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Sponsors' Olympic Balancing Act

March 18, 2008

Tibet Unrest Could Devalue Investments,
But Firms Fear Riling China's Government

The Wall Street Journal
March 17, 2008; Page B1

BEIJING -- The violent clashes in Tibet and western China are causing
Olympic sponsors to evaluate how they can protect their investment in
the coming Games here, without appearing to undermine China's government.

Lenovo Group Ltd., Coca-Cola Co., McDonald's Corp., Volkswagen AG and
others have paid record sums -- as much as $120 million, according to
some estimates -- to sponsor Beijing's Olympics. To them, the Games are
a unique opportunity to tap China's vast and burgeoning markets, and
build vital relationships with the country's decision makers.

But there is growing concern among corporate sponsors that the rising
tide of protests over Tibet and China's support of the Sudanese
government will detract from the Games' commercial success, say some
executives, who spoke on condition of anonymity for fear their comments
could sour relations with the Chinese government.

Behind official statements that emphasize the Olympics as a festival of
sport that can bring people together, sponsors are deliberating what to
do, say some executives and advisers. Several high-level executives from
U.S. sponsor companies had already planned to meet in New York, said a
person familiar with the matter. The meeting, which is scheduled to take
place in the next two weeks, was prompted by an anti-Olympic campaign
from activists, who say the Chinese government's ties with Khartoum are
aggravating strife in Sudan's Darfur region. The group, led by actress
Mia Farrow, recently scored a publicity coup by getting director Steven
Spielberg to withdraw from his role as an artistic adviser to the Games.

Now, the deadly violence in Tibet, which began after demonstrators set
fires to Chinese shops in the Tibetan capital, Lhasa, Friday, is likely
to add urgency to the matter, said a person advising several Olympic
sponsors. Unlike Darfur, Tibet is more obviously linked with China, and
the Chinese government's sensitivity over the issue of Tibetan
independence makes it more likely that they could overreact. "The last
thing [the sponsors] want is another Tiananmen tank incident," said the
person, referring to the iconic photo of a lone protester impeding a
line of Chinese armor sent to put down a 1989 prodemocracy demonstration.

"While it's true many sponsors can take the position that they have
nothing to do with Tibet, they can't take the position they have nothing
to do with the Games in China," said Eliot R. Cutler, managing partner
at the Beijing office of Aiken Gump Strauss Hauer & Feld LLP, a law firm
that advises clients on crisis management and public policy. "They have
an interest in making sure the Games are free of controversy -- and in
taking themselves out of the middle," he said.

Coca-Cola, Samsung Group and Lenovo have more immediate worries, too, as
sponsors of the Olympic torch relay that begins in two weeks and is
scheduled to pass through Tibet and up Mount Everest. The celebration
now could be in danger of being marred either by activists or a heavy
military presence. But there won't be changes to the torch relay, said
the companies and the Beijing Olympic Organizing Committee.

It will be "more challenging and sensitive" for Olympic sponsors to
activate their marketing campaigns and derive maximum value from their
sponsorship given these recent controversies over Darfur and Tibet, said
Marcus John, China managing director for marketing agency IMG Worldwide.

For example, sponsorship for the torch relay is separate from the Games
itself and usually costs about $15 million to $20 million, say people in
the industry. Torch sponsors can spend an equivalent amount building
marketing campaigns around the relays. Coca-Cola, a six-time torch
sponsor, has planned a campaign highlighting the eco-contributions of
many of its torch-bearers, while Lenovo held a global competition
inviting potential torch-bearers to submit essays and video clips.

Most company sponsors said it wasn't their role to advise China on
political policy, and they stressed the role of the Games in promoting

An executive at one of the sponsor companies said: "We think when the
Games start, as has always been the case, people will focus on the
Games." While the situation in China could be better, the country is
moving in the right direction in terms of democracy and greater freedom,
and the Olympics would help "move things along."

In a statement, computer maker Lenovo -- the only Chinese company to be
a top-tier Olympic sponsor -- said the company is following news reports
from Tibet "with concern and regret" and noted that "the situation
involves a longstanding dispute and political forces beyond the control
of Olympic sponsors, and it would exist even in the absence of the
Olympic Games."

Adidas AG said it was concerned about violence in Tibet and would
continue to monitor news on Darfur and Tibet closely, but "we should
however not lose sight of the fact that the Olympics is being held to
celebrate sports." General Electric Co. spokeswoman Deirdre Latour said
any issues regarding the Olympics should be left to the governing
bodies, and the Olympics "is a force for good." McDonald's said in an
email that political issues should be resolved by governments and
international bodies such as the United Nations.

International Olympic Committee president Jacques Rogge told reporters
that a boycott of Beijing Games would only hurt athletes and "doesn't
solve anything."

Few expect the sponsors, which have longstanding businesses in China, to
pull out of the Games at this stage. But people close to the matter say
some companies could scale back Olympic marketing to distance themselves.

There is precedence for such a move. During the 1996 Atlanta Games,
International Business Machines Corp., suffered an embarrassment when an
Olympic news-distribution system it devised crashed. Subsequently IBM --
then a sponsor -- reduced its Games marketing. In a similar vein, Adidas
yanked sponsorship of the T-Mobile cycling team this past summer, after
a doping scandal at the Tour de France.

Executives at some sponsor firms also say they have been privately
lobbying the Chinese government and the International Olympic Committee
to improve human-rights issues. Such an approach has its problems
because the nature of its privacy makes it hard to appease activists,
who are increasingly seeking to publicly link the Games and sponsors.

To that point, a coalition of Darfur activists is planning to target
sponsors the activists deem unresponsive in a campaign beginning March
31. Called Turn Off/Tune In, the campaign is asking the public to pledge
to turn off Olympic sponsors' ads during the Games, and instead tune in
to daily live broadcasts with Ms. Farrow from a refugee camp in Darfur,
according to the Dream for Darfur Web site.

In November, the group released a report grading sponsors on whether
they had used their influence with the Chinese government or
international bodies to lobby for a cessation of violence in Sudan.

Now, in the second phase of the campaign, companies that received low
scores could face demonstrations at their corporate headquarters, likely
headed by Darfur survivors, said Jill Savitt, the organization's
executive director.

Tibetan activists also say they are planning to target Olympic sponsors
in grass-roots campaigns.

"We don't have high hopes, but it doesn't mean we let them off the
hook," said Lhadon Tethong, director with the New York-based advocacy
group Students for a Free Tibet. Referring to the Olympic Games this
August, she said, "We are taking their moment in the sun and
[highlighting] the shame of the occupation in Tibet."

--Jane Spencer in Hong Kong, Kathryn Kranhold in New York, Janet Adamy
in Chicago and Mike Esterl in Frankfurt contributed to this article.
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