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An Olympic Games only the sponsors could love

NEW YORK (MarketWatch) -- There was a minor controversy last week when the man in charge of the London Olympics seemed to suggest that anyone wearing a Pepsi T-shirt to events would be thrown out.

Sebastian Coe, chair of the London Organising Committee of the Olympic and Paralympic Games (LOCOG), rapidly backtracked, but it wasn't hard for many observers to believe the Games he is organizing are more about brands and corporations and less about fans and sports.

The Pepsi (PEP) comments captured a big part of what the Games are about -- Coca-Cola Co. (KO) is one of the International Olympic Committee's main sponsors, and it was all-too-easy to think the Games' organizers would throw out any fan showing preference for a partner's business rival.

The presence of so-called brand police, staff who will be on the lookout for any sign of a non-Olympics sponsor trying to market itself at the Games, and some of the aggressive actions taken by Olympics bodies against innocuous parties, tell a sorry tale.

"With every additional Games, the enforcement of sponsors' and Olympic brands get stronger, and incrementally more and more controls are being put in place and the Games are becoming more commercial," said Guy Osborn, professor of law at University of Westminster who has studied the issue extensively.

It isn't just about the Olympics clearing the way for its biggest sponsors to indulge in an orgy of marketing and promotion unfettered by rivals. In the U.K., media reports said that an 81 year-old woman who wanted to sell a doll at a fundraiser for $1.60 was told to think again after authorities found out the doll wore sportswear featuring the Games' logo and Olympic rings; at the University of Derby, a banner that stated "supporting the London Olympics" had to be taken down.

In the U.S., the national Olympic Committee last month sent a cease and desist letter to the owner of a Philadelphia restaurant called Olympic Gyro -- an eatery in operation for almost 30 years.

"I find it hard to believe this sort of thing hurts the Olympics trademarks," said Elizabeth Moriarty, a lawyer at Greenberg Glusker in Los Angeles. "They're getting zealous to the point of absurdity."

The U.S. Olympic Committee is unfazed by such criticism.

"If someone is using [our intellectual property], whether they're a big, medium, or small business, we do make calls," said Lisa Baird, USOC chief marketing officer.

Follow the money

There is likely one big reason for all this: money. The USOC, for example, is one of the few national Olympic bodies that is entirely funded from private sources. Ensuring that being a partner and sponsor is a valuable proposition is in the USOC's material interests.

For its part, the International Olympic Committee earns roughly $1 billion each four-year cycle from its main sponsors. If Coke or McDonald's Corp. (MCD) are spending tens of millions of dollars a year, then it makes sense to ensure they see as much bang for the buck in return.

So while it's open to question whether the world's biggest sporting event needs the world's biggest McDonald's on its premises, for example, the publicity (and likely business) generated by that store will certainly boost the hamburger chain. Procter & Gamble Co. (PG) has been blanketing media with its Olympic campaign, and has on-site promotions planned for London, but given that a much smaller push for the Vancouver Games saw $100 million in extra sales, the effort makes sense. Read about how TOP sponsors plan their Olympic campaigns.

And, after all, sports and big business are becoming increasingly linked, and its not as if the Olympics are the only sports events in the thrall of sponsors -- each year the Super Bowl seems as much a platform for advertisements and marketing campaigns as a game of football. But the Olympics, until recently at least, did seem to be more about the sports than the money.

"The issue is 'what are the Olympics about?'" said Osborn. "The Olympic charter says the Games are a celebration of sporting talent and competition, but they focus their energies on protecting sponsors."

The turning point was the Los Angeles Games in 1984, say experts. After a near-debacle in Montreal in 1976, where there were 628 sponsors, the IOC initiated its Top Olympic Partner (TOP) program, that offers less than a dozen slots for very large sums. That concentration of top partners began a journey that led to today's focus on companies' rights, said Simon Chadwick, professor of sports business strategy and marketing at Coventry University, because it promises high levels of exclusivity.

As part of a winning bid, a host nation is expected to amend its laws to permit aggressive protection of intellectual property rights, noted Chadwick -- a step further than any other sports event requires.

And it isn't just about keeping the area around the Games sacred for sponsors, or stamping on mom-and-pop enterprises that use Olympic words or logos. Perhaps the most surprising illustration of sponsors' clout is the ban the IOC places on athletes advertising before, during and after the Games.

This year, from July 18 through Aug. 15, athletes, coaches, trainers and officials participating in the Games are forbidden from using their names or likeness in advertising for non-Olympic sponsors; doing so could mean expulsion from the Games.

Such is the importance of the rule that LOCOG supplies a 19-page handout that gives clear instructions, including example graphics of acceptable and unacceptable ads, marked with checks or a large 'X', respectively.

The rule means non-Olympic sponsors such as Japanese athletics outfitter Asics Corp. (ASCCF) (7936) , which is sending marquee U.S. running stars Lolo Jones and Ryan Hall to London, are forced to cut back.

"We had to cease all communications to include press releases about [the runners] and also had to take down all images of them on our website," said Shannon Scott, director of marketing communications for ASICS America.

The rule can create strange situations for sponsor companies. Earlier this spring, Asics struck a deal with reigning Olympic decathlon champion Bryan Clay, only to watch Clay fail to make the U.S. team for London. But because he won't be taking part, Clay can head to London and act as a spokesperson for the Asics during the Games.

It remains to be seen whether even doing what technically he's permitted to, Clay will run into difficulties with local officials -- one factor in the sponsor-friendly tone of these Games is London's willingness to enforce the rules, as Coe's Pepsi comments showed.

Chadwick believes this may be somewhat intentional, and perhaps even beyond the scope of the Olympics.

"I think the organizers are keen to ensure that London is seen as a good place to do business," he said. "London is trying to let itself be seen as the home of sport, but also the friend of business."

Additional reporting by Sara Germano.