“If you were going out [to the market] today, you probably wouldn’t be doing a fast food sponsorship,” says the man who negotiated McDonald’s entry into the International Olympic Committee’s top-tier ‘TOP’ sponsorship programme some 20 years ago.
Michael Payne, for over 20 years the IOC’s marketing and broadcast rights director, and now a high-profile and frequently-quoted independent sports industry consultant, is speaking to me in Lausanne, where he’s scheduled to have meetings that evening with senior executives from Alibaba, the Chinese e-commerce giant that joined the TOP programme in an 11-year deal in January.
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By his own estimation, it was Payne who enabled that deal,
albeit working on the side of the sponsor, not of the IOC, this time. More of
that later.
When I raise the issue of McDonald’s, Payne’s first response is to repeat a comment he made on social media as the story of McDonald’s withdrawal from TOP broke a couple of weeks ago, deploring the hypocrisy of media coverage of McDonald’s Olympic sponsorship. ‘McDonald’s fast food fit with Olympic health values was often criticised by the media, now media howling no more Big Macs at press centre’, said Payne’s post.
It’s clear we’re on sensitive territory here. On the one hand, Payne admits – indeed, insists – that marketing programmes cannot stand still and must reflect society and its changing concerns. On the other, he’s proud of the work that he and others did in bringing mega sponsors like McDonald’s to the table (no one could ever accuse Payne of not taking pride in his work), and frustrated by the lack of historical “perspective” of those who would seek to criticise.
Asked about the climate in which the original deal was agreed, Payne says: “I don’t think the health food agenda and debate was a major issue on the radar back then. Maybe once the lawyers had finished settling the tobacco cases [it seems almost inconceivable now, but the Olympic Games actually used to have tobacco sponsors], then they looked for a new dog to hunt.
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By GlobalData“With social media also came a greater awareness of individual health, and issues such as sugared drinks. But you need to be careful saying sports should never have sponsorships with Coca-Cola or McDonald’s [the Olympics have had both]. Where do you draw the line? If you were going out today you probably wouldn’t be doing a fast food sponsorship. Plus, the IOC can afford to say that [now]. Thirty years ago, it couldn’t afford to.”
The near bankruptcy of the IOC at the start of the 1980s (Payne joined in 1983) and the seeming lack of a future for the Olympic Games at the time was the starting point for Payne’s book, Olympic Turnaround, published in 2005, so he’s more aware than most of the (potential) precariousness of the IOC’s financial position. But he goes further, insisting that, even now, companies and brands aren’t exactly jostling to sponsor the Olympics. “It’s easy to say McDonald’s is inappropriate [as an Olympic sponsor],” he says, “but this is the IOC’s sole source of funding. There isn’t a queue of TOP sponsors; it’s a fallacy!”
You need to be careful saying sports should never have sponsorships with Coca-Cola or McDonald’s. Where do you draw the line?
Actually, sponsors are not, of course, the IOC’s sole source of funding. Broadcast revenues total about four times the amount brought in by the TOP programme. So for the four-year cycle leading up to the Rio 2016 games, the IOC estimates that its broadcast revenues were about $4.1 billion, versus estimated TOP sponsorship revenues of $1.02 billion (although Payne argues that sponsorship deals agreed by the local organising committee for each games should also come into the equation).
Still, why does the IOC always appear so beholden to its sponsors, when they only provide a fifth of its revenues, I ask? This does not go down well with Payne. “Just because the CEO of a TOP sponsor has an Olympic accreditation” doesn’t mean he is being unduly favoured, he says. “He’s one of the key funders, so you look after him – but not to the detriment of the athletes. It’s the athletes first, then the broadcasters, then print – then the sponsors.” Interesting pecking order.
Anyway, Payne has his own theory about how and why the McDonald’s TOP deal was ended, mid-term. “The McDonald’s partnership had run for 20 odd years as a TOP programme,” he says, “but the relationship went back even further to 1984 [McDonald’s was first engaged to supply burgers to US athletes at the Los Angeles Olympics in that year].
“It worked well for McDonald’s and for the Olympic movement, but in recent years the partnership became ever more strained,” Payne continues. “McDonald’s wanted an ever broader vision of the category – ultimately, food – and it became ever more complex to manage. LOCs often couldn’t enter into local sponsorships [with potential food sponsors, as a result]. Just because McDonald’s makes cheeseburgers doesn’t entitle them to own the category ‘cheese’. If you have an Olympics in France [Paris looks set to host either the 2024 or 2028 Olympics], you go and tell [organisers] they can’t have the category ‘cheese’.”
