THE WALL STREET JOURNAL, 6-7 FEBRUARY 1998 BY A. GRAIG COPETAS
Commercial Success of Olympics Leaves Challenging Legacy
With Samaranch Retiring, Can Anyone Else Balance Idealism and Cold Cash?
Fluke That Was Atlanta
MOSCOW – How will the games be played when the Lord of the Rings is gone? It’s a question likely to loon over the XVIII Winter Games in Nagano, the final Winter Fames for Juan Antonio Samaranch as president of the International Olympic Committee. And it’s a question that, like the Games themselves and the fice intertwined rings that symbolize them, evokes the powerful combination of sports and money.
Billions of sponsorship dollars may hinge on how well big-league Olympic underwritters such as Coca-Cola Co. And Visa International get along with whoever follows the 77-year-old marquis from Barcelona. Some $20 million in sedd money for IOC foreign-policy initiatives in education and the environment also comes into play. But the stakes are highest among the 198 National Olympic Committees and the 35 international sports federations – a cantankerous bunch known as the Olympic Family – and a roughly $4 billion in IOC sponsorship, merchandising and TV money that this family often feuds over.
Under Mr. Samaranch’s leardership and the managment of his marketing director Michael Payne, the International Olympic Committee has come to preach the ideal of amateur athletic competition while it reaches in all directions for the hard cash needed to make that ideal a reality. The dual message is reflected in the Olympic Rings: Any unlicensed use of them not only threatens to tarnish the Games as a purely commercial exercise but undercuts the multimillion-dollar investiments of those who use the logo legaly. Whoever succeeds Mr. Samaranch will have to be some kind of world-class gymnast, for a look at the Samaranch reign shows the job has become an extraordinary balancing act.
“There are no small number of people in the Olympic Family who are terribly worried that Samaranch has made too many deals with Mammon”, says John J. MacAloon, a University of Chicago anthropology professor and authoroty on the Olympic movement. “When Samaranch retires, the fear is there’s no one to prevent the Olympics from drawing it’s power solely from money – and not ideals.”
Since he was elected IOC president in 1980, Mr. Samaranch has transformed the Olympic Games into a global industry, turning a broken-down, poverty-stricken athletic festival into the world’s richest and most widely watched sports event. But as he went about polishing the Olympic tings into the planet’s No. 1 logo, the former Spanish ambassador to the Societ Union irked many in his family by inextricably linking the rings with too many things involving too many paople. A museum and conference center in Switzerland, global marketing and broadcast divisions, product licensing and lucrative stamp and coin investiment programs are only part of the formidable power base at his command.
The “Boss”, as Mr. Samaranch is known at the IOC headquarters in Lausanne, will pass the baton in 2001. At that time, he’ll back a successor in front of 108 member IOC at the group’s Moscow meeting. Insiders say possible successor to unpaid job include IOC vice presidents Richard Pound and Kim Un-Yong, IOC board members R. Kevan Gospar and Anita de Frantz, and the French gold medalist skier Jean-Claude Kiley.
So whom is he going to tap for the job?
“My problem is I’m tapping too many people on the knee,” insists Mr. Samaranch, sitting on the lounge of the elegant government guest house provided to him by Russian President Boris Yeltsin. On his way to Nagano, the IOC president has stopped in Moscow for a tea with Prime Minister Viktor Chernomydrin, dinner with executives from Olympic sponsors Coca-Cola and International Business Machines Corp., and a rancorous family powwow over the lack of Olympic largesse with the cash-starved National Olympic Committee chairman from 16 former Soviet republics.
The man who many people believe holds the power to anoit the next IOC president is Mr. Payne, the Olympic marketing director. “Payne is a very important player to watch,” says Mr. MacAloon. “Samaranch allowed Payne to completely transform the Olympic Games in order to achieve a fiscal stability that no one else dreamed possible. Payne plays a huge role, and in many minds, the relationship between Samaranch and Payne is that of Moses and Joshua.”
