News of the world | Tale of two cities: Olympics sponsors in Pyeongchang and Tokyo

Masahiko Sakamaki, executive director of marketing for Tokyo 2020, stands in front of the wall decorated with logos of Olympic sponsors

Pyeongchang is a little-known destination in one of South Korea’s poorest provinces. It is the ‘little town that could,’ bidding twice unsuccessfully for the Winter Olympics before winning on its third try. A final push enabled it to reach its sponsorship target of 940 billion won (USD830 million) in September, with just five months to go.

Tokyo is an established global capital, and the Summer Games usually generate more excitement — and more money. Organizers have raised 300 billion yen ($2.7 billion) in sponsorship, twice any previous Olympics. International Olympic Committee Vice President John Coates describes it as a remarkable achievement.

The divergent experiences of two Asian host cities illustrate the challenges that smaller bidders face, as well as South Korea’s dependence on the big family-owned companies that dominate its economy. Not that Tokyo is home-free. The cost of the 2020 Games has nearly doubled from initial projections. As with most Olympics, taxpayers will have to foot a good part of the bill.

Starting with the 1988 Seoul Olympics, South Korea has used mega- events such as the soccer World Cup to raise the profile of the country and its manufacturing exporters.

Pyeongchang is different. The project was initiated by local politicians in an area long alienated politically and economically in South Korea’s rise to prosperity. Some feared people would confuse the city’s name with Pyongyang, the North Korean capital. They couldn’t count on the automatic support of the huge family-run conglomerates, known as “chaebol,” such as Samsung, Hyundai and LG.

“When such mega-events were the nation-state’s key project, the chaebol were called on and were expected to become the leading participants,” said Joo Yu-min, a professor at the National University of Singapore who co-authored a book on South Korea’s use of mega-events.

In the end, the national government brought the conglomerates in, first in the bid process, and then for sponsorship. That underscores both the outsized role they play in the economy and their close ties with government. They owe a debt to special treatment from the government, which in turn used them to industrialize the country after the devastating 1950-53 Korean War.

After Pyeongchang’s bid was rejected a second time, the government called on Samsung and others to help. The president even pardoned Lee Kun-hee, the patriarch of the Samsung founding family who had been an IOC member but voluntarily suspended his membership after being indicted for tax evasion. The IOC reinstated Lee in 2010 with a reprimand and some restrictions, allowing him to lobby heavily for what became Pyeongchang’s winning bid in 2011.

It took three years for the organizing committee to sign its first domestic sponsor, KT Corp., the country’s second-largest mobile carrier. Again, the national government asked the conglomerates for help. All the major ones signed on, after the office of then-President Park Geun-hye made a special request and multichannel pressures for financial assistance, Joo said.

Elsewhere, companies may weigh sponsorship decisions based more on the marketing benefits. “In South Korea, companies make donations out of a sense of duty that they are being part of the national event,” said Park Dong Min, the executive director overseeing membership at the Korea Chamber of Commerce and Industry.

Sponsors who signed up late weren’t willing to give as much, because there was less time to enjoy the marketing benefits. A bank that signed on less than a year before the Games significantly reduced its sponsorship.

To top it off, a massive sports-related political corruption scandal rocked South Korea in 2016, just when Pyeongchang was making last-ditch efforts to raise sponsorship.

“Companies showed some reluctance” to sponsor the Olympics, said Eom Chanwang, director of the Pyeongchang organizing committee marketing team. “Nevertheless, they still joined.”

The scandal brought down Park, the president. Lee Jae-yong, the heir to the Samsung group, received a five-year sentence for bribery.

Lee, who has appealed, had become de facto chief of the Samsung group after his father Lee Kun-hee, the IOC member pardoned in late 2009, fell ill. It was the younger Lee who signed an agreement with IOC President Thomas Bach to extend Samsung Electronics’ sponsorship of the Olympics globally through 2020. Samsung declined interviews for this story.

With the scandal still fresh in people’s minds, major companies have held back from launching full-fledged marketing to promote the Games.

“Samsung traditionally has done consumer marketing through the Olympics, but because its chief is in jail, it cannot do as much these days,” said Kim Do-kyun, a sports professor at Kyung Hee University Graduate School of Physical Education.

The Pyeongchang Games were the biggest victim of the scandal, he said.

The president of Japan’s biggest toilet manufacturer was seven years old when the Olympics first came to Japan.

TOTO Ltd. made news in 1964 for its prefabricated toilet-and-bath units that helped speed the construction of a luxury hotel, the New Otani, in time for the Games. The company, now known for high-tech toilets that baffle some foreign visitors, is back as a sponsor of Tokyo 2020.

“I feel our company and the Olympics have been bonded by fate,” TOTO president Madoka Kitamura said at a sponsorship signing ceremony at the same hotel last year.

The $2.7 billion in sponsorship for Tokyo 2020 is more than three times the original estimate. By comparison, sponsorship revenue was $848 million in Rio de Janeiro last year, and about $1.2 billion for both London 2012 and Beijing 2008. The Winter Olympics typically attract less, though Sochi, Russia, raised $1.2 billion in 2014.

Analysts attribute Tokyo’s success to both patriotism and a sense of nostalgia for the 1964 Summer Games. They were much more than a sports contest for Japan. They were a moment of pride, marking the country’s return as an industrial power after the devastation of World War II and a seven-year U.S. occupation.

“All of Japan still recognizes the unique role that the 1964 Olympics played in Japan’s stepping out onto the world stage,” said Michael Payne, a former IOC marketing director who now works as a consultant. “Many of the CEOs of top Japanese companies would have been young kids back in ‘64 and are very aware of the role those Games played for the psychological recovery from the Second World War.”

They grew up with the high-speed “Shinkansen” bullet train, inaugurated in 1964; modern expressways and western-style toilets, all symbols of Japan’s postwar economic growth.

“Now they have become business leaders, they want to contribute and leave something behind that can be remembered for the next 50 years,” said Masahiko Sakamaki, executive director of marketing for the Tokyo organizing committee.

He said that memories of the recovery may have boosted interest in sponsorship, as Japan was still reeling from a deadly 2011 earthquake and tsunami when Tokyo won the bid in 2013.

Sakamaki said the organizing committee started receiving sponsorship inquiries as soon as it was established in 2014, before the official start of sponsorship contracts in 2015. There is so much interest that the IOC is allowing Tokyo to have multiple sponsors in some categories, instead of the usual one, including in aviation, newspaper publishing, electronics and banking.

TOTO officials won’t say how much they are contributing, but media reports say companies in its sponsorship category give between 6 billion and 15 billion yen ($53 million to $133.5 million). Tokyo 2020 wouldn’t comment on those reports.

“We believe our presence as part of an all-Japan effort toward a successful Olympics will enhance our favorable brand image,” said Mariko Shibasaki, the company’s senior planner for sports communication.

Thanks in part to robust sponsorship revenue, the organizing committee has increased its contribution to the cost of the games from 500 billion to 600 billion yen ($5.3 billion). The sponsorship revenue makes up half of the income in the privately-run organizing committee’s operating budget.  Other revenue comes from the International Olympic Committee, marketing and ticket sales.

The overall cost of the Tokyo Olympics is estimated at 1.4 trillion yen (12.4 billion) with the Tokyo government shouldering 600 billion yen ($5.3 billion) and the remaining 200 billion yen (1.8 billion) paid by the national government and local governments hosting events. Youkyung Lee & Mari Yamaguchi, AP, Seoul