Once a bonanza for sponsors, the Olympics are becoming a drag

ROM CUISINE to carmaking, the Japanese way is meticulous. Yet with just over a month to go, the Tokyo Olympics remain anything but. Thanks to covid-19, and Japan’s sluggish vaccinations, it is unclear whether the games, originally due to be held last summer, will let spectators in—if, that is, the event takes place at all. Organisers insist it will. This is nerve-jangling for those hoping to peak at the right moment: the athletes, of course, but also the games’ financial muscle, its corporate sponsors. Though no backers have pulled out, some are privately calling for another delay. Asahi Shimbun, the games’ official media partner, has called the decision by the International Olympic Committee (IOC) to plough on “self-righteous”. What was supposed to be a golden opportunity to burnish brands has turned into a reputational minefield.

Olympic commercialism has deep roots. Kodak advertised in the official results book of the inaugural modern games in 1896. Then, in 1984, the Los Angeles Olympics ushered in a new era. It was the first to be largely bankrolled by big business. Organisers bet that brands from McDonald’s to Buick would splash out for exclusivity in their product segments. And splash out they did: the LA games turned a profit. Since then profits have been rare for host cities, which splurge billions on venues and transport links.

For corporate sponsors the financial wins are nebulous. Still, they keep coming back, so must feel it is worth it. They can flaunt brands, push new products to a global audience—3.2bn people tuned in to the Rio de Janeiro games in 2016—and be associated with a globally admired symbol, the Olympic rings. The Tokyo organisers touted all this plus, for domestic sponsors, a chance to partake in a celebration of Japan’s emergence from decades of economic stagnation, just as the 1964 games marked its post-war “coming-out party”, says Andrew Zimbalist, a sports economist. Tokyo raised over $3bn from 47 mostly domestic “partners”—more than twice the previous Olympic record. It is also getting around $500m from the IOC’s 14 “TOP” sponsors: global firms like Coca-Cola, Visa and Airbnb that sign multi-games tie-ins.

Corporate involvement always carries risks for the firms. When people look back at Rio, they are just as likely to recall crime, white-elephant projects and the Zika virus as sporting glory. But the disintegration of a mega-event is something else entirely. There are few precedents in sport; the collapse of Allen Stanford’s annual cricket Super Series in 2009, when he was charged with running a Ponzi scheme, hardly compares (with all due respect to cricket fans). This time a last-minute cancellation, or a spike in covid-19 cases a few days in, cannot be ruled out. Parts of Japan remain under a state of emergency. Over half the population opposes the games going ahead.

That puts domestic partners, such as Japan Airlines and NTT, a telecoms firm, in a bind. What was sold to them as a once-in-a-generation opportunity now risks alienating consumers in their home market. They doubled down last year, signing contract extensions and adding a combined $200m to the pot. Some, fearing a summer PR disaster, are reportedly offering even bigger sums if the games are moved to October, when more people will have jabs and public disquiet may have abated. The TOP sponsors, whose contracts may span a few summer and winter games, can shrug off one dud Olympics. Regulars like Coke and Visa are already looking beyond Tokyo. The 2022 winter games will, pandemic permitting, kick off in just over seven months. Yet there, too, corporate backers face a problem: the choice of host, Beijing, has led to ever louder calls for a boycott over China’s human-rights record.

Such pleas are not new—they rang loud before the Beijing summer games of 2008. Firms have mostly shaken them off. They are more willing to withdraw endorsements from misbehaving individuals (think Lance Armstrong or Tiger Woods) than to desert tainted hosts and organisers, from China to FIFA, football’s corruption-plagued governing body, because of the vast TV exposure they offer. That may not be so easy this time. Global outrage over China’s mistreatment of its Uyghur Muslim minority is mounting, as is pressure on companies to find “purpose”—which in practice often means taking a stand on hot-button issues.

In the run-up to Beijing, global brands will thus find themselves squeezed between calls to disengage and fear of retaliation from a huge market. Pulling back from one Olympics, let alone two, could shut them out for longer, as firms from China and elsewhere take their place. Undemocratic regimes are happy to splash out for sports-tournament hosting rights; Qatar is hosting the 2022 football World Cup. Local companies are waving money. Russia’s Gazprom is a sports-advertising giant. Chinese firms are spending heavily to boost their global image: Hisense, Alipay and Vivo are among the top ten sponsors of the European Championship in football that kicked off last week. Alibaba is unlikely to be the sole Chinese firm on the IOC’s TOP roster for long.

Champion prevaricators

Back in Tokyo, some sponsors have hired consultants to assess the possible impact on their brands of sticking with the programme or withdrawing. Marketing campaigns are “in disarray”, says one adviser. With no spectators, there will be no promotions at venues or corporate hospitality. Merchandise sales will be limp; mountains of Tokyo 2020-branded gear will gather dust. As for advertising, sponsors are unsure what the message should be, or whether to flaunt their ties to the Olympics. Just in case, many are not, instead telling athletes’ stories while emphasising unity, resilience and other admirable traits that imply an awareness of the pandemic. Some sponsors are working on dual campaigns, one more Olympic-themed than the other. For Western brands, the ideal competition would always take place in a world of happy, healthy democracies. But most aren’t above donning their face masks or holding their noses, if that is what it takes to stay in the race.

This article appeared in the Business section of the print edition under the headline “Track and minefield”