Over the past decade, the 39-year-old Mr. Payne, a former member of the British Ski Team, has served as Mr. Samaranch’s chief tactician. Mr. Payne also oversees the care and feeding of the IOC’s 11 most important current corporate sponsors, each of whom kicks in approximately $50 million over four-year period for the “festoon” – the right to use the Olympic rings in their corporate promotions. The 1998-2000 sponsors gathering in Naganoare a fomridable group: Coca-Cola, Visa, IBM, John Hancock Mutual Life Insurance Co., Eastman Kodak Co., McDonald’s Corp., Panasonic Inc. Samsung Inc., Time Warner Inc.’s Sports Illustrated and Time magazines, United Parcel Service Inc. and Xerox Corp.
Values and Value
Mr. Payne speaks with a clear, soft sincerity when citing the gospel according toJuan-an exhaustive, 10-year global markeitng analysis undertaken by Mr. Payne and Tony Meenaghan, a marketing professor at University College Dublin. The study, which concludes that the Olympic rings are the most recognized brabd image in history, has set the tone for how Mr. Samaranch handles the Games.
“The critical challenge facing the Olympic movement is to preserve the values associated with the Games while at the same timederiving revenue from business partners and returning value to the corporate sector,” the report concludes. And, says Mr. Payne, revealing the hard nose behind the soft voice: “I throw hand granades to ensure corporate-sponsorship rights are protected and Olympic ideals remain intact.”
He once discovered that a division of American Express Inc., which isn’t an Olympic Sponsor, had started up a company called Olympic Heritage Committee in order to tickle investors into believing the firm was associated with the Games.
“I called the CEO of American Express and had the thing shut down in a few hours,” Mr. Payne recalls. “Had they not followed my instructions, I would have called a global press conference to charge American Express with ambushing the Olympics.”
Mr. Payne's ability to act quickly and decisively was one of the reasons Mr. Samarach in 1983 gave him the keys to the Olympic treasure chest. At the time, the IOC had assigned its marketing work to the Swiss-based firm ISL Marketing SA, and Mr. Payne was the ISL executive in charge of orchestrating the activities of the IOC New Sources of Financing Commission, a group designed to scour the corporate world for the cash the Olympics needed to stay afloat after the financial disasters of the 1976 Summer Games in Montreal and the boycotted 1980 Summer Games in Moscow.
Mr. Payne emerged from the commission as Mr. Samaranch’s most trusted field commander and, says Mr. MacAloon, the consequences of their relationship set the stage for the rebirth of the Olympic Games.
“Remember the Montreal Games were a financial disaster for the city and there was a little interest in bidding for the 1984 Games,” Mr. Samaranch says. “Few National Olympic Committees had any form of indenpendent revenue programs. Over 90% of the marketing revenue that did exist came from broadcast-rights fees, and over 85% of that came from American broadcasters. There was no money.”
Mr. Payne’s earliest attempts to find fresh sponsorship capital for the Olympic athtletes were hobbled by the lingering fallout from Soviet Prime Minister Constantin Chernenko’s call for a Soviet Bloc boycott of the 1984 Los angeles Games. But Mr. macAloon says, “The boycott in Moscow and Los Angeles compelled the IOC to Develop sound leadership. Samaranch and Payne were no Longer able to just stand aside and let political actors have their way.”
For the Seoul Games four years later, Mr. Samaranch scored two victories. The IOC sold sponsors on a politically turbulent Asian site and Mr. Samaranch forced nations to stop using Olympic athletes as pawns by having the U.S., the U.S.S.R. and China agree to play together.
“The success of Los Angeles showed cities and corporations they could stage the Games without bankrupting the community and outraging shareholders,” Mr. Payne explains. “The dynamic was then unique to the U.S. market. We had to convince governments and sponsors the idea could work globally, and specifically in the climate of South Korea, where there were riots going on. Not a very good atmosphere to sell sponsorship in.”