What happened, Payne thinks, is that “Someone at McDonald’s might have said the relationship had become difficult, and the IOC agreed. Combine all of that with the growing question mark over whether the fast food category was an appropriate partnership for the movement, based on fitness, sport and health. But there’s a caveat: McDonald’s did some of the best sports inspirational advertising ever seen. Also, some of the worst. Plus they used the Olympics to pioneer healthier eating with McSalads.
“Twenty to 30 years is an incredibly long time. The idea that McDonald’s walked, and the IOC had no incentive, despite a binding contract, to let them walk away… It happened because it made a lot of sense to the IOC.”
So what about Coca-Cola? At a time of worldwide concern over the growing obesity crisis, has the time also come for the IOC to end its association with the company best known, by far, for a sugary, fizzy drink? “Coca-Cola also makes sports drinks and fruit drinks,” Payne replies. “Coke is one of the biggest sponsors of sport in the world. I don’t think that time has come.”
But then, emphasising the need for the IOC to keep embracing change, and undermining the apparent certainty of his answer over Coke’s future as an Olympic sponsor, Payne adds: “Who would have forecast 50 years ago that companies involved in data and the cloud [Alibaba] and drones [Intel] would be Olympic partners? The world is changing fast and society’s standards are permanently changing to adapt to that. When TV came along, [former IOC president] Avery Brundage said at first, ‘We’ve lived perfectly well without it’.
Coca-Cola’s relationship with the Olympics dates back nearly 90 years. “Clearly, with partners who have been with you for a long time, you respect them,” Payne says. “If McDonald’s hadn’t been so aggressive about its category claim, if it had really used the athletes’ village to reinvent menus, there was nothing wrong with that partnership.
“McDonald’s has got to change its associations or its business will slowly struggle. It is struggling. So as the Olympics change, the companies have to change their focus. Take Red Bull: it’s one of the biggest partners of sport and no one questions it – except in the countries that are trying to ban it.”
There are a few apparent contradictions here, but I think what Payne’s saying is that brands, like the Olympics, can’t stand still and have to move with the times or risk redundancy. In his estimation, Red Bull is doing so and McDonald’s isn’t – or at least, not fast enough. Coke? We’ll see.
In any case, it’s hard not to conclude, with the addition of the likes of Alibaba and Intel to the TOP programme, along with the withdrawal of McDonald’s, that a shift is taking place away from classic multinational consumer brands towards more technology-based, business-to-business ones that, by their nature, are leaders of change.
“You need to keep a balance,” is Payne’s assessment. “If it’s all consumer brands you’re missing an opportunity. But all business-to-business would also be missing an opportunity.” The Alibaba and Intel deals are “real integrated partnerships,” he says, adding: “The games were always a great showcase for new technology, thinking and ideas. It’s exceedingly refreshing to have major new players with an understanding of the potential power of sport as a business marketing engagement platform. But that’s not to say they’re replacing consumer brands. Forty or 50 years ago, TV was a small box, and cameras filmed at a distance. Now we see Intel’s evolution and pioneering with drones and how it will help OBS [the Olympic host broadcaster] get ever closer to the action and make it more visual. It’s all designed to engage viewers in the sports entertainment experience.”
As for the Alibaba deal, Payne claims it is about much more than simply creating an e-commerce partner for the IOC for the first time. He got involved as an adviser in the deal through Shankai Sports, the Chinese sports agency with offices in Switzerland, which had been asked to facilitate a meeting between Jack Ma, Alibaba’s powerful and influential founder, and the IOC.
“I believed that potentially there was a very, very big play here that initially started with e-commerce,” says Payne, who is not shy of taking credit for the deal, as his many social media posts on the subject reveal. “I always felt there was an important opportunity with e-commerce, not just from a revenue standpoint but from the point of view of [the Olympic Games’] brand position in the marketplace. I was never able to establish it [when working at the IOC], primarily because we spent too much time worrying about the media and TOP programmes, and it kept going to the bottom of the queue. But when I looked at what Alibaba represented, I saw it could be a vehicle for much more.
“People are only beginning to fully understand the potential of what the [Alibaba] partnership means, way beyond TOP. From a partnership standpoint, it’s the most significant deal the IOC has ever signed.
“People are only beginning to fully understand the potential of what the partnership means, way beyond TOP. From a partnership standpoint, it’s the most significant deal the IOC has ever signed. When I sat down with Jack Ma, I said the first revolution in the sports world was TV in the 1950s and 60s, which transformed the ability of people to follow their favourite team or sport. The second revolution was sponsorship in the 80s, and the funding it brought to sport.
