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With Brazil suffering its worst recession in a generation, organizers for the 2016 summer Olympics are pitching barter deals to prospective sponsors — and finding it an easier sell than big cash payments.
Taking a page from the previous summer games — when London, still reeling in the wake of the 2008 financial crisis, structured about half of its sponsorships in barter deals — Rio is increasingly turning to “value-in-kind” agreements. Rio had planned a 50-50 split, but organizers now are relying on a record of more than 60 percent barter for the 3 billion real in local sponsorship revenue needed to support the Games.
It makes sense. With the economy weak, not only are companies reluctant to shell out hard cash for the right to co- brand with the 2016 Olympics, they also have excess capacity Olympic organizers can put to good use.
“For me to go to a company now and say, ‘Hey get money out of your bank account and give it to me’ — it’s a very tough discussion,” said Rio 2016’s Chief Commercial Officer Renato Ciuchini. “We started seeing VIK as a much easier discussion.”
Value in Kind
Lacking sufficient hard cash, organizers will be looking for more deals like the one they recently inked with Aliansce Shopping Centers. Rio 2016 will take thousands of car parking spaces close to the games in return for allowing stores to be decked in Olympic signs.
“It’s valuable for Rio 2016 and the same for us,” said Ana Paula Niemeyer, head of marketing at Aliansce Shopping. “Certainly we are able to fulfill a need for them, and it’s an opportunity for us to use such a strong brand.”
She declined to disclose the value of the deal.
Similarly, Brazilian rental-car company Localiza has signed on as a sponsor. It will supply about 150 Nissan cars adapted for the 95-day cross-country torch relay and in turn use its Olympics tie-in to attract foreign tourists for rentals, said Herbert Viana, head of marketing. The 2016 Olympics logo will hang from car-rental counters, and a print and digital media Olympic campaign is in the works.
“Rio Is Behind”
Not all sponsorships can be paid for in-kind. Some 90,000 Olympics workers, including 5,000 staffers within the organizing committee itself, have to be paid in cash, and that cash has to come from somewhere.
If Brazil has turned out of necessity to the London model, it still has a ways to go, with the games starting in 10 months. A year and a half before the London games, organizers had already signed most of their sponsors, said Tim Crow, chief executive officer of London-based sponsorship consultant Synergy, which has worked on Olympic programs for two decades.
“By this time, London was in execution mode, not still looking for suppliers,” said Crow, whose games clients have included Coca-Cola and BMW. “It seems Rio is behind.”
As many as 10 new partners still might be signed before the games begin, though organizers aren’t expecting too lure another top tier partner like Nissan, Ciuchini said. Last month, organizers said they will scale back some operations to ensure they stay within the event’s 7.4 billion real budget.
One possible complication: Brazil’s currency has fallen 43 percent in the last 18 months. In dollar terms, the value of Rio sponsorships was $1 billion when the accounts were calculated in December. That figure is just $740 million today. With the deals all paid in real, foreign partners maybe getting more for their money, because the value of goods has increased in local terms.
What About Japan?
Rio’s cash crunch doesn’t appear to be part of a longer- term Olympic trend. In Tokyo, the host of the 2020 Games, Japanese organizers have already signed 14 so-called Gold Partners, which are all providing cash. Companies including Canon Inc., Nippon Life Insurance and Fujitsu are paying a minimum of 15 billion yen ($125 million) for their partnerships, according to Japan’s Kyodo News.
“Every Olympics is different,” Ciuchini said.
This article was written by Tariq Panja from Bloomberg and was legally licensed through the NewsCred publisher network.