Olympic organizers put squeeze on cash-strapped sponsors
Games sponsors pay $3.3 billion, but more needed as national pride on line
Domestic sponsors already have contributed a record $3.3 billion US to help pay for the Tokyo Olympics. That's at least twice as much as any previous games.
But it's still not enough.
Now they're being asked to pay millions more to cover some of the soaring costs of the one-year postponement.
This comes as Japanese businesses are battered by the COVID-19 pandemic, raising doubts about re-investing in an Olympics that may be short on fans but long on pandemic-related rules to discourage tourists, sightseeing and spending.
"We are in the process of asking for additional sponsorship (payments) from our partners," organizing committee CEO Toshiro Muto said last week as he detailed why the postponement will cost organizers and Japanese taxpayers an extra $2.8 billion. "The sponsors have expressed the willingness to contribute to the games next year. But they have not specified an amount."
None of the nearly 70 domestic sponsors is saying "no"— at least publicly — to an Olympics backed by Prime Minister Yoshihide Suga and driven by Japan's powerful advertising conglomerate Dentsu Inc., the official marketing agency for the Tokyo Olympics.
Dentsu helped land the Olympics, lined up the sponsors and stands to profit with the Olympics opening on July 23, 2021.
Little arm-twisting may be needed to keep sponsors on board. Harmony and consensus are valued in Japan, and this stretches to the corporate world. It's best illustrated by this Japanese saying: The nail that sticks up gets hammered down (Deru kugi wa utareru).
Pulling off the Olympics is viewed as a national project, a matter of honour and saving face. Doubts expressed behind the scenes are unlikely to trickle to the surface. Some sponsors might offer additional "in-kind" payments — contributions not made in cash — but there has been little open dissent and few contract details made public. In the end, any shortfall is likely to be made up by taxpayers.
Among the domestic sponsors is Japanese airline ANA, which posted losses of $1.8 billion through the first half of the fiscal year, and travel agency JTB, with losses of $750 million in the same period.
Also on board is the financial services company Nomura, both Narita and Haneda airports, food makers such as Kikkoman and Ajinomoto, and the SkyTree tower. The Japanese media, charged with covering the Olympics, also are on in droves including top newspapers Mainichi, Nikkei, Yomiuri and Asahi.
Record expense
The Associated Press contacted a dozen sponsors and almost all refused to comment. A Tokyo Gas spokesperson said organizers had advised against speaking to the media.
One of few on-the-record comments came from instant noodle maker Nissin, which has registered 63 per cent profit growth recently as people stuck at home turn to quick meals.
"We will continue with our preparation toward a safe and secure Olympics while paying heed to further developments," spokesman Tomonao Matsuo said. He said no decision had been made on the renewal.
The Tokyo Olympics have become very expensive. A University of Oxford study says they are the most costly Summer Games on record.
The official cost of putting on the Tokyo Olympics is $12.6 billion in the latest budget. But a government audit last year said it was probably twice that much, and this was before the added cost of the delay. This is all public money except for $5.6 billion from the privately funded organizing committee budget. Domestic sponsors make up about 60 per cent of this income.
Polls in Japan show wavering support for holding the Olympics in the midst of a pandemic, which IOC President Thomas Bach tried to counter last month in Tokyo in meetings with organizers, politicians and sponsors. Though Japan has controlled the pandemic relatively well, new infections in Tokyo hit a one-day record of 602 on Thursday. About 2,400 deaths in the country have been attributed to COVID-19.
The squeeze on cash-strapped sponsors is only half the story. The other half revolves around Dentsu Inc.
In essence, through unrivaled connections in business, politics and media, Dentsu helped land the Olympics and then profited by lining up billions in domestic sponsorships. These are distinct from the 14 long-term International Olympic Committee sponsors, which include three prominent Japanese brands — Panasonic, Toyota, and Bridgestone.
Analysts estimate Dentsu gets a 15 per cent commission for signing up sponsors and possibly more if it handles the advertising work.
The IOC itself pays relatively little to hold the Olympics. It generates about three-quarters of its income from selling broadcast rights and relies on the host nation's public coffers for the staging. The latest Tokyo organizing committee budget shows IOC contributions of $1.3 billion. This is about 10 per cent of the official costs but a far smaller percentage if outlays are being underestimated.
