Olympic scandals put marketing giant Dentsu’s business in the spotlight

Corruption allegations in Olympic sponsorships involving former Dentsu director Haruyuki Takahashi have shed light on the company’s overwhelming grip on Japan’s sports marketing industry.

Through its role as exclusive agent, Dentsu secured a record approximately 370 billion yen ($2.8 billion) in marketing revenue for the Organizing Committee for the Tokyo Olympics and Paralympics, where Takahashi was a leader.

Haruyuki Takahashi. (Kyodo)

Prosecutors are currently investigating Takahashi and the suspicious flow of funds from Aoki Holdings Inc. to one of his companies. Aoki is one of the official Olympic sponsors that Dentsu secured after being announced as the exclusive marketing agent for the Tokyo Games in April 2014.

The press release that accompanied the announcement included a national marketing program target of 150 billion yen, not far off the record 165.6 billion yen brought in by organizers of the Beijing Olympics in 2008.

Revealing the target figure at that time was also spotty as no company had yet signed on as a local Olympic partner. Behind this figure, however, there was a Dentsu guarantee that sponsorship revenue would reach a certain minimum amount.

Dentsu caters to event organizers and guarantees a minimum amount of sponsorship revenue, a source familiar with the matter said. If that revenue doesn’t materialize, Dentsu promises to make up the difference.

However, Dentsu’s percentage of total fees increases after earnings exceed the guaranteed minimum. Dentsu’s offer to organizers of the Tokyo Olympics reportedly included a guarantee of around 150 billion yen.

Dentsu can operate in this way due to its power to bring in money from the vast network of companies it works with.

“Only Dentsu can guarantee so much revenue and deliver. Dentsu has had close ties with many listed companies,” said a former top executive of the Tokyo Games Organizing Committee.

Thus, it is not surprising that Dentsu has become the exclusive agent for many international events and sports federations.

A Dentsu employee said, “We can present customers with numbers that other companies can’t match.

File photo taken in May 2020 showing the Tokyo headquarters of Dentsu Inc., Japan’s largest advertising agency. (Kyodo)

While several companies competed for the position of exclusive marketing agent for the Tokyo Games, none other than Dentsu “did not stand a chance”, a source with knowledge of the matter said.

With a keen eye on the use of public money, Dentsu’s ability to secure the maximum amount of private funding meant that for the Organizing Committee the company choice was a no-brainer.

Dentsu asked 15 companies to commit about 15 billion yen each to become Tier 1 “gold partners”. Even organizers of the 2012 London Olympics, a success from a revenue and expense , had just seven companies signed up as high-level sponsors for the equivalent of about 5 billion yen each.

In the end, Tokyo’s sponsorship revenue was more than double the guaranteed minimum that Dentsu promised.

But Dentsu’s big sponsorship swipe has come with undesirable associations, starting with Tokyo’s attempt to secure the games.

In March 2020, Reuters reported that Takahashi received $8.2 million from the Tokyo Olympic Bid Committee for his work in finding sponsors and lobbying against former International Olympic Committee member the late Lamine Diack, who then investigated for corruption.

That same investigation entangled the head of the bid committee, former Japanese Olympic Committee president Tsunekazu Takeda, over a $2 million “consultation” payment to a Singaporean company he said Dentsu had recommended.

A former organizing committee staffer says he lobbied committee leaders to find out if they thought it was odd that working with Dentsu was the only way to get sponsors.

In the future, more attention will certainly be paid to the way sponsors are selected. But the way the business has been run in plain sight thus far leads the former committee member to believe that “if it hadn’t been for Dentsu, we wouldn’t have had the Olympics. “.

Related coverage:

Tokyo Olympic sponsors deny relationship with suspected corruption official

The home of the Tokyo Olympic executive raided, suspected of corruption

The head of the Tokyo Olympic organization probably paid 45 million. yen per sponsor

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