Olympic Sponsorships Are a Multi-Billion Dollar Business
The planet's widest reaching athletic event is less than three months away, but the behind-the-scenes money machinations have been years in the works as Olympic sponsors eagerly shell out millions to be involved.
Baby it's cold outside
A few of the biggest sponsors for this winter's Games in Sochi, Russia aren't who you'd expect. Take Rosneft (OTC: RNFTF). It's the world's biggest publicly traded oil and gas giant by production. The state-owned company is Sochi's primary petroleum partner, and in preparation for the Games, Rosneft has said it will build over 150 commercial fueling stations in the surrounding region.
It will also provide fuel to all Olympic facilities. Rosneft anticipates it will profit on its record-high $180 million sponsorship, which is more than twice that of BP's contribution in 2012.
Dow Chemical is another name that's heavily invested in the event. Dow is set to be a Worldwide Olympic Partner through 2020, and the company told Crain's Detroit earlier this month that "hundreds of [its] products" will be used in Sochi, from wiring to fluids that assist in the storage of snow and ice. Although Dow hasn't announced the value of its sponsorship publicly, it's estimated to be worth at least $100 million.
Stepping away from basic materials, Samsung Electronics (OTC: SSNLF) is another Winter Olympics sponsor to keep an eye on. In addition to being the official phone of the Games, Samsung plans to dole out free Galaxy Note 3 devices to all athletes. Forbeshas called this a "priceless opportunity" to display the technology, and they're right. Each device will be equipped with an app that allows Olympians to track things like race data, schedules, and statistics. Samsung executives can only hope the athletes use their phones to snap photos and tweet about the Games in real-time too—that's an even bigger marketing opportunity than the TV time they're all but guaranteed to have.
It's getting hot in here
Visa , Procter & Gamble , and Coca-Cola are also prominent sponsors in both Olympic seasons. P&G, in particular, is very good about disclosing exactly how much its partnership affects business. The consumer goods giant says U.S. market share gains in Olympic quarters boost sales by $100 million, and individual ad impressions number more than 6 billion.
In the Summer Olympics, the remaining big-time companies involved are a bit more traditional. Speedo sponsors many of the Games' best swimmers, and the brand is typically behind 50% to 90% of the sport's medal winners depending on the year. Speedo's deal with Michael Phelps is likely worth at least $2 million a year, and the company sponsors about 20 other Olympians and 18 national teams. A second major apparel sponsor of the Summer Olympics is Nike . Its new TurboSpeed running suits were a big hit at the 2012 Games, cutting as much as 0.23 seconds off a 100 meter sprint, according to tests.
Taking a step back
Now that you know some of the specific companies invested in the Olympics, let's take a step back in the analysis. In 2014, there are multiple $100 million sponsors, and about 40 major partners in total. Reasonable estimates place the total sponsorship value of the next two Games close to $1 billion, greater than the $866 million companies paid in the Beijing-Turin cycle, and nearly double the $579 million figure from Nagano and Sydney, according to Bloomberg.
Want to go even further back? The IOC offers a comprehensive history of Olympic sponsors. As the site points out, one of the first major partners was Coca-Cola in 1928 at Amsterdam, and the first broadcast fee was $3,000 paid by BBC at the 1948 London Games. By 1980, aggregate sponsorship dollars totaled $7 million in Lake Placid, about one-fiftieth of today's activity when adjusting for inflation.
Judging by the expansion that's occurred in the past three decades, expect more of the same in the immediate future. Historical growth rates indicate that total sponsorships should eclipse $2 billion by 2030, and $4 billion by 2045. It's tough to forecast how much companies like Samsung and Procter & Gamble will be involved further down the road, but longer-term sponsors probably won't leave the party any time soon.
Speedo and Nike's apparel innovations should continue to dominate, and Visa and Coca-Cola are safe bets to be involved for the next century (or longer). While Rosneft is obviously done once the Olympics leave Russia, it's quite possible that state-owned oil will continue its prominence in future events. We'll be watching the 2016 and 2018 Games in Brazil and South Korea to see if regional energy giants like Petrobras and S-Oil (OTC: SOOCY) become involved.
Regardless of what specific companies take stakes, the future of Olympic sponsorships is bright, and business is on a promising growth trajectory.
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The article Olympic Sponsorships Are a Multi-Billion Dollar Business originally appeared on Fool.com.
Fool contributor Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Nike, Petroleo Brasileiro S.A. (ADR), Procter & Gamble, and Visa. The Motley Fool owns shares of Coca-Cola, Nike, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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