How the IOC and NBC Can Fix the Olympics Model (Before It Breaks)
Technology is Making Scarcity and Exclusivity Harder to Maintain
The TV ratings broke records. A new generation of athletic icons emerged. Sponsors were happy. NBC even made a little money, which counts as a headline when both media partners and host cities willingly go deep in the red just to have the Olympics. But if the International Olympic Committee and NBC believe the games are healthy enough to just press "repeat" for Russia in 2014 and Rio in 2016, they're mistaken.
That's because the two main economic drivers of the games -- hugely lucrative TV deals and corporate sponsorships -- are predicated on the Olympics' ability to preserve scarcity of their product. As technology makes that model unworkable, the IOC has felt forced to take increasingly authoritarian measures, regulating athletes' Twitter feeds and turning a city like London into a marketing police state.
Since 1960, when the IOC inked its first TV deals, the games have become one of the greatest platforms for brands in history, and over the years the IOC and various national organizations like the United States Olympic Committee have understandably worked to grow and protect it. But nothing will kill it faster than ignoring the communications trends that are changing everything: the web's near-infinite capacity to distribute content and the ability of any individual -- athletes included -- to communicate directly with his or her audience.
Few understand these trends better than P&G, Coca-Cola and GE, some of the most sophisticated marketers on the planet, which should help the IOC adapt rather than exacting promises that it can no longer deliver.
Fixing the broadcast
Much has been made about NBC's broadcast strategy, which involved airing taped digests of the games' marquee competitions in prime time. While NBC did stream every event online as it happened in London, it also took some steps to protect its lucrative prime-time broadcast, such as refusing to make certain big events available on demand until they had been shown on TV.
Limiting access is anti-consumer and won't work long-term. So, what to do for NBC, which paid $4.38 billion for exclusive U.S. rights to broadcast the Olympics through 2020? First, the network should heed the music industry's bad example. It should put its audience first by aggressively making Olympics programming so easy to access on so many devices -- whenever the audience wants it -- that there will be no incentive to hack illicit streams of the BBC or browse torrent sites.
NBC will presumably continue to require online viewers to prove they subscribe to cable or satellite. NBC's parent company, Comcast, after all, is the biggest U.S. cable company. But NBC also wants to remain on the best of terms with other cable and satellite distributors as it tries to build the NBC Sports Network into a viable competitor to ESPN. But NBC should do everything possible to make this as effortless as possible for viewers -- and provide a paid alternative for cord-cutters.
That won't stop some consumers from complaining on Twitter, or whatever other platforms come along over the next eight years, but it will mean NBC keeps its audience by serving it better than anyone else, rather than trying to protect advertisers with increasingly untenable scarcity.
Exclusivity at what cost?
After TV rights, which account for 47% of the IOC's top-line revenue, sponsorships are the committee's most important revenue stream, contributing 45% of the total. Global sponsorships generated an estimated $1 billion during this Olympiad, primarily via the 11 exclusive global sponsors that paid through the nose to be "Top Olympic Partners."
Marketers are willing to pay close to $100 million to partner with the Olympics partly because its a sports event -- and therefore generally watched as it happens -- and partly because it's the one sporting spectacle that reaches lots of casual sports fans and women. And then there's the aura, if not the reality, of exclusivity.
The IOC has traditionally worked zealously to protect that aura, to the point of getting new laws passed in host cities. "If you want official sponsors to pay top-dollar, you have to provide an opportunity for them to reach their audience and persuade them to buy a product or service free from competition," explained Neal Pilson, former president of CBS Sports, who has consulted for networks, sports leagues and the IOC.
But achieving that ideal amid big changes to media and technology has led the IOC to impose an increasingly repressive regime designed to prevent ambush marketing, like London's "brand exclusion zones" and new restrictions on social media.
"The IOC needed to be convincing in their negotiations if they wanted to raise 750 million pounds revenue from sponsors in the middle of a global recession," said Andy Sutherden, global head of sport at Hill & Knowlton. "A big reason that London won 2012 was the 2006 act of parliament safeguarding official sponsor brands."
It's not clear, however, that the Draconian measures are paying off. A recent Toluna online poll revealed that consumers only have a vague idea of which marketers are official sponsors. Only 21% of respondents could identify P&G as an official sponsor. Adidas is an Olympic sponsor, but only 24% correctly identify it as such.
Nike fared a bit better, with 37% identifying it as a sponsor. One problem: It isn't. Its excellent "Find Your Greatness" campaign beautifully captured the Olympic spirit anyway, demonstrating that great content earns its way into people's consciousness in a way that some semblance of "exclusivity" won't.
Stop censoring athletes
The IOC's clumsiest attempt to maintain the sanctity if its sponsors is Rule 40, which prevents athletes from talking about their sponsors in social media for a month surrounding the Olympics.
This doesn't particularly hurt Michael Phelps, Ryan Lochte or Carmelo Anthony, all of whom are big enough stars to cash in well beyond the games, but it's enormously unfair to the little-known athletes in minor sports who rely on smaller sponsors to finance their training and expenses.
Social media gives these athletes a megaphone that NBC won't, but the IOC takes it away when it really matters -- during the games. Athletes sign with professional leagues like the NFL or NBA understanding that they're agreeing to terms that may limit their speech in exchange for the lucrative salaries they'll earn. But these Olympic athletes -- the canoe racers, archers and weightlifters -- aren't pros and don't earn sports salaries. Their model is smaller sponsorships, but they don't have years to capitalize on their image like, say, Gabby Douglas. Once the games end, so does their opportunity.
That's why track-and-field athletes led a rebellion against Rule 40 -- no doubt urged on by Nike -- with the Twitter hashtag #wedemandchange and the "Barefoot Movement," backed by the Track and Field Athletes Association, encouraging athletes and fans to tweet photos of their bare feet. The symbolism here is that while athletes can compete in whatever shoes they want, they must wear official sponsor apparel in the medal ceremonies.
It's a far cry from the black-gloved fists raised by sprinters Tommie Smith and John Carlos in 1968, but it's embarrassing to the IOC. "For the IOC it comes down to a public-relations matter," said Jim Andrews, senior VP at sports-marketing firm IEG. "How much backlash can we put up with from consumers who are naturally predisposed to be on the side of the athletes and not the megabillion corporations that are involved here?"
One part of the problem is easily fixed by doing away with the silly Rule 40, but that will also mean allowing athletes to bring their own sponsors into the games. If the IOC was smart, it would see that as an opportunity. For this, the IOC could look to NASCAR, which allows teams to bring their own sponsors with them to every race. If Olympic athletes could do the same in some limited fashion, it would allow them to maximize the system, and that would include talking about their sponsors in social channels if they wish.
The IOC should also study the Ultimate Fighting Championship, which likes its athletes tweeting so much that it gives bonuses to athletes to build their followings. "Twitter is the greatest marketing tool in the history of the world, and it is free," UFC president Dana White told Fox Sports.
If this makes U.S. athletes more valuable for sponsors, then great. It might even diversify the U.S. medal haul, which as of presstime was concentrated among just nine sports, compared to 10 for Britain and 14 for China.