The business of winning

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Sports and money have been closely linked for thousands of years. Now there’s even more of both, but those providing the money want more results.

It is fitting that the first evidence of recorded sports should appear between 4,000 and 10,000 BC in China, now host to the 29th Olympic Games. In fact, evidence of competitive activity almost certainly goes back further than that, with hunting competitions and the preparation for warlike acts being recorded on cave walls across what is now Europe. But what appeared in China during that period was evidence that people were doing physical exercises to stay fit. Weightlifting, archery and gymnastics were all ancient Chinese sports, and these acts of stamina were soon the subject of organized competitions. And then came an added incentive in the form of monetary rewards for doing well or, for spectators, betting on the outcome. Even early sports could make athletes rich. The Greek author Plutarch wrote that the first Olympic victors would receive a cash prize of 500 drachmai, a fortune in 600 BC. And nothing showed the might of a ruler or a state better than to splash out lavishly on sporting events and venues to keep the populace entertained. The Colosseum in Rome has stood as proof for nearly 2,000 years that sporting events and money are almost inextricably linked.

For as long as sport has been for participators, it has also been for spectators. The Colosseum had space for 50,000. But what really brought sport to the people was the advent of television – and with it, an upward spiral in the costs of sport. The first televised events actually began with the 1936 Berlin Olympics, even though there were no TV sets as such and the organizers had to provide auditoriums with large screens. Within three years tennis at Wimbledon, a rugby match and the first college baseball game had been broadcast. Camera technology improved steadily throughout the 1960s, followed by the advent of colour TV.

Whole new spectator sports were created through TV – such as darts, for instance, and snooker. As the quality of coverage increased, so did the popularity of sporting programmes with advertisers – and hence, the cost of advertising spots. Football’s FIFA World Cup attracted a global audience estimated at more than 700 million in 2006; in the United States the Super Bowl has become one of the most-watched TV broadcasts of the year. In 2007, advertising space during the match was being sold for a reported 2.6 million US dollars for a 30-second slot. With all eyes firmly on those taking part, there are ever-richer pickings for sportsmen.

It’s easy to see what’s in it for those competing, but what’s in sport for a potential sponsor? Lloyds TSB bank is one of Britain’s biggest banks, and a tier-one domestic sponsor of the London 2012 Olympic Games. In return for its cash (which Sally Hancock, the company’s London 2012 Olympic Games sponsorship director, says represents less than 10 percent of the company’s marketing spend over five to six years) it will have marketing rights in the banking and insurance category for the United Kingdom’s Team GB (Great Britain) and Paralympics GB both in Beijing 2008 and in the Vancouver 2010 Olympic Winter Games, plus exclusive marketing rights for the London 2012 Olympic Summer Games. There will be plenty of branding opportunities, and the bank will also help with the promotion of tickets when they go on sale in 2011. In addition, it is allowed to use the official London 2012 Olympic Games brand name in conjunction with its marketing activities.

“There is a clear business rationale behind our investment,” says Hancock. “We want to be recognized as the best financial services company in the UK, and London 2012 provides a catalyst to achieve that.” Will it work? Lloyds TSB has previously been closely associated with sponsorship of the Six Nations Rugby tournament and the Rugby World Cup, which, according to Hancock, were extremely successful in raising Lloyds TSB’s profile amongst key target audiences at the time. But this time, the bank is leaving nothing to chance and has put in place a framework for measuring the responses to its involvement with the Olympic Games amongst customers and potential customers. When it comes to the business of sport, it aims to win.

Money and athletes

Gone are the days of that very English gentlemanly attitude to sport, when to take part was as important as the winning. Today’s sportsmen have one eye on the finishing line and the other one on the bottom line. Nothing spurs the struggle for success more than the promise of a large purse. Indeed, to attract the best sporting talent (and hence the most revenue from media and advertising deals), prize money may not be enough, and appearance fees are sometimes part of the package.

For being one of the world’s best golfers, Tiger Woods earned enough to put him at the top of Forbes 500 top sports earners (USD 100 million in 2007). In terms of winnings alone, tennis player Pete Sampras earned in excess of USD 43 million over his career to 2007, while Roger Federer picked up just over USD 10 million in prize money during 2007.

Money and sponsors

The modern athlete rarely gets anywhere today without sponsorship, and sponsors want their money to get results. At the top end of the remuneration scale, the value of sponsorships will far exceed the value of an athlete’s winnings. Management agency IMG, which looks after tennis champion Roger Federer’s interests, declines to say exactly how much the star makes in total earnings, but does concede that it is “substantial, the highest in tennis history.” In 2007 Federer’s sponsors included Nike, Wilson, Rolex and Gillette, in addition to having his own branded range of cosmetics.

Performance counts – both on and off the field. In 2007, Gillette swapped the world’s richest footballer, David Beckham, as the smooth face of its global advertising campaigns for Roger Federer, Tiger Woods and Thierry Henry. They were selected, the company said, not just for their sporting success, but because each embodied “true sporting values” and was a good example off the field.

Sponsors love a winner, as the then-relatively unknown hurdler Liu Xiang discovered after he won the 110-metre hurdles at the Athens 2004 Olympic Games. For being the first Chinese male to win a gold medal in a track and field Olympic final, Liu was given 3.5 million renminbi (some 320,000 euros), but his commercial pay-off is likely to exceed that figure many times over.

Money and Olympic cities

Governments are keener than ever to showcase their countries through such major sporting events as the Olympic Games. Los Angeles was the only city in the running in 1984, yet London had to fight off eight rivals for 2012. Twelve cities are said to be considering making a bid for 2016. But winning the organization of the Olympic Games is no guarantee of financial success.

For the first Olympic Games of modern times, held in 1896, the Greek government could not afford to build a stadium and relied on private donations to restore an ancient ruin as a venue. In the post-war gloom of London in 1948, athletes were housed in army barracks and had to bring their own food. The Montreal Games in 1976 left Quebec in debt for decades. But Tokyo in 1964, Seoul in 1988 and Barcelona in 1992 were all firmly put on the tourist map by their games, and Los Angeles in 1984 and Atlanta in 1996, both of which made use of existing facilities and corporate sponsors, made a profit.



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