Keeping IBM as an Olympic sponsor would have forced the Salt Lake Organizing Committee to buy computer equipment and services from the company, expenditures that could have broken the budget for the 2002 Winter Games.
Months of negotiations between the computer giant and the International Olympic Committee broke down this week, leaving the 2002 Winter Games without an information technology sponsor.The deal that was being discussed, though, would have ended up costing Games organizers money - too much money - according to SLOC Chief Executive Officer Frank Joklik.
"We felt we could not afford the kind of cash costs that would have been implicit in IBM's preliminary proposals," Joklik told the Deseret News Friday.
While Joklik did not specify how much money was involved, it was significant. "It came down simply to cash out on our part, and the indications that we had indirectly were that the costs were beyond our means."
SLOC was not a party to negotiations for the sponsorship because it involved worldwide marketing rights to the Olympics. Those rights belong to the Switzerland-based IOC.
Companies must come up with tens of millions of dollars in cash as well as goods and services for the right to market themselves worldwide as official Olympic sponsors.
It's an exclusive club. Fewer than a dozen companies are international Olympic sponsors. The list includes Coca-Cola, McDonalds, Kodak and VISA. So far, only Coca-Cola and Sports Illustrated have signed on for 2002.
IBM had been a worldwide Olympics sponsor for some 38 years. The company's current deal with the IOC expires after the 2000 Summer Games in Sydney, Australia.
IBM officials describe the decision, announced in an internal memo to company employees Thursday, as mutual. Eli Primrose-Smith, IBM vice president of worldwide Olympic sports sponsorships, blamed costs.
"We agreed to part ways because going forward, with the significant investment the IOC would have liked IBM to contribute, the marketing rights we would have gotten in return were not adequate for our investment," she told the Deseret News in a telephone interview Friday.
Primrose-Smith confirmed IBM wanted the Salt Lake Organizing Committee to help cover the company's costs of providing a wide range of information technology services.
That includes buying computers, software and services, as well as paying the salaries of IBM experts assigned to the organizing committee. Primrose-Smith said Sydney organizers are already paying some of those costs.
"I think the business model that we proposed was a very fair business model," she said when asked to respond to Joklik's concerns about the costs being too high.
The other factor in IBM's decision was an attempt by the IOC to begin treating the Internet as a separate sponsorship with a separate price tag. IBM has provided Web sites for past Olympics.
Breaking up the sponsorship category could work to SLOC's benefit. Olympic organizers earn less money from worldwide sponsorships than they do from those sold nationally.
The U.S. Olympic Committee and SLOC, which jointly market national sponsorships of the 2002 Winter Games, want to be able to take over the results-reporting portion of the information-technology sponsorship.
That's up to the IOC. "I think it could well happen, although it's too early to attach any probability to it," Joklik said. Seiko, already a national sponsor for timing systems, could take over providing results as well.
Or AT&T or another national-level Olympic sponsor could pay more to take over the Internet portion of the sponsorship. That's probably less likely, because Olympic Web sites are popular worldwide.
IOC Vice President Dick Pound said changes will be made to the sponsorship category. "Our position was it was already too broad," said Pound, a Montreal lawyer who oversees Olympic marketing worldwide.
Pound said IBM's widely reported difficulties in supplying results to the media in the 1996 Summer Games in Atlanta was not a factor in the decision. He said every effort was made to keep IBM.
"They're a very long-standing sponsor, and we had spent a lot of time and effort trying to get a deal with them," Pound said. "We're certainly not firing IBM. We're just not entering into a new agreement."