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Downhill struggle | A commercial preview of the Winter Olympic Games

If 2016’s Olympic Games in Rio represented a calculated risk on the part of the International Olympic Committee – albeit one which ultimately came off – then hosting the 2018 Winter Olympics in Pyeongchang, South Korea was supposed to be a safer bet. 

While Brazil may be an economic powerhouse, it remains a developing marketplace, with the attendant mass inequality and vulnerability to unexpected headwinds. South Korea looked a more stable choice that would, if nothing else, be sheltered from the political and financial issues that plagued the build-up to the Rio Games.

Instead, the sense of déjà vu has been palpable. A president impeached on corruption charges in the months before the Games; a commercial programme that lagged behind target so severely it required IOC intervention; a seemingly never-ending doping scandal rumbling in the background; slow ticket sales and an at-best uninspired local populace: history repeating itself, though whether as tragedy or farce is perhaps up to the observer.

To compound matters, sabre-rattling between the United States and South Korea’s neighbours to the north ramped up in late 2017. With Pyeongchang situated just 50 miles from the border with North Korea, the Winter Olympic Games came to represent a potential flashpoint in the long-running war of words between President Trump and Kim Jong-un. Worries of open conflict threatened to overshadow the Games entirely.

Yet for all the malaise that appears to be hanging over the event, the last few months have seen a flurry of commercial activity, with the Pyeongchang Organising Committee (Pocog) signing deals to take the total number of domestic partners to 77 and surpassing the purported budget-meeting target of ₩870bn (€530m/$650m) with weeks to spare.

Commercial concerns

From the IOC’s perspective, after a challenging beginning, things are starting to fall into place.

“Everything’s very positive and, in a general sense, everything’s on track for the event,” Timo Lumme, television and marketing director of the IOC and head of the body’s global sponsorship programme, tells SportBusiness International. “It’s fair to say that it was a slow-burn, but it’s got going now. I think what’s happened has been a little bit of a hockey stick-type phenomenon that has really accelerated in the last two and a half years, and they’re in good shape now.”

Not everyone is so convinced. Many of the deals signed in late 2017 were smaller partnerships with regional companies, leading some to suggest a last-minute panic has set in, with Pocog attempting to bolster a faltering commercial programme with under-sold sponsorships packages, devaluing the Olympic brand in the process. 

Michael Payne, former IOC marketing director and consultant, has been most prominent among the naysayers, tweeting in December that Pyeongchang had run “by far the weakest marketing programme in living memory,” adding that “[a large] number of sponsors, with small donations, does not equate to marketing!”.

Speaking to SportBusiness International in the days after that broadside, Payne traced the issues back to the bidding process, during which “various big Korean companies all [supported] the bid, and the moment they got the Games they said, ‘mission accomplished, we don’t need to do any more.’”

Payne is dismissive of suggestions that wider economic and political issues have affected the programme, pointing to the “crazy numbers” Beijing is already pulling in for its own Winter Olympics in 2022. He believes South Korea has “overdosed on hosting major events”, citing the Asian Games in Busan and the World Athletics Championships in Daegu as examples. 

“Time and again they would run the toughest bid campaign of anybody, and then once they got the event the government would disengage, it gets tangled up in local politics, and nobody would care,” he says. “It’s 110 per cent issues local to Korea. It’s nothing to do with Russia, nothing to do with the situation over 2024 and 2028. This is Korea – whether it’s the problems with ticketing in the build-up, or the problems with international PR and communication.”

Other observers have been less downcast about Pyeongchang’s commercial potential. Tim Crow, former chief executive of sponsorship agency Synergy, cautions that any assessments carried out at this point are merely “guesswork” until the final profit and loss statements are issued, and notes that “the only thing we can say with certainty is that they’ve got a lot of partners in.”

“One doesn’t know how much [the partners] have paid, how much is cash and how much is VIK [value-in-kind]”, Crow says. “One of the things that is misunderstood continually about the Olympics is that about 50 to 60 per cent of each deal in total is VIK rather than cash, because the Olympics is a giant joint venture and every organising committee goes out there and procures services and products that they would normally buy but, because they don’t have any money, they have to go out and offer them as a mixture of cash and VIK.”

Lumme concurs, elaborating that while external observers tend to dismiss VIK deals as less significant than cash sponsorships, “VIK is by definition budget-relieving, and then it’s up to the local organising committee how they define ‘value.’ Even if a sponsor is purely providing services, if they’re budget-relieving services it’s something we’re ultimately very happy with.”

Olympic technology

Pocog may have succeeded in turning around an initially slow sponsorship programme, but more important than the volume of brands will be how those partners support the Games once they’re underway, says Crow.

“The other side of it now, and the real challenge, is how they activate, how they respond to any issues that are going to crop up, and ultimately what image is presented of Pyeongchang, because every Olympics is very different,” he says. The Winter Olympics offers a radically different proposition to sponsors than their summer counterpart, and not just in terms of scale. 

While the IOC is attempting to engage a younger audience by introducing more youth-oriented sports such as surfing and skateboarding to the summer programme, the Winter Games have long been its point of contact with the more extreme side of the sporting world. The likes of snowboarding and ski jumping already have some crossover with the X-Games market, bring a millennial fanbase and, crucially, lend themselves very well to clipping and sharing online.

