The Race For Olympic Profits

For some small companies, the '84 summer games in Los Angeles have already begun.

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The games of the XXIIIrd Olympiad, which will open in the Los Angeles Memorial Coliseum on July 28, 1984, represent more than a test of athletic speed, skill, and strength, in a very real sense, they will also challenge the fitness of the free enterprise system. From start to finish, they are a businessman's Olympics -- the first in the 88-year history of the games to be held without reliance on public money.

Unlike Montreal, the site of the 1976 Olympics, Los Angeles was unwilling to shoulder the heavy financial burden of the games -- taxpayers in Montreal footed a $1.5 billion bill for plush new sports facilities. L.A. had actively pursued the Olympics since 1932, when it last hosted them. But it took seven months of negotiations, during which the city ran the risk of losing the games, and suspension of the International Olympic Committee's Rule 4 -- under which the host city assumes financial responsibility for the games -- before the contracts were signed.

Under the agreement, the U S. Olympic Committee and the Los Angeles Olympic Organizing Committee assume responsibility for the financial performance of the games. The LAOOC, headed by Paul Ziffren, a prominent Los Angeles attorney and Peter V. Ueberroth, a California businessman who founded First Travel Corp. and turned it into the second-largest travel company in North America ($200 million in annual sales), has vowed not only to meet the $450 million-to-$500 million cost of the games, but also to produce a profit. "The Olympics must be run like a business," Ueberroth says.

To that end, the LAOOC has decided to avoid construction of new facilities wherever possible, using existing sites instead (for example, the Los Angeles Coliseum, the Forum, Dodger Stadium, the Rose Bowl, the Long Beach Marina and Harbor). When new construction is required, builders will be responsible for cost overruns. The committee has also opted to limit the number of corporate sponsors to fewer than 40 -- compared with the 181 signed for the Lake Placid wintergames in 1980--concentrating on companies with significant resources or expertise. Among them are American Express, Anheuser-Busch, General Motors, Coca-Cola, McDonald's, and Xerox. Similarly, the number of licensees is being severely restricted -- fewer than 40, compared with more than 200 at Lake Placid.

"Generally, licensing has been profitable," explains Daniel D. Greenwood, who is vice-president of the LAOOC, "but, historically, a solid percentage of licensees -- about 30% -- hasn't made money because there was too much product out there.. We've turned some products down because we didn't think the company would make money on them, to do otherwise would be a disservice by us and a bad business deal "

Even though the LAOOC is limiting participation, Greenwood expects licensing to generate $15 million in revenues for the Olympics, $13 million more than Lake Placid produced Thus far, 11 licensecs have been signed; only 2 of them are repeaters. "What we're seeking out in each category," says Greenwood, "are local firms, small firms, medium-size firms and minority firms. Of the present group, 9 are womenor minority-owned companies." The 11, he notes, were selected from more than 2,000 applicants.

Some submitted full-blown proposals with all the facts -- the company's background, financials, distribution system, sales projections, et cetera," he says. "Others sent in a letter, or phoned, and we mailed out forms asking for basic information about the firm." A company's track record, the suitability and quality of the proposed product, and the suggested royalty arrangement were principal considerations in choosing licensees, a standard 19% royalty was required, but guarantees and payment schedules were negotiated. "In one case, a license called for a $25,000 guarantee with a $5,000 payment at the time of signing," Greenwood recalls. "ln another, one that guaranteed $5 million in royalties, $1 million was payable upon signing." In some cases, negotiations with a particular company took more than two years.

"We have no cutoff date," Greenwood points out. "If someone came in with a good suggestion in late '83, we'd still consider it. . . But our deals have to be good business deals for us and for them...

"A lot of eyes are going to be on us in '84," Greenwood notes "The Soviets, the Cubans, other communist countries -- everybody's going to be watching to see how well the first 'free enterprise' Olympics performs."

Ooh La La. Pete Peterson is a short, stocky man with windblown, reddish blond hair, and a boyish, born-salesman charm. He spent three years with Aviva Enterprises Inc., a company that made its fortune wit products bearing the likeness of Snoopy and other Peanuts cartoon characters. In 1978, he helped Eddie Chien set up Ooh La La, a jewelry company based in Monterey Park, Calif., where he is now vice-president of sales and marketing.

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