Deborah Malone's Commentary

Will the Rio Games Redefine Future Olympic Advertising & Sponsorship Strategies?

By Deborah Malone, The Internationalist

In the upcoming Olympic Games, now just three weeks away, two extraordinary occurrences are affecting marketers and their strategies-- for the short and long term. One involves significant changes to the rules regarding marketing restrictions and their impact on official sponsors, while the other, of course, involves the many unforeseen issues now occurring simultaneously in Brazil. These factors will undoubtedly recast both advertising and sponsorship concepts around such large events moving forward, particularly as marketers seek innovative ways to develop more authentic connections between brands and consumers in a transparent, social media era.

As the world watches the Rio Games, it will also become clear that overwhelming financial, political and social burdens can quickly batter host countries in light of today's complex national and international challenges. Such realizations will also have far-reaching consequences for the planning of future Olympiads.

This is the first year that we'll see new marketing efforts affected by the International Olympic Committee's Rule 40, which ends a blackout during the Games for companies who sponsor athletes, rather than the event itself. This turnaround is the result of concerted lobbying efforts by both athletes and their agents who persistently and persuasively argued that athletes were being deprived of commercial consideration and potential income during their most marketable moments. In a statement, the US Olympic Committee's CMO, Lisa Baird, said: "The USOC relies on partner support and works very hard to protect their Olympic rights, but while doing so we also look to expand opportunities for Team USA athletes."

Under Armour, a company not currently an official sponsor of the Games-- (while competitor Nike is indeed an official global sponsor) -- is certainly using Rule 40 to their advantage. In a move that characterizes its innovative marketing approach, the sports apparel company has backed nearly 250 athletes, including swimmer Michael Phelps, and has planned a range of inventive tactics to connect its brand to the Olympics. Under Armour will rent a series of outdoor gyms throughout a 50-mile stretch of Rio's beaches to establish marketing outposts and to host daily workouts for fans. Plus, the company plans to entertain VIP guests in a venue where they can mingle with its "family" of sponsored athletes.

Other companies, like Greek-yogurt maker Chobani and camera company GoPro, along with beverage brands Red Bull and PepsiCo's Gatorade, have also introduced new campaigns featuring Olympians. Companies sponsoring teams or individual athletes were required to submit their campaigns to the USOC or other national committees at least six months before the Games to certify that their programs did not infringe on Olympic copyrights. It is estimated that hundreds of brands applied for approval. Interestingly, athletes and their agents generally feel that these new rulings do not go far enough as many do not find out if they quality for the Games until just a few weeks prior to the event, not six months in advance as required by the new Rule 40 changes.

Interestingly, this may now imply that some efforts previously considered "ambush marketing" will be accepted as mainstream-- provided marketers don't use Olympic intellectual property, like the Games' symbolic rings or the word "Olympic." Nonetheless, GALA (Global Advertising Lawyers Alliance) asserts that "Ambush marketing by association," or marketing activities that directly or indirectly associate advertisers with the Olympics without authorization, and "Ambush marketing by intrusion," or marketing activities that promote advertisers at the official Olympic sites without authorization, may be subject to criminal penalties, including fines and jail time. Jeffrey A. Greenbaum, GALA's Chairman and Managing Partner of Frankfurt Kurnit Klein & Selz in New York, says "As global marketers prepare to launch campaigns in Brazil during the Olympics, they should ensure that their advertising complies with Brazil's tough new restrictions." So perhaps the rule changes will not be "crystal clear" in this first year.

No doubt, official sponsors will be closely monitoring all marketing activities to gauge how much the Rule 40 amendments will affect their investments in the Games. It is estimated that the IOC sponsorship deals cost roughly USD $25 million per year for Olympic rights, or about USD $100 million for a four-year commitment that includes both Summer and Winter Games. It is also rumored that the IOC intends to significantly increase its official sponsorship fees for the four-year period beginning in 2021. In fact, some believe that these fees will double, which could prove challenging in light of the new Rule 40 changes.

It is certainly understandable that the IOC seeks long-term sponsorship funding for the Games. (The Rio Olympics, for example, are predicted to cost $12 billion-- about 40% coming from public funds and the rest from private lenders.) However, no one could have imagined several years ago that a host country like Brazil would be plagued by so many unforeseen and concurrent problems. After all, the Rio Olympics are the culmination of a decade of huge sporting events in the city, including the Pan-American Games (2007), the Military World Games (2011), the FIFA Confederations Cup (2013) and the World Cup (2014). All of these spectacular events were considered successes. Plus, an annual event like Carnival attracts about a million tourists each year, and is generally well managed.

This is not the first time that there have been concerns about a host country's involvement with the Games. The 2004 Summer Games in Athens were criticized for slow construction and worries that venues would not be completed in time for the Opening Ceremonies. The 2014 Winter Olympics in Sochi fielded reports of faulty plumbing and shoddy construction against the backdrop of unseasonably warm weather. Some will also recall that fears of swine flu were a big concern in anticipation of 2010 Winter Games in Vancouver.

Yet the challenges facing Rio are unprecedented and only seem to mushroom. Plus, finances may be just one of many interrelated problems. According to Francisco Dornelles, the Acting Governor of the State of Rio, "The state is bankrupt." (The incumbent governor, who has lymphoma, is on sick leave.) Yet, Eduardo Paes, Mayor of the City of Rio, asserts that the current fiscal situation will not affect Olympic preparations. This debate comes amid a national political crisis as Brazil's President, Dilma Rousseff, was forced to step down this May in light of allegations that she manipulated the state budget. The result has been a frozen economy and political turmoil.

However, Leonardo Picciani, the newly-appointed Sports Minister who was given his role after Dilma Rousseff's suspension, claims that the Games will be "fantastic." He has also emphasized that the mosquito-borne Zika virus is under control, particularly given that August in the Southern Hemisphere is mid-winter when the drier and cooler weather lessens threats from mosquitos. Of course, that has not stopped 150 doctors and scientists from signing an open letter asking for the Olympics to be moved or postponed in light of the epidemic. Nor has it stopped a number of prominent athletes from staying away.

As if these issues were not enough, the Rio Games are also embroiled in a doping crisis, and the result is the barring of Russia's entire track and field team from competition for what is considered "an extensive doping conspiracy."

One can only hope the XXXI Olympiad in Rio, Brazil moves forward with the kind of spirit and passion that has long made the Games so celebrated and so unique in the world of sports. It does sound as though it will take a miracle to conclude preparations before August 5th. However, if you know anything about Brazil and Brazilians, in the end, everything seems to turn out alright.

Even so, the advertising and sponsorship commitments surrounding these Games will be changed forever in light of occurrences in 2016.