The invisible hand behind the Tokyo Olympics

TOKYO – It is not an official sponsor of the Olympics. It will remain invisible to the millions of viewers who start to tune in this week. But without that, the Tokyo Games could not have taken place.

The force behind the Olympic curtain is Dentsu, an advertising goliath with almost mythical levels of power and influence in Japan.

Guardian of the third largest economy in the world, he has become a major figure in international sport. He played a leading role in Tokyo’s Olympic bid, then was named the Games’ exclusive advertising partner, bringing in a record $ 3.6 billion for Japanese sponsors.

With his almost total control over the Olympic marketing bonanza, Dentsu was the biggest Japanese winner of this year’s Games. But as the pandemic has taken its toll with the event, a company accustomed to always coming out on top finds itself in an unknown position.

His expectation of a huge windfall has diminished. Advertising campaigns and promotional events that sponsors typically run in the months leading up to the Olympics have been canceled or curtailed, robbing Dentsu of what analysts say is one of the most lucrative parts of the sports competition.

And with the start of the Olympics, some of Dentsu’s biggest customers have started to pull out. Toyota, one of the main sponsors, said on Monday it would not air Olympic-themed TV commercials in Japan during the Games, reflecting concerns about a possible public backlash against the companies funding the event. .

For customers who continue with their Olympic advertising campaigns, Dentsu faces a serious messaging test. Polls show that about 80% of the Japanese public are opposed to holding the Olympics, which have been postponed for a year and will now be held under a state of emergency in Tokyo.

“What kind of message are you sending right now?” This is a really tough question, and the sponsors are definitely confused by it, ”said Osamu Ebizuka, a veteran of Dentsu’s sports marketing department who is now a visiting professor of business management at JF Oberlin University in Tokyo. .

Dentsu, who asked him how he was going to shape his clients’ approach to the Olympics, said he was “not a sponsor” so he was “not in a position to comment.”

Even with its challenges, Dentsu remains an unmatched force in Japan. It is by far the largest marketing company in the country, with a grip on nearly 28% of the country’s vast advertising budget.

Dentsu started life in 1901 as a news agency before realizing that it was more profitable to package its content with advertisements. In the run-up to WWII, it was merged into a state-run news service that broadcast propaganda for the Imperial Japanese Army.

Under the American occupation, the organization split into three parts: the advertising agency Dentsu and the two largest news services in Japan, Kyodo and Jiji Press.

In the years that followed, Dentsu became wired into almost every major institution in Japan. In addition to his extensive dealings with business and the media, he served as the unofficial communications department of the ruling Liberal Democratic Party for over 75 years in almost continuous power.

Conspiracy minds sometimes call the company the CIA of Japan, a puppeteer using its vast network to gather information and shape the fate of the nation.

The comparison is whimsical, said Ryu Honma, an author who began writing about the company after working for rival Hakuhodo. But the company has undoubtedly made itself indispensable to Japan Inc.

Dentsu is the nation’s mender, with a reputation for getting things done no matter how tough. For years he was known for a ruthless work ethic expressed in a creed called the Devil’s Ten Commandments, instructing employees to “never give up a job, even if it kills you.”

Its clients are among the elite of Japanese companies, part of a list, Dentsu likes to say, which includes 95 of the top 100 advertisers in the world. He recruits from the ranks of the best universities in Tokyo and is said to have a preference for the children of politicians, celebrities and industry titans.

While most advertising companies outside of Japan avoid conflicts of interest by representing only one company in a given industry, Japanese companies are often less exclusive. Dentsu frequently works for competing companies in the same sector, one of the keys to its ubiquity.

Dentsu offers virtually all types of communications related services. Dentsu ad executives sell ads made by Dentsu, featuring actors represented by Dentsu, to the television stations where Dentsu manages ad sales.

The company buys entire blocks of airtime before it sells ads to fill them. Its grip on television advertising is so tight that Japan’s competition regulator has warned it twice.

