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Nike & Asics Could Lose Big If the Tokyo Olympics Are Canceled

The fate of the Tokyo Olympic Games appears to be in question, and that could have major implications for the sporting goods industry, experts say.

A report yesterday by the British Times declared that the global games are headed for cancellation, citing an unnamed senior member of Japan’s ruling coalition. However, Japanese officials and representatives from the International Olympic Committee (IOC) have since denied the rumors, stating that the event will go forward as planned.

The Tokyo Olympics already were postponed last year due to COVID-19, with the new Opening Ceremony set for July 23, 2021.

Tom Cove, president and CEO of the Sports & Fitness Industry Association, said there is a strong sense of determination within the organizing committee to move forward with the events, particularly because the only other Olympics to be cancelled in modern times were the 1940 Tokyo Games, called off due to the outbreak of World War II. “It’s a big point of national pride [for Japan] to hold these games,” he said.

However, the country is currently under a state of emergency after being hit by a third wave of the novel coronavirus: As of Jan. 21, Japan had a seven-day average of 5,914 new cases and 108 deaths.

Throughout the past year, the IOC and the Japanese government have been implementing comprehensive safety measures to protect athletes, staff and spectators. But as COVID cases spike — and new, potentially more contagious and deadly COVID-19 strains crop up — the organizers may be forced to face the fact that even those efforts may not be sufficient to proceed with such a large spectator event.

Marc Beckman, CEO of the DMA United ad agency, said that the impact would be “astronomical” if the games were canceled outright. “Economically, the adverse financial consequences will start at the top of the sponsorship pyramid (i.e. Asics) and then extend downward to include all performance brands committed at the national sponsorship level (i.e. Nike and Oakley for USA), and even impact the individual athletes in certain instances,” he said.

The financial losses would stem primarily from lost sponsorships: The Olympics have traditionally been a tentpole marketing moment for athletic companies to build brand awareness and unveil new product and technologies.

“Without an Olympics, brands will have to figure out other ways to introduce new products to the market,” said Matt Powell, senior sports industry adviser at The NPD Group.

Fortunately, he added, many brands already made adjustments to their strategies after the postponement last year. “In many cases, that new product was in production or in transit a year ago,” said Powell. “It’s tough to hold it out that long.”

Cove agreed that major athletic brands are in a better position this year, should there be changes again. “Last year was a crushing blow — everybody was organized around the games. I think people are doing the same now, but they’re much more flexible.”

For his part, Cove predicts the Olympics will be held in some form. “They will likely figure out a way to run the games with maybe no spectators or with reduced events,” he said. “Over the course of this year, what we’ve learned is there are ways to do these professional events at the highest level. Just look around at all the professional leagues.”

However, he added, that scenario is still not ideal, since it would change the games completely for the athletes who have spent their lives training for this once-in-a-lifetime achievement. For instance, organizers might have to rethink the Opening Ceremonies and the athlete’s village — two cornerstones of the Olympic experience.

“And for brands, there’s a huge loss in terms of being able to invite customers and being able to associate athletes with these terrific achievements and to work with the press,” said Cove.

Beckman added that there are also negative consequences — even with a pared-down version — in terms of viewership and merchandise sales. “There is a very different dynamic at play without fans in the stands representing their country, face painted, flag in hand,” he said. “We have seen a significant drop-off in television viewership with the NBA, etc., here in the U.S. There is a weird malaise within the world of sports fandom right now. It’s just not the same without the third team: the fans.”

Ultimately, the fate of the Tokyo Olympics will be decided by the IOC with input from the Japanese Olympic Committee and other major stakeholders. The next IOC executive committee meeting is slated for Jan. 27, where leaders will no doubt address the state of the games.

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