General Electric will be able to go for some real gold (and silver) after being bundled into the NBC bid that won the U.S. media rights to the 2010 and 2012 Olympic Games.
While NBC paid $2.01 billion for all media and assorted other rights, parent company GE added a commitment of $160 million to $200 million to be admitted to The Olympic Programme and become a TOP global sponsor of the Games that will be staged in 2006 in Turin, Italy, 2008 in Beijing and 2010 and 2012 in cities still to be named.
Like Coca-Cola, John Hancock, Kodak, McDonald’s, Panasonic, Samsung, Schlumberger, Sports Illustrated, Time magazine, Visa and Xerox, all current TOP Olympic sponsors, GE will “receive exclusive marketing rights and opportunities within its designated product category,” as the Web site of the International Olympic Committee puts it.
The IOC site delineates other TOP sponsor rights, including use of Olympics imagery on products; tickets and hospitality opportunities at Games; preferential access to advertising availabilities; protection from “ambush marketing”; and “on-site concessions/franchises and product sale/ showcase opportunities.”
Coca-Cola, for example “provides refreshments for Olympics athletes, coaches, officials and spectators.” Kodak processes millions of photographs for photojournalists, produces badges for athletes, Olympic family members and volunteers and supplies diagnostic equipment and personnel for the Olympic Village Clinic. Panasonic supplies state-of-the-art TV, audio and video equipment and technology.
Now GE will have first dibs on selling-at fair market value-whatever of its products or services are pertinent to the building and operating of the four Games, starting with Turin -but not in competition with other TOP sponsors.
GE was approached in the past-once to be a TOP sponsor and twice to be a Games sponsor-and all three times then-chairman Jack Welch vetoed such participation.
This time the idea was generated by NBC Olympics VP Gary Zenkel, largely in response to the IOC’s appeal to all U.S. bidders to make their pitches corporate family affairs. The many disparate businesses of GE set it apart as a parent company from ABC-ESPN parent The Walt Disney Co. and from Fox parent News Corp. Viacom’s CBS pulled out of the competition for the Olympic rights days before bids were due.
The announcement was made June 6 that NBC had won the 2010 and 2012 rights with a bundled bid that included the network’s $2.01 billion bid for all related media rights in the United States as well as GE’s TOP sponsor proposal.
On a conference call after the announcemment, current GE Chairman Jeffrey Immelt said, “This is an important building block as GE becomes more global. GE is the world’s pre-eminent infrastructure company. What we do aligns with where the Olympic movement goes.”
“None of us saw it coming,” said Rob Prazmark, the president of Olympic sales and marketing for International Management Group, who left the ABC entertainment sales team in 1985 to form the team that created TOP. “GE took advantage of one moment in time and completed a transaction that was brilliant and good for everybody.”
While some on the NBC side have described GE’s TOP role as “self-liquidating,” Mr. Prazmark said, “It is a profit center.”
However, despite that potential to further raise its profile overseas, GE investors don’t necessarily see the Olympics deal contributing significantly to the company’s bottom line- even with the potential to strike up new business through its sponsorship of the games.
“I don’t believe a company like GE needs something like this to expand its footprint,” said one portfolio manager with a stake in GE. “I don’t believe their name is unknown worldwide.”
However, Peter Cohan, an investment strategist and a GE investor, said there could be some cross-selling opportunities for the company, particularly in providing construction and power generation to the as-yet-unnamed host cities, but he remains uncertain of how significant those revenues could be. He noted that the 2002 Winter Games in Salt Lake City generated $716 million in sales for NBC, which while significant were just a drop in GE’s bucket, representing just 8 percent of GE’s total profits and 5 percent of total revenue.
“It’s a steal. GE will do millions of dollars in business biz with each of the organizing committees. The marketing rights alone in China are worth $85 [million] to $100 million,” Mr. Prazmark said. “It’s truly the last marketing frontier.”
But with a population of nearly 1.3 billion people, many of whom are just getting such amenities as electricity, China is still in the early stages of opening itself to business prospects offered by the Western world and the formula seems more tantalizing than usual:
Make a reasonable amount of money helping Beijing’s Olympic Committee build and light and perhaps power an estimated $23 billion worth of infrastructures for the Games. Spend money to entertain Chinese officials and business executives (one estimate is that big sponsors’ guests may account for 1 percent to 2 percent of the attendance at Games) and to show them products and business solutions in operation at what amounts to a 17-day convention of technology as well as athletic competitions and ritualized pageantry. Make lots of customers for life and lots of money in the long run.
And, say sources who have studied the upside-downside of this TOP scenario: Never underestimate the value of Mr. Immelt’s making the front pages of every newspaper in China with announcements of deals related to the Beijing Games but resonating even more because they come in China’s SARS-exacerbated time of need.
“GE and the Olympics are two of the world’s leading global brands,” said Bob Wright, vice chairman of GE and Chairman of NBC, “and this announcement puts them together in a big way.”