Around 23.7 million people watched prime-time coverage of the 2014 Sochi Olympics Tuesday night when U.S. snowboarder Shaun White missed on a third-straight gold medal for the halfpipe event, a 17% jump in viewership from a comparable night of the 2010 Vancouver Olympics.
Those numbers are why advertisers compete for - and spend so much money on - attracting viewers' attention.
The International Olympic Committee (IOC) generated an estimated $1 billion in sponsorship revenue in the four-year cycle ending with the 2012 London Olympics.
Olympic sponsors, who are organized into one of four categories - worldwide and tiers one, two, and three - are picking up most of the advertising tab. In London 2012, "top Olympic sponsors (TOP)" paid more than $100 million in cash and "value-in-kind" goods and services for the right to participate, with the next tier paying $40 million each.
TOP sponsors in the 2014 Sochi Olympics are: McDonald's, Proctor & Gamble, Coca-Cola, Acer, Dow Chemical, Visa, General Electric, Atos, Omega SA, Panasonic, and Samsung.
In exchange for their costs, TOP sponsors get the rights to associate their brands with Olympic symbols worldwide during a particular Olympic time period.
But the corporate sponsors end up shelling out a lot more than just amount required to gain participation rights.
What Olympic Sponsorship Really Costs
Top sponsors are estimated to spend as much as $1 billion over the four years culminating in the Olympic Games, according to media-tracking company The Global Language Monitor.
"The rights fee is really on the right to spend more money," managing partner for sports marketing consultancy AMM John Ivey said to CNN.
For every $1 paid in sponsorship fees, the companies are spending an additional $3 to $4 for Olympics-related ad campaigns and product launches that take advantage of their exclusive rights to the Games, according to IMD business school president Dominique Turpin for CNN.
What kind of benefit are the TOP sponsors - and their shareholders - seeing for millions and billions in contracts and ad campaigns?
How the 2014 Sochi Olympic Sponsors Benefit
A quantifiable monetary benefit is impossible to pin down.
"It's very difficult to put a number on return on investment, and many investors are questioning the huge amount of money put into [sponsorship]," Turpin said.
But it's clear that companies see real value in being able to associate their brands with the Olympics. Marketing revenue collected from Olympic sponsors by the IOC has steadily increased with every Games, according to public relations firm The Hoffman Agency'sCaroline Reynon.
Less quantifiable benefits include the following:
- Brand visibility;
- Opening the door to fresh products and ad campaigns;
- Blocking out the competition from ad spots;
- Gaining local market share;
- And associating your brand with the human element of the games.
Advertising using the human element is powerful. In the 1940s and 1950s, ads were all about the product itself. But today, it's about emotions.
People don't buy Apple - they love Apple. We use words like "hate" and "love" when discussing brands. The Olympics, chock full of emotional highs and lows all coming to bear on the world's stage, is a rare opportunity for companies to earn an emotional association for their brands.
"Once the flame gets lit, the focus shifts to the athletes and the competition and that's what the sponsors pay for - the human element of the Games," said Ivey said to CNN. "That's what creates the value."
One company that clearly does directly benefit from the 2014 Sochi Olympics coverage is NBC.
Strong ratings have NBC confident it will be "comfortably profitable" coming out of Sochi. The network paid $775 million for coverage rights, and expenses are in the $100 million range, but it's profited more than $800 million in national sales ads and $50 million in digital ads.
The Sochi Olympics started Feb. 7; the closing ceremonies will be held Feb. 23.
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