“Now we’re on the cusp of a third revolution: data, and its ability to empower communities. On the basis that Alibaba will drive data through e-commerce, through the cloud and through transformational technology, from a marketing engagement standpoint and potentially a revenue standpoint you’re opening up new areas that until now are untapped. This is the furthest thing from acquiring a set of rights. Yes, there are important benefits [for Alibaba], but the benefits back to the Olympic world go way beyond. It’s truly game-changing.”
Asked for an example of how Olympic stakeholders will actually experience this step change, Payne, who’s now really getting into his stride, says: “A lot of people think Alibaba is the Amazon of China. In fact, it’s Amazon, Google and Facebook all in one. [It will enable] smart broadcasting, the customisation of broadcasting, the ability to feed you with exactly what you’re interested in. I’m interested in ski trekking, so it’s the idea of giving you content you’re interested in and creating a community you’re interested in. You may not know that in the next village is another ski trekker. The creation of community through the power of data will allow for much deeper engagement with sport, whether as a fan or participant.”
Payne’s other clients include: Bernie Ecclestone, the former Formula 1 promoter (he says he was offered the opportunity to advise Liberty Media, F1’s new owners, but declined); the FIVB, the international volleyball federation; LA 2024, Los Angeles’ bid to host the 2024 Olympic Games; Sir Martin Sorrell, the chief executive of advertising giant WPP, himself an adviser to the IOC; Australia’s Channel 7; and Samruk-Kazyna, Kazakhstan’s sovereign wealth fund.
One sports industry executive Payne does business with says that it’s his reliability that makes him stand out: unusually, in the business he’s working in, for example, he always returns telephone calls and emails punctually. So how did he get to the position of having an enviable list of clients, houses in Lausanne (a “big house,” which he’s now trying to sell, he says), plus Verbier, the Costa Brava and London (a “small mews house”), and a reputation for always doing what he says he’s going to do?
He was born in London in 1958 and went to the private Highgate School in north London. While he was there, Payne’s father, who worked in public relations, “had a role in building a plastic ski slope where I learned to ski.” In an ambitious scheme which now seems hard to credit, the demountable ski slope was sited at high-profile London venues like Lord’s cricket ground and Alexandra Palace. Payne quickly graduated to summer grass skiing, joining the Great Britain team at the age of 15, and competing against skiing greats like Italy’s Gustav Thoni.
The day after completing his A Level exams, Payne moved to Austria to try to make his way as a professional freestyle skier (or ‘hotdogger’), for which skiers at the time, the mid-1970s, had to seek their own funding through personal endorsement deals with sponsors. It turned out, he says, that “I was a lot better at finding sponsors than winning competitions,” and after a couple of years of doing deals for his fellow competitors, he decided to make the nascent sports marketing business his career.
At the time, the two best-known sports agencies were IMG and West Nally, the UK agency founded by sports marketing pioneer Patrick Nally and BBC presenter and sports commentator Peter West. Payne applied to both, and was offered a job by West Nally, where he “spent five years learning the fundamentals – I was fortunate to be in the industry at the ground floor.”
He joined the IOC in 1983 by way of ISL, the now-defunct
sports agency that nurtured the careers of so many executives still working in
the sports industry, where he helped create an Olympic marketing department
(his departure from ISL came long before its eventual collapse in a major
bribery and corruption scandal, of which he was unaware during his time there,
he says).
Having made his name at the IOC during a tumultuous 20 years in which, as he says in Olympic Turnaround, ‘The goal was to design a marketing strategy for the Olympic Games that would save the IOC and the Olympic movement from bankruptcy and, in the process, avoid selling the Olympic soul to Mammon’, Payne left to join Formula 1 and Ecclestone as an adviser. That job now looks like coming to an end as the 86-year-old gradually extricates himself from the complex structures he has built around himself over close to 50 years.
Having watched the handover of power to Liberty Media at close quarters (he’s travelling to London the day after our interview for more meetings with Ecclestone), Payne is unsurprisingly sceptical of the approach of the new owners, but contents himself (on the record) with saying: “It was never going to be an easy transition, in any organisation or structure where you have someone who was the founder and ran it for 40 or 50 years, then transitioned to new ownership and management. The US team is now running a global franchise.
