Japanese sponsors poured $3 billion into the Tokyo Olympics. What will they get in return?
Japanese corporate sponsors of the Tokyo Olympics have poured $3 billion into the Games, the largest-ever amount contributed by domestic companies. But even before Friday’s Opening Ceremony, firms began scrapping advertisements and canceling plans for officials to attend the COVID-era Games.
On Monday, Toyota Motors, whose multi-year contract with the Olympics is valued at almost $1 billion, announced it won’t air Olympic-themed television ads in Japan. It also said company president Akio Toyoda will skip the Opening Ceremony, despite the spectator-less event being open for VIPs like company executives and foreign dignitaries.
Toyota chief communications officer Jun Nagata told local media the 84-year-old carmaker scrapped its Olympic campaign in deference to the Games’ unpopularity among Japanese consumers. Toyota will continue to support the Games and athletes via other means, such as providing electric vehicles for transportation during Tokyo 2020; its Olympic TV ads will continue to run in other countries.
Other Japanese companies are following Toyota’s lead. The day after the carmaker’s announcement, sponsors Fujitsu, NEC, and Nippon Telegraph all said they wouldn’t send company officials to the Games. Executives from other sponsors Panasonic, Nippon Life Insurance, Sumitomi Mitsui Financial Group, Meiji Holdings and Asahi Group won’t be in attendance either.
“Pre-pandemic, Tokyo 2020 was extolled as a means to promote ‘brand Japan’ and to regain the country’s status as a global technology leader,” says Ben Ascione, assistant professor at the Graduate School of Asia-Pacific Studies at Waseda University in Tokyo.
But now the Games have become a “liability for domestic sponsors who are seeking to distance themselves from the event. [Companies have] decided that the potential advertising benefits are outweighed by concerns of reputational damage,” he says.
Originally scheduled for last summer, the Tokyo Games will officially open this Friday and run until Aug. 8. The event will coincide with Tokyo’s fourth pandemic state of emergency. Only 22% of Japanese citizens are fully vaccinated. Critics of the decision to proceed with the Games say Japan’s prime minister, Yoshihide Suga, is ignoring medical advice, and prioritizing fiscal windfalls over public health.
In a Monday survey conducted by local paper Asahi Shimbun, over two-thirds of respondents doubted the government’s promise to hold a ‘safe’ Olympic Games. In an Ipsos poll released last week, only 22% of Japanese respondents thought the Games should go ahead. In another telltale sign, public approval ratings for Suga sank to a record low of 33% in a survey conducted by public broadcaster NHK two weeks ago.
Public sentiment turned against the Games before long before athletes departed for Tokyo. But their arrival has revealed holes in the Games’ COVID protocols. So far, 110 individuals linked to the Games have tested positive for COVID, undercutting Suga’s promise to hold a “COVID-safe” Games and exacerbating worries that the weeks-long spectacle will turn into a super-spreader event.
Toyota’s decision to ax its Olympics ads is something the company could not have taken lightly, says Jamie Corr, managing director, sports at PR consultancy Hill + Knowlton.
Meanwhile, the companies that canceled executives’ appearances at the Game no doubt considered the poor optics. If their representatives appeared at an event that’s off-limits to ordinary fans amid a state of emergency that restricts movement, people in Japan would see it as a double-standard, said Ascione.
A ‘business as usual’ approach from sponsors would have been “tone deaf—and increased the narrative that [sponsors] are more concerned about protecting commercial opportunity than about protecting athletes,” says John Davis, author of The Olympic Games Effect and chairman of executive consulting firm Brand New View. “It’s easier for a sponsor to simply not have their executives appear.”
But saving face comes at a cost. Pulling ads or cancelling executive appearances diminishes the benefits a brand will derive from the pricey sponsorship contract it signed pre-pandemic. “Unwinding these investments so close to the start of the Games would [be] complicated and next to impossible,” says Davis.
At the top of the Olympic sponsorship pyramid is the ‘worldwide’ tier: multi-year contracts that span multiple Olympic Games. Only two Japanese firms, Toyota and Panasonic, are on this list of thirteen companies. Toyota’s contract for instance, is valued at nearly $1 billion and extends to 2025. Some say that long-term sponsors could still stand to gain. Davis says that reimbursements are unlikely to be written into contracts, whereas “rolling the investment into support for the next Games” is more probable.
But the majority of the domestic firms that have plowed money into the Tokyo Games are ‘gold’ sponsors, meaning their Olympic affiliation only applies to the 2020 (now 2021) event. An oft-cited price tag for these contracts is at least $100 million. While the terms of each sponsorship vary, a basic package would include association with the Olympic brand, says Michael Payne, chairman and CEO of Payne Media Strategies, a sports consulting firm. This means brands can use the word ‘Olympics’ and the logos and imagery synonymous with the Games for physical and digital advertisements and social media marketing campaigns. Sponsors are also allotted a certain number of ‘hospitality’ tickets, to be used for ticket giveaways and to entertain clients. Extra add-ons include options like TV spots, which gold sponsors like Nippon Life Insurance have opted for.
A one-off association means that the 15 Japanese gold sponsors—including the likes of Asahi Breweries, sportswear brand Asics, and financial group Nomura—will miss out on the usual basket of perks with no chance of recapturing benefits at future events.
The absence of in-person events means that companies will likely lose out on the opportunity to entertain important clients during the event; ‘hospitality’ tickets for client schmoozing are one of the most integral benefits of sponsorship. They allow sponsors to “give VIP treatment to key targets, such as buyers, vendors and government officials,” says Rick Burton, professor of sport management at Syracuse University.
A Fujitsu spokesperson told Fortune that “the decision regarding spectators means we will discontinue the use of sponsor tickets; [and] that we will no longer be able to offer our hospitality program, which was an opportunity for us to build relationships with customers.” The Japanese IT provider is a Tokyo 2020 gold sponsor.
Most Japanese sponsors began to dial back their use of Olympic branding in marketing campaigns in Japan when the pandemic first began, says Payne. Companies are taking a “restrained” approach to TV advertising, says Ascione. Nippon Life will run its commercials which will show “support” for Japanese athletes, but the company said they have nixed new marketing campaigns, a spokesperson told Fortune.
“I can’t say for certain what [sponsors’] loss on return on investment will be… but some of them will see at least a 25-40% loss,” says Burton.
The Olympics is the world’s second-most valuable sports events brand behind the Super Bowl, which means sponsoring the Games normally represents a “transformational business opportunity” for companies to boost their own brand value just by association, says Corr. This year, though, national sponsors have sought out marketing consultants to advise them on the risks of remaining associated with Tokyo 2020, says Ascione.
While the Tokyo Games will be made-for-TV this year, many are expecting a drop in viewership since the “crowd psychology will be missing,” robbing the broadcast of its usual gusto, says Davis. “The sheer energy generated from in-person fans won’t be there, which might discourage the more casual fans [from watching].” The same Ipsos poll surveyed respondents in 28 countries. Results show that 29% of respondents were “not at all interested” in watching the Games, while 25% said they were “not very interested.” Thirty percent said they were “somewhat interested.”
Even before the Olympic flame is lit, the prospects look grim for Japanese sponsors. But the public could have a change of heart once the Games get underway, Payne says, especially if Japan starts winning gold medals.
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