The SIG Column – 4 January

With speculation rife that Lloyds TSB is set to become the first
domestic sponsor of the London 2012 Olympics, Drew Barrand, head of media at
Sport Industry Group, assesses the machinations behind the supposed
deal…

‘2007 always promised to be an intriguing year for LOCOG, the London 2012
organising committee, and, only a few days in, its already proving to be the
case.

With so many commercial contracts up for grabs, it was only a matter of time
before the rumour mill kicked into overdrive although those within the corridors
of LOCOG’s Canary Wharf offices might have expected to get at least a week’s
grace from such speculative stories.

Strong rumours from prominent, albeit unnamed, sources have placed Lloyds TSB
at the head of the queue to sign up as the first domestic sponsor of the 2012
Games, filling the exclusive banking category slot in a reported £80m deal.

While both parties have refused to substantiate the claims on the record, the
story seems to have convinced the majority of onlookers in terms of its
accuracy.

Lloyds TSB has beat off some stiff competition. Bank of America, Citigroup
and Barclays were all known to have looked at the contract. But with the first
two primarily viewing it from a corporate business-to-business angle and
Barclays opting to retain its investment in the FA Premier League – an
allocation of budget that effectively ruled it out of the 2012 running – LOCOG’s
clearly favoured the benefits of partnering with the more consumer facing brands
of either HSBC or Lloyds TSB.

Herein lies the intrigue. If the speculation proves true, the mystery of why
HSBC, the clear front runner when you consider its vastly superior global
marketing budget compared to Lloyds TSB, didn’t take the contract is the one
element of the negotiations that remains clouded.

The most likely explanation is that the contents of the package did not fit
in with the global remit of its existing sport sponsorship portfolio.

Another factor for HSBC’s reticence could have been the late inclusion of an
insurance sponsorship category for LOCOG to sell after the IOC’s top-tier
partner John Hancock Financial Services announced it was to end its Olympic
associations after Beijing 2008.

The freeing up of the insurance category at a domestic partner level
presented major problems for the banks given that it could easily be sold to a
rival financial services organisation. The prospect of doubling their spend to
take both categories was generally considered a stretch too far given the £200m+
price tag the organising committee had put on the cumulative worth of the
contracts.

Whatever the reasons behind the negotiations, the proposed deal would
represent a feather in the cap for Lloyds TSB which hasn’t invested in sport
since its Six Nations title sponsorship contract expired.

If the speculation proves true – and no formal announcement is expected until
March – then Lloyds TSB has stretched its budgets to new lengths in taking the
contract for a reported £80m. A risk no doubt but one which is clearly
considered to have the potential to reap huge dividends for the brand.

Unfortunately, the real loser in this could be LOCOG. With huge demands on it
to reach the £750m target for sponsorship income outlined in the bid, it had
placed a £100m price tag on its six primary categories – banking, insurance,
telecoms, utilities, automotive, and petroleum.

With Lloyds TSB managing to talk the price down to £80m, if the speculation
is to be believed, then those companies taking the remaining category slots are
unlikely to pay the extra £20m more than their banking contemporary. Such
downsizing across the board would leave LOCOG with a £120m hole to fill. Where
those funds will come from is anyone’s guess.’