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Kodak Joins Home Depot Deserting Olympics for Alternate Ads

Bloomberg, February 12, 2010

By John Helyar and Christopher Donville

Feb. 12 (Bloomberg) — Eastman Kodak Co., an Olympics sponsor since the modern Games began in 1896, is no longer in the picture.

The Rochester, New York-based company ended its International Olympic Committee sponsorship with the 2008 Beijing Games, as did fellow global partners Johnson & Johnson, Manulife Financial Corp. and Lenovo Group Ltd.

With the Winter Games about to start in Vancouver, corporations that long clamored to link their brands with the Olympic rings are looking elsewhere amid a battered economy and emerging marketing alternatives. The IOC, which tripled revenue from global sponsorships to $866 million from 1993 to 2008, hasn’t been able to replace three of the four lost sponsors. As of October, when the IOC last disclosed financials on its TOP (The Olympic Partnership) sponsorship program, it had $883 million in revenue for the 2009-12 cycle, short of the committee’s $1 billion target.

“I don’t think the Olympics have lost their appeal at all, but the digital revolution, the economic recession and the saturation of major sports events around the world have made Olympic sponsorships a tougher sell,” said Rick Burton, former U.S. Olympic Committee marketing chief and now the David Falk professor of sports management at Syracuse University in Syracuse, New York.

Not Re-Signed

The USOC failed last year to re-sign Bank of America Corp., General Motors Co. and Home Depot Inc., which collectively were sponsors for 56 years and paid the USOC an estimated total of $45 million from 2005 to 2008. Their spots haven’t been filled.

“A sponsoring company can reach its target audience and business objectives in many different ways, so a sponsor’s chief marketing officer or even its CEO is sometimes risking his or her career in making a $70 million, or more, commitment to a global event that only runs 17 days every two years,” Burton, 52, said in an interview. “It’s a huge decision and one that isn’t made lightly.”

The IOC’s sponsorship problems have contributed to the financial challenges faced by the Vancouver Winter Games, which start today. Host cities get half the revenue from the program known as TOP, for The Olympic Partnership.

Individual sports have suffered, as symbolized by comedian Stephen Colbert’s rescue of the U.S. speedskating team. The television host raised $300,000 to become lead sponsor.

Sponsorships Slide

Sports sponsorships in North America declined to $11.28 billion in 2009 from $11.4 billion in 2008, according to IEG Sponsorship, the first drop in 25 years of tracking data. The Chicago newsletter cited cautious spending since the 2008 financial crisis.

“Within the context of overall spending, we’re quite pleased with where we are,” said Lisa Baird, the USOC’s chief marketing officer, who added that she is “hopeful” sponsorship revenue during the 2009-2012 cycle will match the $320 million level of 2005-2008.

The USOC has succeeded in attracting sponsors to newly created categories, such as Big Four accounting firm Deloitte LLP (professional services) and consumer-products giant Procter & Gamble Co. (personal-care products).

Marc Pritchard, chief marketing officer of P&G, said he sees the Olympics as a perfect fit with emphasis on families. The Cincinnati-based company announced a joint venture with Wal- Mart Stores Inc. this week to create “family-friendly” TV programming.

“The Olympics brings families together in front of the TV,” Pritchard said in an interview on the day P&G introduced its “Thanks, Mom” ad campaign, showing mothers and their Olympic-hopeful children.

TOP Sponsors

The IOC still has a core of TOP sponsors willing to pay top dollar, particularly consumer-product giants such as Atlanta- based Coca-Cola Co., the world’s largest soft-drink maker, and Oak Brook, Illinois-based McDonald’s Corp., the world’s largest restaurant company, for whom the kind of image advertising tied to the Olympics is an important marketing component, according to Syracuse professor Burton.

As McDonald’s president and chief operating officer Donald Thompson put it in a Bloomberg TV interview, “The goals, visions and values of the Olympic games are aligned with McDonalds.”

The weak economy affected ex-sponsors such as General Motors, now 61 percent owned by the U.S. government, and Bank of America, the largest U.S bank by assets, which reported $2.2 billion of losses in 2009.

Return to Profit

Yet financial struggles don’t altogether explain the exit of even a company like Kodak, which reported its first quarterly profit in more than a year for the fourth quarter of 2009, when it had operating earnings of $430 million, or $1.36 a share, on sales of $2.58 billion.

