Can Putin Score Olympic Gold?
With billions of dollars on the line at this year's troubled Winter Olympics, Stephen Greyser breaks down what's at stake for the brands of NBC, key corporate sponsors, Russia—and Vladimir Putin.
A pall hangs over Sochi.
Not since the bribery scandal overshadowed the 2002 Games in Salt Lake City has an Olympic Winter Games been so fraught with controversy. Fears of a terrorist attack by Islamic extremists; outrage over Russia's anti-gay laws; difficulties with transportation and infrastructure; and soaring costs all threaten to detract from the good vibes of the Games, which begin Friday.
As of two weeks ago, Sochi had sold only 70 percent of tickets—compared to 97 percent for the Vancouver Games four years earlier. And the organizing committee has already acknowledged defeat in merchandise sales, with sales so far topping only $30 million, compared to Vancouver's $51 million. Such lackluster performance spells trouble not only for the Games themselves, but also for all of the brands that hope to ride its bobsled to marketing gold.
"If there is no terrorism, the people are friendly, and you can get tickets, then the Games will probably enhance their image"
"The Olympics is the most significant sports-based event in the world," says Stephen A. Greyser, professor emeritus in the Marketing unit at Harvard Business School and an expert on the business of sports. "And 'The Rings'—capital T, capital R—are arguably one of the most recognized brand symbols in the world. By definition, companies want to cobrand with the Olympics, at least when they aren't laden with problems.
Big names such as Coca-Cola (an Olympic sponsor since 1928) and McDonald's pay an estimated $100 million every four years just for the privilege of using The Rings in their advertising—with hundreds of millions more spent on the advertising campaigns themselves. They aren't the only ones banking on Olympic success. NBC, which paid $775 million in rights fees for the Sochi Games, could also be in trouble if they don't go well. Perhaps the brand with the most to gain—or lose—is Mother Russia, which paid a record $51 billion to host the Games, and has a rare opportunity to show it has shaken off its economic and political doldrums to pull off a major coup on a global stage.
When NBC announced it would be broadcasting the Summer Olympic Games in London in 2012, observers expected the network to take a loss on the event, as it had for Olympic broadcasts for a decade. For the 2010 Winter Olympics in Vancouver, NBC paid $820 million in rights fees, and lost a jaw-dropping $223 million. Now with a $1.2 billion rights fee for London, most pundits expected it to lose between $100 and $200 million. Instead, NBC not only broke even on the Games, but it also made it the most viewed television event in United States history.
"London was truly a big surprise for NBC, as well as industry forecasters," says Greyser, who, with Vadim Kogan, analyzed the issue in the HBS working paper: NBC and the 2012 London Olympics: Unexpected Success. Achieving the same kind of success in Sochi may be more difficult.
There are several reasons for this. First, the network benefitted from the time zone difference between the United States and London. A five- to eight-hour difference meant events during the day could be recorded and edited in time to broadcast during primetime. While some criticized the network for not airing events live, the decision actually increased the number of viewers who tuned in—especially if it was known that Americans performed well in popular sports such as swimming and gymnastics.
The network also harnessed social media to increase buzz about the Games and viewership, including encouraging athletes to post to Twitter and Facebook. "This broadened the public's interest and reminded people of the multiple platforms available to see the competition," says Greyser.
The biggest boon to NBC, however, was the Games themselves. Winning performances by American athletes such as swimmer Michael Phelps and gymnast Gabby Douglas motivated US viewers to tune in, and when they did, they saw a warm, welcoming city, with attractive facilities and convenient infrastructure. Team Great Britain also vastly exceeded expectations, earning 65 medals in the Games compared to 19 four years earlier and adding a feel-good storyline that boosted the Games overall.
"Many Americans have positive feelings about Great Britain, which were reaffirmed by some NBC features," says Greyser. "At the same time, local stations capitalized on interest in local American athletes through additional stories."
NOT SO IN SOCHI
NBC faces a more difficult environment in Sochi. The nine- to twelve-hour time difference makes it more difficult for the network to plan primetime coverage, since most events will take place overnight in the US.
NBC's biggest challenge, however, may be the image of the host country and city. Sochi is largely unknown to American audiences, and the network will have to spend time familiarizing viewers with its geography and culture. Early impressions, meanwhile, have been overshadowed by fears of terrorism and the anti-gay backlash. If NBC is going to be successful, it may depend on how successful Russia is in presenting a positive face to the world.
Countries have long used the spotlight the Olympics provide to celebrate their national pride and improve their international image. The first of these was in 1936, when Adolf Hitler used the Olympics in Berlin to try to show that Nazi Germany was an acceptable member of a larger group of nations, says Greyser. In 1964, Japan made a similar overture with the Tokyo Games to point to its recovery from defeat in World War II.
China used the Beijing Games in 2008 to showcase itself as an economic and political superpower. "The 2008 Games were a very explicit and deliberate initiative to build business for China," Greyser says.
It achieved mixed results. When first awarded the Games, the country promised improvements in human rights and media access, on which it largely failed to deliver. On the other hand, the Games were certainly a boon for business, spurring an increase in foreign investment.
Along with opportunities come risks. The 1972 Games in Munich will be remembered not for the prowess of athletes on the field, but for the terrorist attacks on Israeli athletes. Greece embarrassed itself in Athens in 2004 with empty stadiums and crumbling infrastructure that showed it wasn't quite ready for showtime.
Whether or not Russia goes the way of Great Britain or Greece depends on a number of factors, starting with the infrastructure of the Games. The resort community of Sochi isn't known for its snow; for alpine events, athletes and spectators will have to take a two-hour bus ride out of town. "The question is, can Russia demonstrate that it has the planning and operational expertise to run the Games—especially with venues so spread out?" asks Greyser.
Secondly, Russia will be measured by the success of the business community—both in terms of external partnerships and the boost to the local economy. Thirdly, there are the athletic competitions themselves. As Team Great Britain showed in London, a strong performance by the athletes of the Olympics' host country can go a long way toward engendering positive domestic feelings for the Games overall.
Finally, Greyser says, Russia will be judged by how visiting athletes and journalists perceive the country and its people. If the venues are modern and convenient and the people as welcoming as they were in London, then the country may come out unexpectedly well. If, on the other hand, visitors are confronted with empty seats and crumbling infrastructure as they were in Athens, then it will not bode well.
"If there is no terrorism, the people are friendly, and you can get tickets, then the Games will probably enhance their image," concludes Greyser. Given security concerns around both terrorism and protesters, however, that may require a delicate balance by the government. "Russia needs to demonstrate it can manage the Games without being overly oppressive."
In the end, the branding of the Olympics may be less a referendum on the country than on its leader.
"In my view, the branding of Putin may be more important than the branding of Russia," says Greyser. The last time the Olympics were held in Russia, in Moscow in 1980, many countries boycotted the Games and its Communist government. "Now he wants to show the world that he is a great world leader—even if he has to spend $50 billion to do it," says Greyser. "If they can get through it without any serious problems, then the world will applaud because everyone knows how difficult it was."
With all eyes on Russia and its leader starting this week, the Games are truly Putin's to lose.