Pro-Tibet demonstrations during the Olympic torch relay have some experts saying corporate sponsors need to be nervous about a Beijing backlash.
By David Goldman,
CNNMoney.com staff writer
NEW YORK, April 8 - Continued demonstrations during the Olympic torch relay may spell bad news for corporate sponsors of the Summer Games.
This year's Olympics will be held in Beijing, China. Protesters against China's policies in Tibet and overall human rights track record have disrupted the Olympic torch relay on several occasions since the torch was lit in Athens last month.
The flame is supposed to burn continuously on its way to the start of the Olympics in August. But pro-Tibet protestors managed to extinguish the flame three times in Paris Monday.
And with the Olympics only four months away, sports marketing experts said concerns about more protests are mounting, which could impact major corporate sponsors such as Coca-Cola (KO, Fortune 500), General Electric, Lenovo and Samsung.
"They're monitoring the situation very closely," said Marc Ganis, a consultant with SportsCorp Ltd.
Olympic sponsorship lucrative
Corporations invest in the Olympics and associated events because they have historically been viewed as a high-visibility, "feel-good" media event that reaches every continent, Ganis said.
Sports marketing analysts estimate that a major corporate sponsorship of the 2008 Summer Games will cost an average of $40 million to $50 million. But associations with the Olympics and other big sporting events have historically been very profitable for corporations.
"The Olympics are a fantastic investment for companies," said Sergio Zyman, chairman of sports marketing firm Zyman Group and the former chief marketing officer of Coca-Cola.
Furthermore, companies wishing to tap the lucrative Chinese market had extra incentive to sponsor the games.
Controversy may be bad for business
But with the recent protests, sponsors may have gotten more than they asked for. If consumers believe a company's sponsorship of the Olympics is an endorsement of China's political actions, that could be problematic.
"Some may believe that Coca-Cola is complicit with this because they're sponsoring the Olympics," said David Carter, executive director of the University of Southern California's Sports Business Institute.
But others are not as sure that the pessimism surrounding the Olympics will tarnish corporate sponsors.
"At the end of the day, people realize these events wouldn't happen if they didn't have sponsors," said Zyman. "This is a protest against China, not against the Olympics or their sponsors - people will separate the two things."
Still, if the protests continue into August, sponsors could suffer, at the very least, a public relations nightmare.
"The sponsors' real concern should be about what's going to happen if this carries into the Olympics," said University of Delaware professor John Antil, who specializes in sports marketing.
The Chinese government has said it is working to ensure the Olympics go off without interruption. But Monday, protests already began in San Francisco. And presidential candidate Sen. Hillary Clinton has called for President Bush to boycott attending the Opening Ceremony.
"If the protests become a trend or a pattern, it could well be disastrous," said Antil. "Many more negatives could be associated with the Olympics, and then sponsors would have to figure out what their response will be."
Sponsors unlikely to pull out
Yet even if protests grow louder, don't expect the corporations to back out of sponsoring the Olympics.
"The promotions cannot be turned on a dime," said Ganis. "They may definitely play it down, but they won't cancel due to contractual obligations."
Coca-Cola said in a statement that it "expresses deep concern for the situation on the ground in Tibet," but it "firmly believe[s] that the Olympics are a force for good."
The soft drink company added that it has "witnessed first-hand the cultural, economic and social benefits [the Olympics] bring to the host city and country."
Computer maker Lenovo, which is based in China, issued a similar statement: "Lenovo is proud to play a role in spreading the important values the Olympic Games embody - unity, peace and sportsmanship, and we intend to fulfill our commitment as a sponsor of both the Olympic Games and the Torch Relay."
The company also noted that its sponsorship of the Olympics "is a vital part" of marketing its brand worldwide.
Calls to other major Olympic sponsors General Electric (GE, Fortune 500) and Samsung were not immediately returned.
But Carter said Coca-Cola, Lenovo and other sponsors need to go further to avoid costly controversy by demonstrating the benefits of Olympic sponsorship to the public.
Sponsors must prove that the money invested in the Olympics will do more to promote civil liberties in China than it will to perpetuate the country's human rights violations, Carter noted.
With sponsors branding their products with Olympic logos, consumers may lose favor with the companies if they cannot successfully defer the negative sentiment associated with the event.
"Most of these companies will be listening to what ... the public reaction is going to be," said Carter. "They need to diffuse the controversy, or they could get bogged down globally."