2012 Olympics: Will the sponsors strike gold?

Amid heightened tension about the increased budget for the 2012 Olympics, the Games' organisers are preparing to make an announcement that they hope will finally deliver some good financial news.

Within weeks, the first in a series of blue-chip companies will be unveiled as sponsors of the 2012 Games. In return for a six-year association, each of the "tier-one" backers will be expected to write a cheque for up to £50m. Together, they are to contribute up to £750m towards the running of the greatest sports show on earth.

LloydsTSB is thought to be the first to have taken the plunge, but its high-street rival, Barclays, prefers to continue spending its sponsorship budget on Premiership football. BT and BP seem close to doing Olympic deals, though nothing is official.

Depending on who you talk to, these and other companies are either falling over each other to pay up or are having to be persuaded via a hard sell with the commercial team from the London Olympics organising committee (Locog), which has been criss-crossing the capital to make boardroom pitches.

As well as stressing the commercial benefits of sponsorship, Locog has endeavoured to make bottom lips wobble by showing video presentations featuring deprived children chasing the Olympic dream. It is very slick - and arguably swung a few members of the International Olympic Committee (IOC) towards London in the 2005 vote - but the extent to which it has moved hard-nosed commercial directors and chief executives is only starting to become clear.

Sceptics - encouraged by the fact that organisers no longer seem to quote targets of £100m sponsorship money per company - say the packages are overvalued. They point to the IOC's insistence on "clean" Games venues - which means that they are free of advertising, and so the backers do not benefit from worldwide television exposure during the event. Also, because Locog is offering rights to the Olympics only in the UK, an unattractive concept to a global operation like Barclays, which for £65m for a three-year Premiership deal gets the international exposure that comes from association with the richest football league in the world.

Michael Payne, the IOC's former commercial director who was instrumental in driving up the value of the famous interlocking rings after the movement's financial doldrums of the 1980s, says the rights are still in rude health. Companies will get value for money, if only they bin old-fashioned notions of sponsorship. Payne, who now advises Formula One boss Bernie Ecclestone and has no formal role with London, says: "Decades back, when we started putting packages together, the lack of TV exposure was a hurdle but then companies viewed it not as a sponsorship but as a marketing platform. You use the power of the brand to drive the image and as a catalyst for change; then the exposure becomes irrelevant. Some companies focus too much on exposure."

If that sounds too much like industry jargon, then Payne has some compelling numbers to back up his case. When he started selling deals, a telecommunications company backing the 1988 Games in Seoul paid $5m compared with $140m recently paid for association with Vancouver's 2010 Winter Games, a lesser commodity.

In addition to domestic sponsors, the IOC has an impressive roster of a dozen global, or "TOP", sponsors such as Coca-Cola, McDonald's and Samsung. The renewal rate for such deals is 90 per cent. During arguably the darkest years for the IOC - the bribes for votes scandal surrounding the 2002 Winter Games in Salt Lake City - not a single TOP sponsor bailed out.

The attraction, says Payne, is partly to do with the demographic position of the Olympics. "Compare it to soccer where you've got to like soccer and then you've got to like a particular team. With the Olympics there is a marketing window and platform in which, barring World War Three, you will own the media marketplace."

Locog has identified seven distinct commercial categories from which it aims to sign "partners" by the end of the year and it is to these firms - rather than the 50-odd lower tier backers - that the main spoils will go.

An official Olympic partner has limited use of the Olympic rings as incorporated in the 2012 Games logo, currently receiving the finishing touches by brand consultants Wolff Olins. These firms gain an association not just with the event but also with the host nation's team of athletes. The same cannot be said with the World Cup - the biggest rival to the Olympics for commercial backing - where the tournament is sponsored by Coca-Cola, although individual players have endorsement deals with rival Pepsi.

The IOC has built up an archive of 60,000 hours of Games footage - from Jessie Owens to Kelly Holmes - which backers can use in broadcast campaigns, provided they don't create the impression of product endorsement by the athlete.

Locog offers an impressive goody bag of corporate hospitality options and tickets, ranging in value from a few pounds for a badminton qualifier to £1,000 for the opening ceremony, at which, ironically, no sport will be on view.

Most companies will choose the 2012 Games to showcase a new product. It is a little-known fact that away from the action at the 1984 Games in Los Angeles, telecommunications company AT&T unveiled the now ubiquitous email.

Chris Townsend, Locog's commercial director, who was hired from Transport for London, believes the 2012 Games will be well timed to showcase green products. "(The 2012) Games focus very much on the environment and promote environmentally friendly products and services. There is an opportunity for car companies to get involved in that programme and for them to launch their new models. They are all developing new engines and new vehicles to launch later this decade and this is going to be a fantastic platform. By 2012 this market will be starting to take off in a very big way."

The Olympic movement learnt the hard way how to protect its rights after Nike ambushed the 1996 Games in Atlanta, giving the impression that it, not an arch rival, was the official backer. Last year's London Olympic Games Act will make unauthorised association with the event all but impossible; indeed, the draft wording had to be amended following complaints by the advertising industry that it was too restrictive. Protection under the legislation is given to the rings, games logo and the "O" word itself. Even unauthorised use of the Olympic motto "Citius, Altius, Fortius" - "faster, higher, stronger" - is banned.

A further challenge for backers of the 2012 Games will be associating themselves with the best elements of the Olympics, rather than the bad news stories of tiresome budget revisions, building delays and ticketing controversies, which have dogged previous events.

Organisers know that that they face a potentially ferocious media but will remain bullish about the potential marketing revenue to be had. Their job is made easier by the intense competition among cash-rich London-based firms and the sophistication of the British sponsorship market.

It should not be a case of whether they break an Olympic record, but by how much.