Japanese sponsors poured $3 billion into the Tokyo Olympics. What will they get in return?

fortune.com -- Jul 23
Japanese corporate sponsors of the Tokyo Olympics have poured $3 billion into the Games, the largest-ever amount contributed by domestic companies.

But even before Friday's Opening Ceremony, firms began scrapping advertisements and canceling plans for officials to attend the COVID-era Games.

On Monday, Toyota Motors, whose multi-year contract with the Olympics is valued at almost $1 billion, announced it won’t air Olympic-themed television ads in Japan. It also said company president Akio Toyoda will skip the Opening Ceremony, despite the spectator-less event being open for VIPs like company executives and foreign dignitaries.

Toyota chief communications officer Jun Nagata told local media the 84-year-old carmaker scrapped its Olympic campaign in deference to the Games' unpopularity among Japanese consumers. Toyota will continue to support the Games and athletes via other means, such as providing electric vehicles for transportation during Tokyo 2020; its Olympic TV ads will continue to run in other countries.

Other Japanese companies are following Toyota's lead. The day after the carmaker's announcement, sponsors Fujitsu, NEC, and Nippon Telegraph all said they wouldn’t send company officials to the Games. Executives from other sponsors Panasonic, Nippon Life Insurance, Sumitomi Mitsui Financial Group, Meiji Holdings and Asahi Group won’t be in attendance either.

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“Pre-pandemic, Tokyo 2020 was extolled as a means to promote ‘brand Japan’ and to regain the country’s status as a global technology leader," says Ben Ascione, assistant professor at the Graduate School of Asia-Pacific Studies at Waseda University in Tokyo.

But now the Games have become a "liability for domestic sponsors who are seeking to distance themselves from the event. [Companies have] decided that the potential advertising benefits are outweighed by concerns of reputational damage," he says.

At the top of the Olympic sponsorship pyramid is the 'worldwide' tier: multi-year contracts that span multiple Olympic Games. Only two Japanese firms, Toyota and Panasonic, are on this list of thirteen companies. Toyota's contract for instance, is valued at nearly $1 billion and extends to 2025. Some say that long-term sponsors could still stand to gain. Davis says that reimbursements are unlikely to be written into contracts, whereas "rolling the investment into support for the next Games" is more probable.

But the majority of the domestic firms that have plowed money into the Tokyo Games are 'gold' sponsors, meaning their Olympic affiliation only applies to the 2020 (now 2021) event. An oft-cited price tag for these contracts is at least $100 million. While the terms of each sponsorship vary, a basic package would include association with the Olympic brand, says Michael Payne, chairman and CEO of Payne Media Strategies, a sports consulting firm. This means brands can use the word 'Olympics' and the logos and imagery synonymous with the Games for physical and digital advertisements and social media marketing campaigns. Sponsors are also allotted a certain number of 'hospitality' tickets, to be used for ticket giveaways and to entertain clients. Extra add-ons include options like TV spots, which gold sponsors like Nippon Life Insurance have opted for.

- fortune.com