said probers would probably examine Toronto’s failed bid for the 1996 Games.
Protesting that he was “an innocent victim of circumstances,” the IOC member from Kenya resigned, the fourth guilty party to do so. The FBI subpoenaed schools including the University of Utah, Brigham Young University, and Utah Valley State College looking for information on IOC officials or relatives who may have enrolled with the SLOC’s help.
Rome’s mayor demanded a new vote for the 2004 Olympics, contending that the choice of Athens has been tainted. In Salt Lake City, a wag in a radio station contest suggested “Clinty” as an appropriate name for the Salt Lake City Games mascot, in reference to the “forever scarred” Bill Clinton. (Too late. The mascot is already chosen, although Salt Lake officials are withholding the announcement until the scandal blows over.)
Folks in Salt Lake City should cheer up. Consumers are far more interested in the athletes and the games themselves than in its faceless managers. Research for Brand Olympic shows “we have been bruised, but the athletes have not been bruised,” Krimsky reported.
Management malfeasance won’t lessen the publics’ awe for the games’ athletes and the ideals they stand for. But sponsors won’t sit idly by while mismanagement and bad press tarnish the Olympic rings.
