USOC-NBC Sports partnership extends to new category
USOC-NBC Sports partnership extends to new categoryPublished May 16, 2011
In a move that could affect bidding for future Olympic TV rights, the U.S. Olympic Committee has expanded its sales partnership with NBC Sports beyond the financial services sector to also include the home improvement category.
The organization and network will collaborate to sell a home improvement sponsorship and advertising package the same way they sold the online brokerage and banking categories to TD Ameritrade and Citi, respectively.
The move underscores the USOC’s belief that a joint advertising-sponsorship package appeals to potential sponsors and increases the likelihood that the USOC will partner with a network on sponsorship and advertising sales for the 2014 and 2016 Olympics. The approach is welcome news to the major networks, as such a decision could affect how much networks are willing to pay for Olympic rights by making future advertising packages more lucrative for a network and easier to sell.
The International Olympic Committee plans to sell the TV rights to the 2014 and 2016 Olympics on June 6-7 in Lausanne, Switzerland. ESPN, Fox and NBC are expected to bid. CBS and Turner have met with the IOC but have not shown the same level of interest in the rights to date.
As the bidding approaches, networks have contacted the USOC in an effort to gauge the organization’s willingness to package sponsorship rights with advertising for the 2014 and 2016 Games. A senior executive familiar with those conversations said the USOC told networks that it would be open to partnering with them on as many as six domestic sponsorship categories such as automotive, financial services and home improvement but would not be willing to partner on all categories or sell the network its marketing rights the same way colleges do. It currently has 13 domestic sponsors.
Such a partnership wouldn’t revolutionize the USOC’s business model but it would reshape it. While other properties have required sponsors to make media commitments as part of a deal, USOC sponsorship agreements historically included rights only to the USA five-ring logo. That left NBC to negotiate separate advertising buys with sponsors, and several sponsors declined to advertise, as Home Depot did during the 2008 Beijing Games, putting NBC in a difficult position as it tried to meet its sales goals.
That all changed last fall when the USOC and NBC collaborated to sell a sponsorship and media rights package in the financial services category for the 2012 London Games. The USOC, represented by longtime Olympic sales expert Rob Prazmark, and NBC, represented by Paul Wilson, vice president of Olympic sales, signed TD Ameritrade and Citi to separate media-driven deals valued at more than $50 million combined.
It’s unclear how the USOC and NBC split the money from the banking category. Sources familiar with it said a small portion of that money was set aside to cover the USOC sponsorship value, and the rest went toward NBC’s advertising sales for the London Games.
The USOC and NBC initially partnered on the banking category because the USOC was uncertain it would be able to find a bank partner prior to the 2012 Olympics. People familiar with the Citi negotiations said the deal was pitched to the bank as an ad buy with a sponsorship as a sweetener. The combination made it more appealing to the bank than a straight ad buy or straight sponsorship deal.
The USOC’s recent conversations with networks signal it is open to similar partnerships in other categories with whatever network wins the 2014 and 2016 Olympic rights. Its only conditions would be that it would want someone representing it at the table during joint sponsorship and advertising negotiations and it would keep sole responsibility for managing its marks and servicing new sponsors.
These types of combined deals would also make it less likely other brands could ambush a USOC sponsor because the sponsor would be purchasing advertising exclusivity up front in its combined sponsorship and advertising deal.
“It appears the USOC has maintained control of the rights and that the Olympic parties will be able to better manage ambush issues in the future,” said Davis Butler, president of Encompass, a global marketing agency, and a former IOC executive. “The piece we don’t know yet is if this is a media buy that maximizes revenue short term or if these deals will result in long-term sponsors who stick around and support the USOC in the future.”
Partnering with a network could carry other risks for the USOC. The organization’s sales cycle begins far earlier than NBC’s does. It currently sells sponsorships for a four-year period and receives four annual payments from its domestic partners. But NBC sells advertising in the year prior to each Olympic Games and gets paid after an Olympics ends.
The USOC’s conversations with networks indicate that it would be comfortable with being paid after an Olympics or open to finding a way to make up for the gap in its annual budget by filling other domestic categories that it doesn’t share with the network. The organization currently receives about 6 percent of its annual budget of $200 million from domestic sponsorship, which means that sharing six of 13 categories with a network would be worth approximately $4 million to $6 million.
Partnering with the USOC won’t be a cure-all solution for a network, either. The IOC’s worldwide sponsorship, The Olympic Partner (TOP) program, still doesn’t require sponsors to commit to an advertising buy with Olympic rights holders. As a result, TOP sponsors such as Panasonic, Acer and Samsung can elect not to make ad buys in the U.S. during the Olympics. TOP sponsors get USOC rights, along with 199 other national governing bodies, as part of their IOC deal.
“The IOC will definitely watch this, and there may be some elements from this that they consider doing something with in the future,” Butler said.