VP Networked Insights
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Perhaps more this Olympiad than in any previous, fans and media have focused on the economics of the Olympic Games. From Brazil's budgetary woes and the I.O.C.'s role in them to numerous brand spats about sponsorship rules and the boundaries between promotion and personal communication, the root of these debates mostly traces back to a simple marketing question: what is the brand value of an Olympian?
While it may not be an altruistic point of view, an Olympian has value if he or she helps a brand sell product and/or build some greater brand equity that – at some point in the future – will also sell product. So how much product can an Olympian realistically move, and what is that worth to a brand?
The answer stems from three pieces of data:
- The brand's revenue potential around the Olympics
- The marketing cost necessary to achieve that revenue potential
- The Olympian's role in connecting with the opportunity audience for that revenue
Keying off the recent public attention garnered by niche running apparel brands Brooksand Oiselle, I explored the value Olympic track & field stars bring to the running shoe & accessories market.
Using data from multiple market researchers, including NPD and SportsOneSource, and public filings from Nike, Under Armour, Adidas and other running-related brands, I estimate the total running market generated $6.96 billion in U.S. revenue in 2015. Competitive runners are worth more to the market, spending nearly $200 on their hobby; leisure runners are worth less, spending about $110 per year. This difference is important to the value an Olympian brings to the market, as I will demonstrate later.
Using data from public filings and Ad Age's Top 200 National Advertisers list, I estimate that running industry brands spent 9.9% of running-product revenue ($690 million) in 2015 to entice running consumers to buy. This $690 million in spending generated 39.4 billion ad impressions (including all paid channels except out-of-home and including earned impressions from social media mentions). Every time a consumer sees an ad or a mention of a brand, it counts as an impression – so a TV program viewed by 5 million viewers, which airs two ads for a pair of running shoes during the program, would generate 10 million of the 39.4 billion impressions mentioned above. (This calculation is also important to the value an Olympian brings to market.)
Running brands have achieved marketing scale and are fairly efficient with their advertising; it takes a little more than 800 impressions to win a year's worth of consumer purchases – this ratio was about the same, whether the consumer was a competitive runner or leisure runner.
Which brings us to the Olympics as marketing spectacle, and the value of the Olympic athlete as brand ambassador… Using NBC's reported data from London 2012, counting average daily viewers of the broadcast programming and live streams of events, I estimate 33.3 million U.S. viewers will be exposed to Olympic track & field athletes wearing Nike uniforms and a plethora of shoe brands. This number may be even higher if NBC generates higher viewership for Rio – which it might because of the more favorable time zone compared with London. Using Networked Insights' historical social media data from 2012 I anticipate 205.4 million social media conversations about the events and athletes during the days on which track & field will be contested. With 44 track & field events (most with multiple qualifying rounds per event), and most U.S. athletes expected make it through at least one qualifying round, the Olympics may generate 3.5 billion impressions for running brands during track & field's 10-day run. That's the equivalent of 8.9% of the ad impressions the industry typically generates annually.
But to truly understand what this means for an athlete's value, we have to dig one layer deeper into understanding the makeup of the audience watching track & field events. I built and explored a "Competitive Runner" audience using Networked Insights' Kairos marketing analytics platform. I explored how competitive runners were talking about the Olympics in a 90-day span leading up to the games. Competitive runners were already sharing Olympic content, Olympic Trials results, and athlete news at a rate 9.3x greater than the general public.
When we model this high level of engagement against general projected viewing rates, I expect that nearly 54% of the 18.2 million competitive runners will tune in for Olympic track & field (9.8 million viewers). If the leisure runners behave in line with the typical U.S. consumer (that is to say, only casually interested in track & field, at best), they will add another 3.2 million viewers to the tally – bringing the total number of viewers with a proclivity to buy running products to 13 million of NBC's 33.2 million viewers. Even more compelling, the bulk of those 13 million consumers belong to an audience that's known to spend more on running products than most consumers. (Thus they are weighted higher in our value calculations below.)
So what are the Olympic track & field athletes worth? Because some athletes will garner more air time because they participate in popular competitions – like the 100-meter dash – or because some athletes will be profiled by NBC because of their unique backgrounds, the official answer is: "It depends." But using what we know about the number of brand impressions they will generate, the number of impressions it takes to convert a running products consumer, and the average dollars spent by that consumer, we can develop a baseline. By my calculations, the average U.S. Olympic track & field athlete generates $95,006 in profit for the running products category at large.
Is $95,000 a good number or a bad number if you are a brand or an athlete? If you are a brand not named Nike, this number may be bad. Because Nike is an official sponsor of the Olympic Games, it is the only brand displayed on athletes' uniforms during competition. So non-Nike sponsored athletes cannot represent their brand (except with their racing shoes), which in theory means the brands are missing the premium exposure the Olympics brings – and its corresponding profit.
By association, this may also be bad for athletes because non-Nike brands may pay less in sponsorship fees. This isn't always the case, but if a brand knows its athlete can't wear its product on the world's biggest stage, it certainly might factor into the decision. Worse yet, because of Rule 40, non-Nike brands cannot mention anything about their athletes' participation in the games, their results at the games, or mention anything about the games at all. Thus they cannot use social media and other nontraditional earned or owned ad platforms to recoup some of the lost investment – even the athletes themselves can't tweet or post anything mentioning their brand during the Rule 40 blackout – it is this restriction that has brands like Brooks and Oiselle in the crosshairs of the U.S.O.C. and speaking out/acting out publicly against the nature of the rule. (It has running fans speaking out as well.) Ultimately changing Rule 40 to allow athletes to represent multiple brands would likely be beneficial for the sport – for reasons beyond the scope of this post.
If you are an athlete, however, the $95,000 number may also be good. It has beensuggested in recent media reports that many track & field athletes' endorsement deals are far lower than $95,000 and this number does not take into consideration the value they bring to foreign markets – where track & field is much more popular than in the United States. So $95,000 is underselling the athletes' value on a global basis, perhaps by as much as half. This might be a valuable negotiating point for athletes and their agents. Even though the ratings and ad-impression bonanza that the Olympics creates for track & field comes but once every four years if the global value of the average U.S. track & field athlete was closer to $200,000 in Olympic years, and the athletes could represent multiple brands through the lead-up and duration of the Olympic Games, the four-year blended salary would be much more comfortable than what some athletes live on today.
Given the level of engagement the Olympics generates among a core U.S. opportunity audience for running products brands, it makes sense for the U.S.O.C. to revisit Rule 40, and if they do, it will make more sense for running brands to pay up for the athletes.