Advertisers Going for Gold During 2016 Summer Olympics

  By: IBISWorld Procurement Research Analyst, Ashley Cruz

The 1948 London Games were the first Summer Olympics to be televised, reaching about 500,000 viewers who mostly lived within 50 miles of Wembley stadium. Comparing those figures to the estimated 3.6 billion people who watched the 2012 London Games from more than 220 countries and territories, it’s clear why the 2016 Summer Olympics have advertisers seeing gold. This year investors are wondering if Rio de Janeiro can match London’s unprecedented viewership, with many companies placing their bets on television advertisements for the 17-day event. Yet new rules and the ever-growing access to digital and social media are changing the advertising game in 2016, pushing companies to get creative when reaching out to their target audience.

Sponsoring Athletes Just Got More Lucrative

The International Olympic Committee (IOC) announced changes to Rule 40 of the Olympic Charter in early 2015, removing some of the advertising restrictions in place for competing athletes and non-official sponsors. Prior to this change these companies faced a media blackout — meaning that they could not run print, TV, radio or online advertisements that featured competing athletes — for a prescribed time frame around the dates of the games. The blackout also affected athletes, who faced bans and potentially losing their medals for willfully appearing in ads for the brands or promoting them on social media during the restricted period. The revised Rule 40 removed these restrictions, benefiting brands that sponsor individual athletes greatly, although only official brands are still allowed to use Olympic intellectual property such as the Olympic rings and terms like “games” and “gold.” Companies looking to take advantage of the rule changes were required to submit waivers as early as January 2016 and have their ad campaigns running by March. However, few companies were able to take advantage of the new rules because the deadlines fell prior to many of the qualifying trials that determine which athletes will compete, and running television ads from March through August is expensive. Nonetheless, the IOC’s rule change opens the door to non-official sponsors looking to increase their advertising presence during the Olympics, boosting demand for television ad space and cutting into the exclusive access typically held by official sponsors of the Games.

Advertising with Wide Reach, High Reward

The Olympics are television advertising gold, with around-the-clock coverage for 17 consecutive days and relatively cheap advertising space prices. Kantar Media estimates the average price for a 30-second advertising spot during the 2016 Olympics is about $100,000, a slight increase from the estimated $95,000 per spot during the 2008 and 2012 Summer Olympics. This amount is high compared to average television advertising prices, which IBISWorld estimates at $43,200 per 30-second spot, but low in comparison to other highly watched events such as the Super Bowl — which commands up to $5.0 million per spot, even though it reaches roughly half the audience of the Summer Olympics broadcast.

The higher-than-average price for television advertising during the Olympics is the result of significant demand for these coveted advertising spots. About 220 million Americans tuned in to the 2012 Summer Olympics, making it the most watched event in US television history. The audience is expected to be the same size, if not larger, for the 2016 Rio Olympic Games, due in part to the one hour time difference between Rio de Janeiro and the Eastern Time zone, meaning that many Americans will be able to watch events live without the ability to fast-forward through commercials. Therefore, demand for television ad spots is pressured upward further, with NBCUniversal — the exclusive broadcast network of the 2016 Summer Olympics —already generating an estimated $1.0 billion in total ad sales. Additionally, the IOC’s rule change means that companies can feature competing athletes in their ads this year, and utilize advertising tactics during the games that were previously only available to official sponsors. Although both official and non-official brands can benefit greatly from running ads that focus on US Olympic athletes, who most US viewers will be rooting for, the Rule 40 changes devalue the worth of official sponsor status and may discourage companies from investing in a greater capacity at future games.