The Invisible Hand Behind the Tokyo Olympics

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TOKYO – It is not an official sponsor of the Olympic Games. It will go invisible to the millions of viewers who start tune up this week. But without them, the Tokyo Games could not have taken place.

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

As the gatekeeper to the world’s third largest economy, it has become an important figure in international sport. It played a prominent role in Tokyo’s Olympic bid, then was named the Games’ exclusive advertising partner, and raised a record-breaking $ 3.6 billion from Japanese sponsors.

With almost complete control of the Olympic marketing bonanza, Dentsu was Japan’s biggest winner of this year’s Games. But with the pandemic devastating the event, a company that is used to always being at the top is in an unfamiliar position.

His expectation of an enormous stroke of luck has faded. The promotional campaigns and promotional events that sponsors typically run in the months leading up to the Olympics have been canceled or scaled back, depriving Dentsu of what analysts call one of the most lucrative parts of the sports competition.

And with the start of the Olympics, some of Dentsu’s largest customers have withdrawn. Toyota, a top sponsor, said Monday it will not run any Olympic television commercials in Japan during the Games, reflecting concerns about a possible public backlash against companies drawing the event.

For those customers who continue their Olympic advertising campaigns, Dentsu faces a serious test of news control. Polls show that around 80 percent of the Japanese public are against holding the Olympic Games, which have been postponed for a year and will now take place in Tokyo amid the state of emergency.

“What kind of message are you sending right now? It’s a really tough question, and sponsors are definitely affected, ”said Osamu Ebizuka, a veteran of Dentsu’s sports marketing department and now visiting professor of business administration at JF Oberlin University in Tokyo.

When asked how it would do its customers towards the Olympic Games, Dentsu said that it is “not a sponsor” and therefore “is not in a position to comment on it”.

Despite its challenges, Dentsu remains an unprecedented force in Japan. It is by far the largest marketing company in the country, handling nearly 28 percent of the country’s huge advertising budget.

Dentsu started out as a news agency in 1901 before realizing that it was more profitable to package its content with advertising. In the run-up to World War II, it was merged into a state intelligence service that spread propaganda for Japan’s imperial army.

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

In the years that followed, Dentsu is hardwired into almost every major institution in Japan. In addition to its many corporate and media connections, it served as the unofficial communications division of the ruling Liberal Democratic Party in its more than 75 years of almost continuous power.

Conspiratorially minded people sometimes refer to the company as Japan’s CIA, a puppeteer who uses its vast network to gather information and shape the fate of the nation.

The comparison is fanciful, said Ryu Honma, a writer who started 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 fixer, with a reputation for getting things done no matter how difficult they are. For years it has been known for a ruthless work ethic, exemplified in a creed called “The Devil’s Ten Commandments,” which instructed employees “never to quit a job even if it kills you.”

Its customers are the who’s who of the Japanese company – part of a list, as Dentsu likes to put it, that includes 95 of the top 100 advertisers in the world. It recruits from among Tokyo’s top universities and is said to favor the children of politicians, celebrities and industrial giants.

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

Dentsu offers practically every type of service related to communication. Dentsu advertising managers sell Dentsu commercials with actors represented by Dentsu to television stations where Dentsu manages advertising sales.

Updated

July 20, 2021, 2:59 p.m. ET

The company buys up entire blocks of airtime before selling ads to fill them. Its influence on television advertising is so tight that the Japanese competition authority has issued two warnings.

It has a significant impact on traditional media, both broadcast and print, which are reluctant to offend the company and its customers for fear of losing advertising money.

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

Sport has long been an important part of the company. Dentsu was one of the first advertising agencies to see how international sporting events can raise the profile of customers abroad and help them open up new markets, said Michael Payne, who for many years headed the marketing department of the International Olympic Committee.

Dentsu has used its role as a channel for Japanese advertising money to become an integral part of the finances of global athletics and swimming, while building strong relationships with, among others, FIFA, the governing body of football, and Major League Baseball.

The company’s ties to the Olympics go back to the 1964 Tokyo Olympics when Dentsu was responsible for public relations. The games were not yet commercialized, and Dentsu’s role was more a sign of his size and political influence.

But in 1984, when the Los Angeles Olympics first depended entirely on private funding, Dentsu rushed to include its corporate clients in the mix.

Basics of the Summer Olympics

Dentsu took the lead in the application process when Japan hosted its second Olympic Games, 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 being awkward and exorbitant over budget. Regardless, Dentsu went to the top and, according to a government hearing at the time, took almost 87 percent of the Tokyo Committee’s expenses.

Concerns about the company’s performance in 2016 didn’t stop it from playing a significant role in the 2020 bid, said Nick Varley, an advisor who led the presentations.

The application committee assured him that Dentsu would not be involved, he said. But when he received his contract, he was surprised to find that it was an agreement with Dentsu.

On the surface at least, Dentsu provided mostly logistical support and handled the domestic side of the campaign, Varley said.

But behind the scenes the situation seems to have been darker.

The French authorities have been investigating corruption allegations related to the Tokyo 2020 bid process for years. Questions include the role a powerful former Dentsu employee played in lobbying people with longstanding ties to the company to influence the outcome.

The scandal led to the resignation of the head of the Tokyo Olympic Committee. Dentsu said it was not involved.

Regardless of how the games were won, the company was able to make a huge profit. Within a year, the Tokyo Olympic Committee had named Dentsu as its marketing partner, following a bidding process that competitors said was a foregone conclusion.

The first thing Dentsu did was break the habit of only one company representing each product category. For example, while past games were only sponsored by one bank or airline, Tokyo 2020 will be sponsored by two at a time. This enabled Dentsu to use its connections to convince nearly 70 domestic companies to pay over $ 3 billion in support of the games.

“The Tokyo Games were kind of weird among those of us in the industry – that’s in no way derogatory – the Dentsu Games,” said Terrence Burns, a sports advisor and former executive director of the International Olympic Committee.

“If you want to do sports marketing in Japan, this is your first and last stop, to be honest. They hold a lot of the cards, ”he added.

Dentsu needed a win. It has been difficult to adapt to the rise of digital media. It was damaged by a massive overwork scandal and high profile suicide related to the company’s intense work culture. And even before the coronavirus, the company had started to record losses.

But when the pandemic broke out, Dentsu’s Olympic bet went wrong. The exact financial impact on Dentsu is unclear, said Ebizuka, the company’s former managing director, but there is no doubt that it is “sorry”.

Right now, Dentsu can only hope for the best as it tries to help its customers navigate the unsafe situation, Ebizuka said.

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