“Bernie as an individual is irreplaceable, so the decision to split his role between Ross Brawn, the new managing director for motor sports, and Sean Bratches, the new managing director of commercial operations, was arguably the only way to go. They’re still in the honeymoon period and dealing with the low-hanging fruit.”
The surprise to many observers was that Ecclestone, a
famously shrewd commercial operator, left such fruit to hang (critics say he
was uninterested in digital and social media developments and failed to exploit
the potential for race and series sponsors).
Payne, who after all was Ecclestone’s adviser on commercial issues for the last 14 years, does not deny this, but says: “With digital and social media, Bernie didn’t want to undermine the TV rights.” He tells an anecdote of trying to alert Ecclestone to the opportunities he was missing, to which Ecclestone replied: “Michael, leave it to my successor; leave some money on the table.”
Payne continues: “If you look at the long term, the $8 billion needed to service the banks and offer a return on investment [after the Liberty Media acquisition], that’s a very steep mountain to climb to significantly grow revenues. When statements are made about going back to free-to-air TV, yes, but free-to-air won’t pay the same. When they say they’re charging [race] promoters too much money, yes, but how do you fund the current investment debt process, never mind grow?”
As for the missed sponsorship opportunities, Payne says, “I would agree, but again the core mindset from Bernie was that TV, hosting fees and the Paddock Club [the F1 hospitality programme] were the principal drivers of revenues. Better to let the teams have a freer hand at chasing sponsors. Only when the new deal [between Formula 1 and the teams] came along with a dramatic increase in revenues for the teams did it start to become feasible [for the series to seek sponsors], otherwise it would have been competing with the teams. When I joined Formula 1, the teams got less than 40 per cent [of the revenues]; now it’s over 70 per cent.”
Having turned down Liberty Media’s offer to remain involved with Formula 1, it’s looking like Payne will continue to remain most closely associated with the Olympics. Last year’s games in Rio de Janeiro (he acted as an adviser to the Rio bid as well) were “unquestionably the most difficult and challenging Olympics ever,” he says. “The legacy stories will continue to be unfortunately negative. Yes, there was a perfect [economic] storm in Brazil, but the other half was a complete failure of management of the organising committee. I say that as someone who was a key adviser originally in bringing the games to Rio.”
As such, Payne is a keen supporter of the IOC’s present direction of travel which looks likely to result in the 2024 and 2028 games being staged by Los Angeles and Paris, with only the question of which city stages which games yet to be determined. “One’s got to recognise that confidence in the current hosting process is broken, and understand why it’s broken,” Payne says. “A lot of it is driven by a lack of understanding of the real facts as to what it means to host the games. There is a significant amount of distorted news [you get the feeling here that he avoids the ‘fake news’ construction by a hair’s breadth].
The IOC has not been aggressive enough to ensure a proper understanding of what does it really mean to stage the games?
“It doesn’t cost $50 billion to host the winter Olympics. Putin thought he was doing the Olympic movement a favour by saying how much he was investing [in hosting the 2014 winter Olympics in Sochi]. The IOC has not been aggressive enough to ensure a proper understanding of what does it really mean to stage the games? Combine that with rapidly-evolving social media, and it’s exceedingly difficult for any local politician to say it’s a good idea. It’s easy for local movements to hi-jack the agenda.
“Awarding the two together buys you time, combined with the fact that they’re two tremendous cities. Whoever was going to lose 2024, we might as well count out [of the Olympic bid process] for a generation or more. Both cities had bid repeatedly. The IOC can’t afford to lose those two great cities. I came from a period where there were no cities bidding. The only thing different from 1984 is the IOC has a lot of money in the bank and is not facing bankruptcy. LA in 1984 gave the confidence for Barcelona and everyone else to move forward. You need to re-boot again.”
This sounds pretty apocalyptic. Have the IOC and the games reached the point where another Olympic turnaround is needed, I ask? “No,” he replies. You cannot compare the era of the early 80s where there was no future, no one bidding for the games, boycotts, no funding, ‘shamateurism’, versus the state of where we are we are today in the sports movement. The depth and breadth of it is incredibly healthy.
“That doesn’t mean the management doesn’t have to continue to evolve. One of the changes the IOC has to face is selecting the host city seven years out, meaning the city has to start focusing nine years out. For most companies, two years out is already a long time. They need to evolve, to be very responsive and reactive, and that means changing the IOC’s mechanism for the selection of future cities, flexibility of the sports programme, management of engaging with youth.
“The Olympic movement is in exceedingly robust health but if it thinks it’s arrived and stops, that’s when it will run into trouble. It’s got to evolve, to push.