The IOC game plan for Seoul, developed in 1985 by Mr. Payne and IOC vice president Richard Pound , resulted in world-wide sponsorship program known as the Olympic Partners, or TOP – a recipe that within three years generated a total of $95 million from nine corporate sponsors and $728 million from broadcast-rights fees. In 1989, Mr. Payne left ISL to become IOC’s first marketing director. By 1992, the TOP program had harvested $175 million in sponsorship deals with 12 companies, and a further $928 million in broadcast fees, tickets, and product licensing.
On the political front, the IOC’s success in raising money and a global TV audience of billions helped persuade world leaders to embrace the Games. “Samaranch and Payne sensed from day one to the future of the Olympics on all fronts,” says IOC executive board member R. Kevan Gospar, a former chief executive officer of Shell Oil Australia Ltd. “People forget that back in 1984, nobody but nobody wanted another Olympic Games because it cost too much money. Samaranch told Payne to pull it off, anyway. And Payne understood the rings were a brand that could give the IOC the one thing it never had: cash flow.”
Its deep revenue stream today allows the IOC to channel as much as $150,000 to individual athletes to cover the Olympic expenses, bankroll a $10 million fund to rebuilt the war-torn Zetra Olympic Stadium in Sarajevo, offer free food and housing to all athletes during the Games, and put aside 10% of broadcast fees to creat and Olympic scholarship fund for athletes. Mr. Payne expects some $500 million in sponsorship revenue for the 1998-2000 Games, up from $350 million for the 1994-96 Games. In addition, the IOC will collect broadcast fees of about $1.8 billion over the same period. Mr. Samaranch says the IOC doesn’t need to worry about raising money until 2012. Indeed, only ne TOP sponsor, Bausch & Lomb Inc. of the U.S., has ever dropped out, and that was because of the internal financial problems.
The most distasteful part of his job, says Michael Payne, the Olympic marketing director, is dealing with those poored Olympic Family members and rogue corporations involved in what he calls logo ‘slapping’ – putting the rings on products and services that haven’t been sanctioned by the IOC.
'Like a Religion'
“Getting to the point where the TOP program now has a waiting list quite a ride,” Mr. Payne says. “But my job remains the development of corporate sponsorship and getting 198 countries to buy into the Olympic way of thinking. You have to learn to understand and respect the passions people have toward the Olympics. For many, it’s like a religion.”
All religions have their heredicts, however, and there’s no shortage of them within the Olympic Family. Mr. Samaranch’s critics maintain that he is an idealist, but one who helps the other fellow make a profit. The argument, of course, is rooted in money and how the IOC slices its cash pie. Both the larger and smaller sports federations gripe that the IOC doesn’t give them enough, and the NOCs insist that the TOP agreements prevent them from taping local sponsorship deals.
“The IOC has a lot of very clever spin doctors making it seem that some sports federations are money mongers while the IOC remain the purists,” says Robert Fasulo, shief of staff at the poewrful International amateur Atheltic Federation and secretary-general of the Summer Olympic Federations.
Vilnis Baltins, president of the Latvian Olympic Committee, fumes that he “was forced to turn down a $450.000 corporate sponsorship because IOC didn’t like the idea our sponsor made soft drinks that competed against Coca-Cola. This is not only my problem; nearly all the NOCs are handcuffed by the (deals with the) TOP sponsors.”
Separating the celebration of athletes from the cynicism of commerce is clearly the thorniest issue facing Mr. Samaranch in the wake of the controversial commercial management of the 1996 Centenial Games in Atlanta. “To be upfront about the Atlanta debate, it was a case of great games, poor city.” Mr. Payne says. “for the IOC it was a wake-up call. It meant that we had to go one step further in controlling the programs of the local organzing committee and manage all aspects of the Games and the Olympic rings.”
