Broadcasters and sponsors have publicly backed the decision to postpone the Olympic Games to next year because of the COVID-19 outbreak – they could hardly do otherwise in the circumstances – but behind the scenes all parties will be in deep discussions about how best to handle this unprecedented situation and the huge sums of money that have been committed.
The value of International Olympic Committee (IOC) sponsorships alone was due to reach almost $6bn this year according to WARC’s Global Ad Trends: Sports Sponsorship Investment – almost double the previous Olympiad cycle.
While the IOC’s global partnership program seems likely to be unaffected – 14 major corporations have indicated their intention to stick with it according to Reuters – local sponsors like Tokyo Gas are examining conditions and costs before making a decision.
Sponsors of individual athletes will also have to decide on whether to continue their funding for another year or pull the plug and risk adverse publicity.
Looking further ahead, Alex Brownsell, WARC Media Editor, notes the postponement is likely to have a knock-on effect on the usual four-year summer Games cycle; sponsorship revenue around Paris 2024 is likely to be way down on previous cycles, he says.
And those brands that sponsor both summer and winter games may need to revise their activations if those planned for Tokyo nudge up against the ones they have planned for Beijing 2022.
Broadcasters, meanwhile, face a huge hole in their summer schedules and questions over what happens to money already committed to advertising during the Games.
In the US, for example, NBCUniversal had taken in a record $1.25bn in ad sales. A spokesperson said the broadcaster is “actively working with our advertising partners to navigate this postponement, and we’re exploring all options to best serve their brands and our consumers this year, and into 2021”.
Refunds and credits will be on the table but, in the current economic environment, advertisers may be minded to take the money now, according to WARC Data's Managing Editor James McDonald.
He explained advertisers’ thinking: “‘All of that money we had tied in, that is something that we could recoup at a time when we need to shore up the ship.’ So the $1.25bn is all up for grabs. They’ll be trying to see what they can recoup, what will be shifted.”
Broadcasters will certainly see revenue fall this year, but the overall financial impact will be limited by the reduction in the expense of actually covering the Games.
The IOC itself should emerge relatively unscathed, according to its former head of commercial. “Provided the event takes place, the broadcast partners get their three weeks of programming,” Michael Payne told the BBC. “You may be dealing with a little bit of re-engineering on the margin, but nothing of substance.”
That view would seem to gloss over the potential legal implications, however. Given the extraordinary circumstances, one could reasonably hope that contracts will be amicably renegotiated, but Michael McCann, legal analyst at Sports Illustrated notes that “if renegotiations fail, there could be substantial litigation or, depending on the dispute resolution terms within the contracts, arbitration and mediation”.
Lawyers could end arguing over force majeure and frustration of purpose clauses while insurance companies may end up taking a major hit.
Alex Burmaster, co-founder of sports marketing platform caytoo, notes in an exclusive piece for WARC, that "it is certainly in both parties’ interests to start by figuring out how to solve the situation together rather than looking to legal redress".
Sourced from Reuters, Deadline, BBC, Sports Illustrated; additional content by WARC staff