USOC Is on Solid Footing

Three years ago, the U.S. Olympic Committee found itself wracked by an ethics-related scandal, prompting concern that sponsors might flee.

Two years ago, Peter Ueberroth, who as head of the 1984 Los Angeles Games created the model of Olympic financing that is still in use today, returned to the Olympic movement, agreeing to take over as chairman of a USOC board that had been made over in the wake of the scandal. He promised the USOC would sharpen its financial bearings.

Now, the USOC is perhaps the healthiest it has ever been financially -- a potential boon to U.S. medal prospects this month in Turin and two years from now at the Summer Games in Beijing.

The 2006 USOC budget calls for $172 million in revenue, a $37 million surplus over the budgeted $135 million in expenses. The USOC expects to achieve that surplus even while directing a 17% increase in funding to athletes and national governing bodies over 2002, the comparable year in the four-year Olympic cycle.

“The financial condition when the new board was elected was very unattractive,” Ueberroth said in a recent interview. “We were surprised to find that major bank loans were necessary to fund [ongoing operations], and that the United States Olympic Committee was basically in debt.”

For the years 2001-04, USOC revenue totaled $557.6 million, expenses $580.1 million, a $22.5 million deficit.

“Today it’s debt free,” said Ueberroth, who went on to describe efforts to build a powerful economic model. “The only corporations that should sponsor the Olympics are companies that are extremely competitive businesses and have the culture of wanting to be No. 1,” Ueberroth said. “That marries very well with the story of an Olympic athlete, and the public identifies with those sponsors.”

Paul Swangard, director of the Warsaw Sports Marketing Center at the University of Oregon, said the USOC’s financial resurgence underscores the enduring strength, power and resiliency of the Olympic brand.

“The Games create these compelling stories out of in some case thin air. That is pretty unique,” he said. “It’s a story that here in America everyone can relate to: it’s the hero in the making.”

The USOC’s financial status has afforded senior management the luxury of undertaking long-range planning, particularly with 2008 in mind.

After a 32-year break, China returned to the Olympic Games in 1984 in Los Angeles, and Ueberroth acknowledges that going to the 2008 Games will, in a sense, mark the closing of a circle for him. At the same time, Ueberroth is mindful that whatever happens to the American team in Beijing will happen on his watch.

The U.S. team won the medals count at the 1996, 2000 and 2004 Summer Games. But the Chinese probably will challenge the U.S. in 2008.

“The Beijing Games represent more than the premier sporting event they’re going to be to the world and especially the host nation,” Ueberroth said. “It’s a chance for China to take center stage in opening up their country and on the field of play. They obviously will be favored to win the medal count.

“On a personal basis, these Games will represent a full coming of age for China because it will only be 24 years since they came to ... [the 1984] Games in Los Angeles. I want them to be successful; I want them to be the best Games ever. But we’ll still compete in every way for each and every medal.”

In accomplishing its financial turnaround, the USOC employed tactics that might have come straight from a Business 101 textbook: cutting costs, refocusing business relationships and selling hard.

A full-time workforce that numbered 600 in 1999 has been trimmed to 380.

Sponsors, once viewed as cash cows, according to Jim Grice, USOC marketing director, are now seen as partners, with USOC staff on the lookout for ways that an association with the Olympics and the famed five-ringed logo can help drive sales.

Kellogg’s, for example, is now the “presenting sponsor” of a “junior Olympic skills” program -- enabling the cereal maker’s brand “to be in front of kids, moms and dads in a targeted way,” Grice said.

Another example: of the 211 athletes on the 2006 U.S. Olympic team, 33 work at Home Depot. The home-improvement retailer has sponsored a program through which aspiring Olympians can find work at its stores.

A number of new sponsors have signed on in the last 18 months, and the USOC is aggressively pursuing more, as companies begin to consider opportunities in China’s vast marketplace tied to the Beijing Games.

Sponsors expressed misgivings in 2003, amid congressional hearings and a slew of high-level USOC resignations sparked by an ethics inquiry into then-chief executive Lloyd Ward.

But most stayed put because they still saw the Olympic brand as a winning buy.

The lesson, numerous Olympic insiders said, is that the Games are about athletes, not administrators.

“It’s about those individuals that represent us, that represent society and, I think, that represent everything that’s right about sports and, frankly, what’s right about our society -- all of us being the best we hope to be,” said Michael Lynch, a senior executive at Visa, a longtime USOC and International Olympic Committee sponsor. “Which is why the Olympic rings sits on my business card today. It’s about being your best.”

Businesses that have come on board in 2004 or 2005 sounded much the same note. The events of 2003 played no role in deciding whether to invest in the USOC, they said.

“When we said we were going to be a sponsor, we learned there is a strong belief among many of our customers, among many people, even among many employees, that is a right bestowed upon you,” said Karen Jones, vice president of brand advertising and promotions at DHL, which signed up with the USOC in 2004. “No one looks at it as a traditional bought-for, paid-for rights sponsorship, for rights sponsorship.”