In an era where viewers are fleeing network TV for cable, the internet and other forms of new media, a precious few events have always been held up as invulnerable advertising venues -- among them the Oscars, the Super Bowl and the Olympics.
But now the country's No. 3 advertiser, General Motors Corp., is bailing out of its long-standing sponsorship of the U.S. Olympic Committee and NBC Universal's coverage of the games after 2008 -- taking the estimated $100 million-plus it spends every two years with it. And that raises the question of whether the move is purely a cost-cutting one for beleaguered GM, or whether the Olympics are losing some of their appeal as a big-event marketing vehicle.
"I'm sure GM did a cost-value relationship of the Olympics deal and for them the value wasn't there," said P.J. O'Leary, CEO of Media Performance Monitor America.
More expensive this time
Audience delivery for the games has been erratic over the years, and NBC spent a bundle on make-goods after the 2006 winter games in Turin, Italy, said an executive from an auto-media agency. GM had a lot of ancillary costs tied to the deals for local promotions, and the price of renewing the sponsorship likely has jumped, the executive added.
Viewers, too, are down. Although NBC had more TV broadcasts of the Turin games (68) than it did of the 2002 Salt Lake City games (47), it garnered only a 15 share for the Italian venue vs. a 26 share for the Utah setting, according to Nielsen Monitor-Plus. The Turin games also only scored a 19 prime-time share vs. a 31 prime-time share for the Salt Lake City Olympics, Nielsen said.
One factor that affects Olympic ratings is the amount of live or taped events shown during broadcasts, particularly during prime time, said Mike McCarley, an NBC Sports spokesman. But the first two weeks of the Beijing games will feature live broadcasts of popular events such as swimming, gymnastics and beach volleyball, he said. The Vancouver games in 2010 will not be encumbered with delays, he said, because they'll be taking place in a city that isn't many time zones away from major U.S. markets.
More attractive options
Lincoln Merrihew, senior VP of TNS Automotive, noting that automakers have faced more scrutiny from the finance side of the house and must prove returns on investments, said that there are a lot more options available now than when GM inked the groundbreaking pact a decade ago. "There are alternatives to the Olympics that are edgier and recurring."
|Source: Nielsen Monitor-Plus|
For its part, GM maintains that the Olympics no longer fit its strategy and that other sports-marketing venues allow it to be nimbler. GM wants more fully integrated programs that it can execute more frequently than every two years, said a spokeswoman. Further, it's trying to differentiate its brands by sports properties, she said, citing Buick's marriage to golf, Pontiac's to the NCAA and Chevrolet's to both Nascar and Major League Baseball. "The Olympics are almost too large for one brand to absorb."
To be sure, GM was in fat city when it inked the paired USOC-NBC deal in 1997. That year, the carmaker reported annual record net income of $6.7 billion globally (its North American arm contributed $2.3 billion). A few weeks ago GM surprised Wall Street with global second-quarter net income of $891 million vs. a year-ago net loss of $3.4 billion. Its North American arm posted a net loss from continuing operations of $39 million vs. a net loss of $3.85 billion for the year-ago period.
In 1997, GM sold 4.7 million vehicles in the U.S., giving it a market share of 31.1%, according to Automotive News. Through July 2007, GM sold 2.2 million vehicles and its domestic market share stood at 23.2%.
As part of its belt tightening, GM reduced its U.S. TV ad spending from $1.6 billion in calendar 2005 to $1.38 billion last year, according to TNS Media Intelligence. At the same time, GM beefed up its online advertising by $18 million to $130 million in 2006.
So does that mean GM will send into new media the $100 million that used to go to Olympic sponsorships?
"Who knows where that money will go when we are doing our 2009 budgets," a GM spokeswoman said. "We may put it into a vehicle."
Back to TV?
But Media Performance Monitor America's Mr. O'Leary said a major advertiser like GM can't give up the kind of mass-media reach TV delivers. "I'd be surprised if a lot of that money didn't go right back into TV," he said.
Gene DeWitt, chairman of DeWitt Media Options, said he doubted NBC could sell a package as big as GM's to a single advertiser, but will have no problem finding buyers of smaller pieces. "GM has shrunk while the Olympics have grown, so it's wise for GM to keep more of its dollars."
He predicted that Toyota Motor Sales USA would pick up the ball after GM's deals expire.
The USOC hasn't started any talks with any potential auto sponsor successors, a spokesman said. And Toyota said it is aware of the sponsorship opening, but hasn't been approached about it. Such a deal isn't in the marketer's plan "at this point," a spokeswoman said.
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Contributing: Megan McIlroy