Mr. Payne says the most distasteful part of his job is The most distasteful part of his job, says Michael Payne, the Olympic marketing director, is dealing with those poored Olympic Family members and rogue corporations involved in what he calls logo ‘slapping’ – putting the rings on products and services that haven’t been sanctioned by the IOC. Also known as “ambush marketing,” the tactic reached a crescendo in Atlanta, Mr. Payne says, because of poor rings management by local organizers.
“We are constantly reminding the NOCs and the federations not to allow short-term revenue to dictate the use of the rings,” says Mr. Payne, who must countersign every sponsorship contract that involves the Games. “Whatever a company does with the rings cannot tarnish their spiritual or commercial image.”
To that Mr. Baltins grouses: “I don’t care about upsetting Coca-Cola. The Latvian NOC needs to make money. Don’t talk to me about idealism.”
To assuage the many Olympic Family members who share Mr. Baltins’s view, Mr. Samaranch has promised to call a special meeting of NOC representatives after Nagano in order for Mr. Payne’s marketing team to instruct them in how to cultivate local sponsorships without tarnishing the TOP agreements. “Many of the complaints we hear come out of the fluke that was Atlanta,” Mr. Payne says.
Mr. Samaranch sees the problem in broader terms. “All people practice sport, and sport is by nature held sacred,” he says. We must preserve and protect the special attributes that are the Olympics. The IOC has fiscal independence into the next century, but the agents jump on our family members and tell them they can get more money if they do this deal or that deal on the side. The IOC must control its own destiny.”
Not To Murdoch Offer
To be sure, Mr. Samaranch does practice he preaches. Last year, he rejected a 10-year, $2 billion offer by Ruppert Murdoch’s News Corp. For the rights to broadcast the Games in Europe, Norht Africa and Middle East over his restricted pay-TV network in favor of a $1.4 billion offer with free viewing from the European Broadcasting Union over the same period. Mr. Samaranch turned down millions more in revenue by refusing to allow Olympians to wear corporate logos or have corporate advertisements apper during Olympic competition.
“Samaranch pours money into the Olympic because the Games belong to no one else but the athletes,” says Bob Storey, a former Olympic bobsledder and president of the International Bobsled Federation. “Whoever takes Samaranch’s place as president had better pay attention to the Olympic idealism and believe, like Samaranch, that the Games are bigger than any problems or personalities.”
But the authoritative personality Mr. Samaranch has imprinted on the Games, says Jean-Francois Gautier, president of the Salomon division of Germany’s Adidas-Salomon AG, has landed Mr. Payne – and the next IOC president with a gnarly management problem.
“The archaic nature of the federations in relation to what Samaranch has created is the real demon,” Mr. Gautier explains. “For example, some 120 countries are members of the International Ski Federation, but only five of them are actively involved in the sport. The result is that Payne and Samaranch spend more time dealing with politicians looking for money than skiers looking for snow.”
Mr. Samaranch keenly senses the demon on the horizon, however. “The next president can be the worst or the best or the same as me,” he muses. “But whoever it is, the unity must be kept. If the next president cna’t maintain unity, the Games will fall apart. And there’s no way to completely ensure the Games won’t fall apart.”
Although Mr. Payne is perhaps too young and lacks the global velebrity and diplomatic clout required to succeed Mr. Samaranch as IOC president, many senior IOC members say Mr. Payne is the only Olympic executive able to alleviate the fear Mr. Samaranch has of the Games once again devolving into a carnival show upon his retirement. “It’s a critical issue,” says IOC marketing director, and clearly one that Mr. Samaranch believes can be contained by Mr. Payne’s marketing skills.
“It takes a herculean amount of management skill to service the sponsors,” IOC board member Mr. Gospar explains. “Because handling IOC corporate relationships is complex and intellectually sensitive. Payne is the one who wins the battles with the federations and NOCs. Samaranch knows he keeps the cash flowing.”