He wields considerable influence over the traditional media, both broadcast and print, which are loath to offend the company and its customers for fear of losing advertising dollars.

Dentsu’s dominance in television has made him an indispensable partner of the Japanese political class. It was Dentsu who persuaded Prime Minister Shinzo Abe to show up at the closing ceremony of the 2016 Olympic Games in Rio de Janeiro disguised as Mario character from Nintendo’s video game series, also a Dentsu customer.

Sport has long been an essential part of the company’s activity. Dentsu was one of the first advertising agencies to recognize how international sporting events can improve the profile of overseas customers and help them enter new markets, said Michael Payne, who for years led the division. marketing of the International Olympic Committee.

Dentsu has leveraged its role as a channel to Japanese advertising dollars to become an integral part of athletics and swimming finances around the world, while developing strong relationships with FIFA, the football governing body and the world. Major League Baseball, among others.

The company’s ties to the Olympics date back to the Tokyo Games in 1964, when Dentsu was in charge of public relations. The Games had yet to be marketed and Dentsu’s role was more a sign of his stature and political influence.

But in 1984, when the Los Angeles Olympics became the first to rely entirely on private funding, Dentsu was quick to put its corporate clients into the mix.

Dentsu took the lead in the bidding process when Japan hosted its second Olympics, the 1998 Nagano Winter Games. And when Tokyo decided to compete for the 2016 Summer Olympics, the company was the obvious choice.

Tokyo lost to Rio de Janeiro after a Dentsu-led bid that was widely criticized for its lack of discipline and exorbitant budget. Either way, Dentsu came out on top, pocketing nearly 87% of the Tokyo committee’s expenses, according to a government hearing at the time.

Concerns about the company’s performance in 2016 did not prevent it from playing a significant role in the 2020 offering, said Nick Varley, a consultant who was brought in to lead the presentations.

The bid committee assured him that Dentsu would not be involved, he said. But when he received his contract, he was surprised to find out that it was a deal with Dentsu.

On the surface, at least, Dentsu mainly provided logistical support and handled the national side of the campaign, Mr Varley said.

But behind the scenes, the situation seems to have been more murky.

French authorities have spent years investigating allegations of corruption surrounding the Tokyo 2020 bid process. Among the questions is the role a powerful former Dentsu employee played in lobbying people with connections. long-standing with the company in order to influence the outcome.

The scandal led to the resignation of the president of the Tokyo Olympic Committee. Dentsu said he had no involvement in the case.

Regardless of how the Games were won, the company was able to make a huge profit. In less than a year, the Tokyo Olympic Committee had named Dentsu its marketing partner, after a competitive bidding process that the competitors qualified in advance.

The first thing Dentsu did was eliminate the custom of having only one company for each product category. While previous Games were sponsored by only one bank or one airline, for example, Tokyo 2020 is sponsored by two of each. This allowed Dentsu to use his connections to persuade nearly 70 domestic companies to pay more than $ 3 billion to support the Games.

“The Tokyo Games have been indirectly called among us in the industry – this is by no means pejorative – the Dentsu Games,” said Terrence Burns, sports consultant and former executive of the International Olympic Committee.

“If you’re thinking of doing sports marketing in Japan, this is sort of your first and last stop, to be honest. They hold a lot of cards, ”he added.

Dentsu needed a win. He has struggled to adapt to the rise of digital media. It was damaged by a massive overcharging scandal and high-profile suicide linked to the company’s intense work culture. And, even before the coronavirus, the firm had started recording losses.

But when the pandemic struck, Dentsu’s Olympic bet went wrong. Although the exact financial impact on Dentsu remains uncertain, said Mr. Ebizuka, the former head of the company, there is no doubt that he is “suffering”.

For now, all Dentsu can do is hope for the best as they try to help their clients through the uncertain situation, Mr. Ebizuka said.

They have no choice but to send a “subtle message,” he said: “Let’s look ahead and just get through the pandemic together.”