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Double-edged Sword

PyeongChang has struggled to muster sponsors for its hosting of the 2018 winter Olympics. Elisha Chauhan asks industry experts why Korean electronics firm Samsung had to join the domestic roster, despite it already being a worldwide partner of the Games.

Following a dismal start in filling its sponsorship portfolio, South Korean president Park Geun-hye called on national companies in February to show their support of the 2018 PyeongChang winter Olympic.

Having been awarded the hosting rights on July 6, 2011, it wasn’t until almost exactly three years later that the LOC (local organising committee) secured its first top-tier domestic sponsors in telecommunications company KT and apparel firm Youngone Outdoor in deals worth $50 to $70 million each in cash and value-in-kind services, according to Sports Sponsorship Insider.

You just don’t need
to be both a TOP
and a domestic

Having been spurred on by the record-breaking $1.2bn domestic sponsorship success of the Sochi 2014 winter Games, PyeongChang increased its target from $600 to $800m. However, it did so somewhat prematurely as the LOC only gained two more sponsors prior to President Park’s plea – the Korean arm of financial services firm PwC (known as Samil) and foreign language learning institute Pagoda Education Group, both supplier partners secured at the end of October 2014.

“I honestly think PyeongChang lost four years from when it was appointed host in 2011,” Terrence Burns, co-president of consultancy Teneo Sports, told SportBusiness International.

“The local organising committee was set up with local people who have very little knowledge of Olympic marketing and sponsorship in the marketplace. They just didn’t have the right team in the right place at the right time, and they lost a lot of valuable time in doing so.”

Burns noted that no domestic sponsorship deals were made before the resignation of the first 2018 LOC president Kim Jin-sun, former governor of the Gangwon province where PyeongChang county is located. It was businessman and Olympic bid leader Cho Yang-ho’s takeover in August 2014 that ignited the commercial strategy for the event.

White Knight

It was electronics and white goods manufacturer Samsung that came to the rescue as one of the first companies to answer President Park’s cry for help, despite having just renewed its TOP (The Olympic Partner) deal with the IOC (International Olympic Committee) in August 2014 for a reported $200m over a four-year period, running through to 2020.

Samsung’s quadrennial deal – under the computing equipment category – was in line with the IOC’s new rate card for TOP deals, according to Timo Lumme – the international governing body’s managing director of television and marketing services. The previous TOP cycle fees stood at around $100m.

The 2018 PyeongChang sponsorship, meanwhile, cost Samsung a further $88.5m when the LOC deal was signed in April, according to Sports Sponsorship Insider.

“I don’t know whether Samsung’s deal is for additional rights or just to show support for the country – it’s probably a mixture of both,” said Burns.

“Samsung have been a TOP partner since the 1998 Nagano winter Games, and I was part of the IOC team that brought the company in when [telephone manufacturer] Motorola left. So knowing Samsung, I’m sure it’s not philanthropy that led to a LOC sponsorship, I’m sure they’re getting value for their [Korean currency] won.”

However, Tim Crow – chief executive of agency Synergy Sponsorship and partner at its parent marketing company Engine – believes that Samsung can better target its marketing with both TOP and domestic sponsorship deals.

“What’s going to be interesting is how Samsung will combine the global asset with the local asset, and to then exploit the synergies,” Crow told SportBusiness International.

“The benefit of having both Top and domestic sponsorship is that companies can take a much more single-minded approach to marketing, rather than having to create a global campaign and then localising it around the world. That is always a very difficult thing to pull off.”

“I think everybody has recognised that PyeongChang is a big opportunity for Samsung, simply because it’s a home country deal,” added Burns. “So the national and patriotic tie-in with the Games is probably more relevant and succinct than it is for other multi-nationals that are activating there locally.

“It would be a logical assumption that Samsung’s activation will be much more around the celebration of the Games in the country.”

Deal or no Deal

With TOP deals giving sponsors the right to use the Olympic branding worldwide as well as prime advertising and activation space in the host city, is there a need for companies to take up both TOP and domestic deals?

If the increasing cost of LOC sponsorship – especially for the summer Olympics – is anything to go by, Samsung’s doubling-up is unlikely to be a trendsetter for other Top sponsors when the Games comes to their town (see box-off below). Japanese TOP newcomers tyre manufacturer Bridgestone and automotive firm Toyota, which earlier this year paid $334m and $835m respectively for the right, are yet to – if at all – sponsor their home Tokyo 2020 Olympics. It would be no stretch of the imagination, however, to say that both companies took on the worldwide partnership due to Tokyo’s hosting of the Games.

One of the very few examples of both TOP and LOC sponsorships since the worldwide partnership began in 1986, is that of healthcare company Johnson & Johnson, which secured a place as official partner of both the 2006 Turin and 2008 Beijing Olympic Games, while also holding a TOP deal for the 2005-08 cycle.

“Only Samsung will ever know if having both TOP and domestic partnerships will have a good effect on the bottom line, and that will probably some time to calculate,” said Crow. “I suspect that this was not entirely a business decision, I think there’s more to it. However, buying the same thing twice is not something we recommend our clients to do.

“You just don’t need to be both a TOP and a domestic sponsor, because TOP partners get rights in the local market anyway.”

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