Jeffrey Hayzlett, Kodak’s chief marketing officer, saw better uses for his resources.

“The first day I moved into this job (in 2007), I moved out of the Olympics,” he told a marketing conference in San Francisco in April 2008, according to Promo magazine. “I spend hundreds of millions of dollars and then have to wait two years to participate.”

Hayzlett, who declined to be interviewed for this story, prefers online social networks to Olympic rings. Kodak employs three bloggers; has a YouTube channel; and has developed applications for Facebook photo-sharing. Hayzlett himself has 14,850 followers on, who read his “tweets” about Kodak and other subjects.

New Game

Kodak hasn’t shunned sports; it’s changed games.

The Kodak Challenge picks the toughest hole in 30 U.S. PGA Tour events and awards $1 million to the golfer with the best cumulative score on them for the season.

Hayzlett decided the PGA Tour fit better with a transformed Kodak, whose photofinishing lines have been diminished by digital cameras (revenue from Kodak’s traditional businesses declined 10 percent in the fourth quarter of 2009) and which is now emphasizing growth areas such as digital imaging, whose revenues rose 12 percent in the fourth quarter. The golf sponsorship enables the new business-to-business Kodak to pitch hospitality tents at tournaments and entertain customers and prospects. The tour also provides Kodak more continuous exposure from a sport than the Olympics.

The infrequency of the Games and the inability of corporate marketers to do much with Olympic sponsorships between them reflects not just on the property’s nature but the attitude of many Olympics officials, said Jim Andrews, senior vice president at IEG Sponsorship Report.

“The IOC has had the mindset, ‘You want to buy the rings? Write us a check and check in with us when you run a TV ad,’” he said. “That’s all the IOC needed to do for a long time, but now the world has changed.”

TOP Payments

IEG calculates that TOP sponsors paid an average of $72 million for worldwide marketing rights to the 2008 Beijing Games and the 2006 Turin Winter Games.

Timo Lumme, director of IOC Television & Marketing Services, disagrees. “We continually work with our TOP partners to make the program more relevant and to help them in the delivery,” said Lumme.

Despite the current sponsorship vacancies, the TOP program isn’t in decline but in transition, according to Lumme.

“We’ve had a very, very low turnover rate over the years, which is testament to the strength of the Olympic properties,” he said in an interview prior to the Vancouver Games.

“However, at a certain stage, industries change, companies change, companies’ objectives change and of course there’s the world economic situation,” he said.

Bank of America was one company hit hard by the recession, but officials there say its withdrawal from the USOC wasn’t due to distress but to the strict demands it now places on sports sponsorships to show a return on investment (ROI).

Sponsorships’ Return

Bank of America, which IEG ranks as the 12th-largest sports sponsor in the U.S., wants these deals to directly generate business. Its National Football League sponsorship allows it to extend lines of credit and investment services to teams; provide wealth-management services to owners and players; and offer NFL checking accounts at branches.

“The U.S. Olympic rings delivered strong brand and community alignment,” said Joseph L. Goode, a Bank of America spokesman. “But beyond the brand fit and altruism, the sponsorship didn’t produce sufficient ROI, based on our current business model.”

John Ross, who was chief marketing officer of Home Depot when it ended its USOC sponsorship and is now president of the IPG Retail Practice and Emerging Media Lab, a unit of Interpublic Group of Cos., called the Olympics a great but traditional sponsorship in a radically changed world.

“The games are a large, mass-audience TV buy, which is not designed to be sustained over a year,” he said

More Than Games

Ross won’t discuss the decision by Atlanta-based Home Depot, the world’s largest home improvement retailer. He did say that Olympics official could better retain sponsor by turning more of their focus away from the games proper.

“Why have they failed to see what could be done with a reality TV series that followed Olympic hopefuls?” he said. “It’s their inability to see the Games as anything more than 17-day events that makes it hard to justify the sponsorship cost.”

Lumme said the IOC is assisting its partners in exploring new-media opportunities for leveraging their sponsorships. The USOC’s Baird said she has formed staff teams to work with companies on leveraging their Olympic sponsorships between the Games.

“We’re constantly thinking about opportunities to activate sponsorships,” she said.