Olympics have global reach for business

By John Boudreau

San Jose Mercury News

SAN JOSE, Calif. -- The London Summer Olympics have yet to start, but the windfall from the global economic sports behemoth has already been felt more than 5,000 miles away at La Pastaia restaurant in downtown San Jose, where tables filled up with hungry customers attending the recent U.S. Olympic gymnastics trials at the HP Pavilion.

At times during the recent four-day competition, business soared more than 50 percent, said the manager of La Pastaia, Rashauna Vasquez.

"We went from having a decent night to having a crazy night, which was great news," she recalled of one evening when a crush of gymnastics-loving customers arrived after 8 p.m.

The Olympics, which begin Friday, generate billions of dollars of business that touches virtually every corner of the world. The London Games are creating a swirl of commercial activity -- from a burst in buying of British products to NBC's partnership with Facebook to promote Olympics content on the social networking site -- that could prove larger than any other sporting event in history.

"The reach of the Olympics is absolutely extraordinary," said Robert Boland, a professor of sports business at New York University.

The event represents a global platform for marketing, merchandising and networking that is rivaled only by the World Cup, said Rob Prazmark, an Olympics marketing expert who helped the International Olympic Committee create its corporate sponsorship program in the 1980s.

The London Olympics are generating an estimated $7 billion in sponsorships, broadcast rights, ticket sales and other business, he said. That does not include the indirect economic value-- such as raising the international appeal of the city as a tourist destination -- tied to the games, which are expected to be viewed by 4 billion people.

"The business of the Olympics is its own industry," said Prazmark, CEO of Greenwich, Conn.-based 21 Sports & Entertainment Marketing Group.

The commercialization of the games, with sponsorships of individual athletes, has even extended the competitive lives of aging athletes, Boland said.

In the past, an athlete had one or two shots at Olympic glory, he said. "Now, there is enough endorsement money to live off" and keep training, Boland said. "It keeps athletes in the games who are older."

As an example, he pointed to 45-year-old Dara Torres, who missed making a record sixth U.S. swim team by nine-hundredths of a second during recent trials.

While the Olympics have long relied on corporate sponsors, the 2008 Beijing Olympics propelled the business side of the games into the stratosphere, Prazmark said. While highlighting the emergence of China as a world power, the Olympics also provided companies a rare opportunity to gain access to that market.

"All of a sudden Western companies were able to get a seat at the table and break into markets" that they never had access to before, Prazmark said.

In London, the Olympics are being used to revitalize an economically challenged part of the city with the construction of state-of-the-art athletic facilities, the largest shopping mall in Europe and new transportation infrastructure at a cost of $15 billion to $20 billion. London also hopes the games will promote its new-tech area in the eastern part of the city, dubbed Silicon Roundabout, not far from the site of the Olympic facilities.

"This was once a large piece of London that was run down or generally wasteland," said Ian Foddering, chief technology officer of Cisco Systems in the United Kingdom and Ireland.

While London may not recoup the expenses of hosting the Olympics, at least in the short term, it has been a huge boost in the psyche of the city and the nation as the rest of Europe struggles with a damaging economic downturn.

"There is a real sense of identity that this is a nice place to be, and not even the [often rainy] weather can dampen spirits," Foddering said.

Cisco, which is providing networking equipment and expertise that will enable the transmission of massive amounts of data per second throughout the Olympics -- the equivalent of transmitting an HD movie to 3 million households in London each week -- will use the event to promote its technology.

Facebook will benefit from the Olympics without spending a single British pound in London. NBC, which is spending $4.4 billion for the rights to broadcast the games through 2020, will set up an Olympics page on Facebook that will display breaking news, photos and other content.

NBC will feature a Facebook data tool, Talk Meter, during its broadcasts to inform viewers about what users of the social networking site are talking about.

Altimeter Group analyst Rebecca Lieb said the deal will give Facebook fresh and original content that is "sticky" in nature and sure to draw a lot of users to its site for long periods of time.

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