How partners activate in response to this will have a crucial bearing on the overall commercial success of the Games. After arguably resting on its laurels for the first decade or so of the new millennium, the IOC’s recent sponsors suggest a change of direction. In 2017, two new tech companies – Chinese ecommerce giant Alibaba and Silicon Valley veteran Intel – became the newest members of the IOC’s TOP sponsorship programme. Both are aiming to leave their mark in various ways on their first Olympics.

“Sport has to go where the people are, and many people – in particular many young people – are living a digital life,” said IOC president Thomas Bach in a statement. “So we have to go with sports to where they are living, in their digital world, in their virtual reality.” 

Intel, which has big plans for Pyeongchang, will use its Intel True VR system to that very end, taking the Olympics into viewers’ virtual realities. NBC, the IOC’s US broadcast partner, has confirmed it will show at least 50 hours of coverage using Intel’s technology, while much more of the footage will be available online and through the Olympic Channel, the official broadcasting arm of the IOC. 

Intel will activate on the ground in South Korea by delivering two distinct esports experiences to the Games, bringing both its own Intel Extreme Masters global series and Ubisoft's Steep, the official video game of the Winter Olympics, to fan zones and venues across Pyeongchang. While the possibility of esports joining the Olympic programme remains distant, the emerging sector is likely to play an increasingly large role in the Games through the IOC’s official partners, as the body continues to lean on the likes of Intel and its other TOP sponsors to engage a Millennial audience.

“The role of IT at the Olympic Games is changing significantly,” says Victoria Erice Alonso, marketing and communications officer for major events at long-standing TOP sponsor and major IT services firm Atos, adding that the IOC now has “new expectations about its organisation, delivery and experience”, with increased demand on its supporting partners.

While Atos will continue to provide the technological infrastructure for the Games themselves, and Intel and Samsung will contribute the visible, public-facing aspects, Alibaba is perhaps the most interesting of the tech-oriented partners. Having been appointed to transform the IOC’s global digital framework and official merchandising platforms, Alibaba – 75 per cent of whose worldwide business currently takes place in China – is hoping to use the Olympics as a platform to increase its global visibility.

“Alibaba is extremely excited for our inaugural Olympic Games in Pyeongchang,” says Jennifer Kuperman, head of international corporate affairs at Alibaba Group. Despite coming in as a sponsor ahead of a run of three Olympics in East Asia – Pyeongchang is followed by Tokyo in 2020 and Beijing in 2022 – Kuperman believes the international profile of the Games can nevertheless help to “showcase our brand on a global stage and show how we’ll leverage Alibaba technology and innovations – from cloud to e-commerce – to help transform the future of the Olympics.” 

Political tensions easing

For all this, a sponsorship programme only succeeds if the brands manage to engage with an audience. When reports in November last year claimed only 5 per cent of total seats had been sold, these concerns started to dominate the narrative. But by the end of the following January, Pocog announced this figure had reached almost 70 per cent, a similar rapid uptake just a month from the opening ceremony as seen in Rio. Capturing a global audience via television broadcasts represents the greater challenge, but physical ticket sales are frequently cited as a reliable bellwether for wider public interest in an Olympic Games.

The easing of tensions between North and South Korea – if not between North Korea and the US – in the early stages of 2018, beginning with the announcement that North Korea will see send a delegation to Pyeongchang, may have contributed to the uptick in sales. 

Despite Lumme’s assertion that “it was always the aim of the IOC to have North Korean involvement” in Pyeongchang, the possibility looked increasingly remote as 2017 wore on and Trump and Kim’s continued boasts about the size of their red buttons were setting the international community on edge. The presence of a North Korean team – 22 athletes, competing in three sports, including a pan-Korean women’s ice hockey team, joined by 24 officials and 21 media representatives – is a significant step in the right direction, and if nothing else will help to assuage fears that the Games themselves could become a spark for conflict. 

Nowhere will the news have been more welcome than at the Olympic headquarters in Lausanne. As Crow notes, 2018 is arguably “the most important Olympics for some time”, falling at a time when the IOC has barely been able to move for negative news stories: its inability to attract bids to host future Olympics, the loss of a major and long-term US-based sponsor in McDonalds, and the doping scandal that ultimately led to Russia’s exclusion from Pyeongchang. The IOC is in desperate need of a positive story to restore potential sponsors’ faith in its brand; an indication that for all the noise, the Olympics remains unparalleled as a global communications platform.

“I think it’s very important for them that this is a good Games and is perceived as and remembered as a good Games,” says Crow. “So I think how well the sponsors activate and the stories that come out around the sponsorships are very important to the IOC this time. They will want to see some great activations and some good case studies.”

The best thing the IOC can do at this stage, he says, is to take a step back. “The most important thing that they can do is to give their sponsors room to activate creatively as possible. Anyone who’s worked with the Olympics knows that it can be quite difficult and that the attitude, more often than not, is: ‘No. What’s the question?’. They need to give brands as much creative license as possible.”

From out of the fog, a clearer picture has emerged and what seemed like shaky foundations have settled. Just weeks ago, hope was in short supply. Now, with all the moving parts in place and preparations almost complete, there is renewed promise that Pyeongchang might yet deliver the success the IOC and the wider Olympic movement so desperately needs.

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