Sponsors slow to hook onto Olympic rings
As IOC meeting opens March 16, all eyes are on whether group willreform.
SALT LAKE CITY — When Salt Lake Olympics chief Mitt Romney served pizza to his management committee last week, the symbolism was perfectly clear. The financial belt was tightening on a scandal that had been rife with millions of dollars in freebies and bribes.
It has to. The Salt Lake Organizing Committee (SLOC) is $600 million short of its budget goals. And while a number of factors have contributed to the shortfall, one is particularly glaring: Some $350 million of projected money from sponsors has not materialized.
Concerned about what effects the scandal will have on the image of the Games, corporate sponsors have been slow to hook their fortunes to the five rings. Telecom company U S West, for instance, signed on only after protracted talks, and another potential sponsor, John Hancock Insurance, actually canceled negotiations with Olympic officials entirely.
Now, as the International Olympic Committee (IOC) in Lausanne, Switzerland, begins perhaps the most important meeting in its 105-year history, both sports fans and sponsors are watching to see how far the organization will go to reform itself. The result will likely affect whether some as-yet-unsigned sponsors agree to back the Games - and how much they are willing to pay.
"All sponsors have to step back and take a look at whether or not they'll be getting their dollar's worth of publicity," says Thayne Robson, an economist at the University of Utah here. "Sponsorship is not a philanthropic activity, it's a business activity. It's about accessing the world marketplace through the venue of the Olympics."
In fact, observers say, sponsors are one of the few groups that can actually pressure the Olympic hierarchy into serious reform. As an independent international organization, the IOC is not bound by any country's corruption or bribery laws, making reform voluntary. Sponsors, though, have monetary leverage.
Still, people who have been involved with the Olympics before say the current difficulties can be overcome. Rob Prazmark, for one, is well aware of the challenges of international salesmanship amid scandal.
"I was selling sponsoring while they were imprisoning people in Seoul," says Mr. Prazmark, referring to the controversy surrounding the decision to hold the 1988 summer Games in South Korea.
Despite the successful Los Angeles summer Games in 1984, the IOC had only about $50,000 in its bank account and was in dire financial trouble, he recalls. When he tried to use the corporate sponsorship fund-raising model that had worked in Los Angeles, he found that businesses were concerned about student riots over the issue of martial law in South Korea.
"People were getting killed in South Korea, and some were asking, 'How can you support this country?' That was a marketing challenge," says Prazmark, now a senior vice president of International Management Group, a sports-event management company in Cleveland. In the face of those problems, Prazmark went on to raise $125 million from nine companies.
"The same thing is happening here, only it's a different crisis," he says.
Prazmark now works on the other side, negotiating sponsor contracts for corporations. He has cemented recent Olympic contracts for Texaco and U S West. He's also currently negotiating for two other clients that he refused to name.
For his part, Prazmark thinks the Games will recoup their sponsorship money. Not only has the IOC vowed to address the problems, but the public has a short memory, he says. All that works to a sponsor's advantage. "My opinion is that sponsors feel that the situation will resolve itself, unless there's some massive bump in the road that no one has anticipated," he says. "We won't know the long-term effect of what consumers think ... until Sydney [in 2000]."
Also, significantly, there's been no talk of renegotiating contracts since the scandal broke, he says. Those contracts under negotiation now, however, may come in lower than anticipated.
And that could have a profound effect on the Salt Lake Games. The Salt Lake City Council, which is already facing a budget shortfall, has just been told that it will probably have to provide $22 million of services during the 2002 Games.
"The administration hopes that $9 million will be reimbursed from federal grants, in-kind contributions, and the like, but that still leaves us with $10 million we have to come up with as a city," says Councilwoman Deeda Seed. "There's no pot of gold at the end of the rainbow, and I think we're going to face a net loss at the end of the Olympics."
Forecasts like that have Mr. Romney ordering pizza and trimming budgets. Last week he unveiled a plan to cut as much as $84 million from SLOC's $1.5 billion budget. That's wise, says Prazmark. "Salt Lake is very smart in lowering people's expectations," he says. "You can always spend more money later."