U.S., European firms compete for prestige and profit in Olympics

Olympic boost extends beyond China

U.S., European firms compete for Olympic prestige and profit

By William Spain & Sarah Turner, MarketWatch

Last Update: 12:01 AM ET Mar 27, 2008

CHICAGO (MarketWatch) — While Chinese firms are at the financial and geographic
heart of the 2008 Beijing Olympics, plenty of U.S. and other foreign companies
are mining the Games for gold, too.

From infrastructure to ad sales, this global event has provided bountiful
opportunities for corporate profit and some of the biggest names on big boards
here and abroad have leapt at the chance to take advantage.

While it is paying heavily for the privilege — $1.5 billion in fees for the 2006
Winter and 2008 Summer Games combined — General Electric’s (GE) NBC Universal is
apt to make that back, and more, via selling hours of ad time across multiple
platforms for one of the few events that can still draw a mass television
audience.

Ad spending on TV, including network, cable, local and spot, hit $1.5 billion for
the 2004 Olympics in Athens, up from $1.3 billion during 2000 and just under $1
billion in 1996, according to TNS Media Intelligence.

And with the Peacock Network readying exhaustive coverage over a two-week span,
it is apt to set yet another record. Most of the available time has already been
sold, with top sponsors including AT&T (T), Coca-Cola (KO), McDonald’s (MCD),
Anheuser-Busch (BUD), General Motors (GM), Procter & Gamble (PG), Kraft (KFT) and
Target (TGT).

Indeed, the Olympics and the general election may well be the only things holding
up overall ad spend this year as many companies begin to trim marketing budgets
as the result of the economic slowdown. TNS forecast a 4.2% increase in total
U.S. ad spending for 2008, with most of that loaded into the second half the
year. This week, the ad tracker estimated that spending for all of 2007 was up
juts 0.2% — and it actually fell slightly in the fourth quarter.

Much of the Olympic-related ad spending will be funneled through the large ad
agency holding companies like Omnicom (OMC), Interpublic (IPG), France’s Publicis
and London-based WPP, all of which can expect a top- and likely bottom-line bump
from Beijing. In addition, WPP-owned Hill & Knowlton is the organizing
committee’s public relations and communications firm.

“It’s not necessarily a big money earner,” said Keith O’Brien, editor of trade
magazine PRWeek. “But it’s prestigious. And agencies often want to rep [Olympic]
host countries to expand their global brand.”

Credit Suisse has noted that Publicis (FR:013057) is likely to get a lift from
the summer Olympics, while WPP (WPP)(WPPGY) has already said its performance in
2008 will get a boost from the games.

Microsoft (MSFT) is also getting into the act, announcing earlier this year a
joint venture with NBC that will deliver live and on-demand Internet broadcasts
on MSN, which is also the official site of the 2008 Summer Olympics in Beijing.
Viewers will be able to access to more than 3,000 hours of content for free using
“Silverlight,” a program the software behemoth describes as a “cross-browser,
cross-platform plug-in for delivering high-quality video experiences on the Web.”

By the time the games begin, China will have spent an estimated $40 billion on
new venues and other infrastructure to support the thousands of athletes, coaches
and dignitaries during the competition.

On a more concrete footing, hotel operators like Marriot (MAR) and airlines like
United (UAUA), the latter as the official carrier of the U.S. Olympic Team, can
expect to see brisk traffic during the Games.

Marriott already has 26 hotels in China — seven in Beijing alone — and expects
to have more up and running by the opening ceremonies.

“Our Beijing hotels are essentially sold out for the Olympics,” said spokesman
John Wolf. “Before the games begin, we expect three more hotels to open under our
Marriott, Renaissance and Courtyard brands with the Courtyard to open very soon.
We anticipate heavy demand for rooms in these properties when they go on sale.”

Also cashing in: United Technologies’ (UTX) Otis unit, which scored a $100
million contract to install 1,300 elevators, escalators and moving walkways at
Olympic venues and related infrastructure projects. Of course the company is no
latecomer to the market, points out spokeswoman Elizabeth Young. It first shipped
elevators to China in 1888 and established a joint venture as early as 1984. It
currently has operations in 165 locations in almost 40 cities and with 7,000
employees, “we now have one of the largest footprints of any company in China.”

European companies are also very much in the game, with sponsors including German
sportswear maker Adidas, car maker Volkswagen (DE:766400), Anglo-Australian
mining giant BHP Billiton (UK:BLT), (UK:BLT)retailer Kingfisher (UK:KGF) and
banking group Lloyds TSB (LYG)(UK:LLOY).

Adidas (DE:500340) is looking to be on the top beneficiaries, according to some
industry watchers.

“The group’s media presence this year is likely to be enormous, and there are
also clear positive financial implications … the marketing effect at the
Olympic games should be significant, helping to reach the target of 1 billion
euros ($1.6 billion) in sales for the Adidas brand in 2010,” wrote analysts at
Deutsche Bank.

Societe Generale agrees, noting that “the positive short-term momentum linked to
sports events should benefit Adidas more than any other players thanks to its
ideal positioning as world leader in soccer and official sponsor of Beijing
2008.”

German consumer electronics firm Medion (DE:660500), which makes low-cost
computers, televisions, refrigerators, toasters and fitness equipment, is also in
for a shot in the arm, according to Credit Suisse.

“The super sport event year 2008 (Olympics and European Football Cup) should
support the 2008 business with regards to large-screen high-definition LCD TV
sets,” the brokerage said.

European firms that have snared contracts related to the games include Swedish
telecom-equipment maker Ericsson (ERIC)(SE:ERICB) and U.K. temporary power
supplier Aggreko (UK:AGK), also a sponsor of the games.

Aggreko has a $35 million deal to provide up to 160 megawatts of power across 40
Olympic venues in six cities: Beijing, Shanghai, Hong Kong, as well as coastal
city Qingdao, on the Yellow Sea, port city Qinhuangdao, and Tianjin, which boasts
the third largest urban area in the country.

It will also supply power to the opening and closing ceremonies at the National
Stadium in Beijing as well as field-of-play lighting and camera equipment and to
the international broadcasting center.

U.K.-based hotel chain Millenium & Copthorne (UK:MLC) has opened a hotel in
Beijing in order to benefit from the games. The Grand Millennium Beijing is a
521-room 27-floor hotel located in the heart of Beijing’s financial and business
district, it said.

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