Olympic Sponsorship Survives Samsung Phone Fires

(ATR) Experts say the Olympics may help Samsung overcome its troubles with exploding cell phones.

The South Korean firm is in the midst of a worldwide recall of the Galaxy Note 7 after some of the smartphones caught fire. About 2.5 million of the phones have been manufactured with 1 million of them sold in the U.S. Retail price for the phones was in the range of $850.

So far the recall may mean a $2 billion loss for the quarter but the company’s worldwide sponsorship of the Olympics appears to have escaped tarnish from the recall.

"Not great for the brand, but all companies have their technical/ brand melt down from time to time, and eventually come through stronger," Olympic marketing expert Michael Payne tells Around the Rings.

Payne cites the 1985 debacle Coca-Cola suffered when the company introduced New Coke as an example of branding issues faced by other Olympic sponsors.

In the case of Samsung and New Coke, timing may have helped avoid detracting from their Olympic branding. The furor over New Coke happened a year after the Los Angeles Olympics while the Samsung phones started catching fire after the Rio Olympics.

Samsung distributed 12,500 phones to athletes for use during the Rio Olympics, but these were a different and problem-free model, the Galaxy Edge 7.

The lack of a link between the recall and the Olympics is important saysDr. Denish Shah, marketing professor at Robinson College of Business at Georgia State University.

"I don’t think that (the incident)will be that serious of an issue as far as the sponsorship of the Olympics is concerned for the simple reason that the company is not doing anything that is unethical or has deliberately done something that has harmed the consumers," he says.

Both Shah and Payne think that the Note 7 recall will not be an issue as Samsung considers whether to renew its Olympic sponsorship which expires in 2020. The cost of a four-year worldwide sponsorship is approximately $200 million; prior to 2013 the figure was closer to $100 million. Samsung has held the wireless phone category since 1998, meaning nearly to $1 billion in fees for the IOC since then.

Shah believes Samsung’s willingness to invest in the Olympics can help erase the notoriety of the Note 7 demise.

"It will definitely help, the Olympics is one of the most widely watched events worldwide and their commitment to support a noble event like the Olympics despite the financial losses that they have encountered, I think will send a positive message," says the professor.

Payne says the crisis over the recall is a distraction for Samsung but won’t signal the end of its Olympic sponsorship.

"So I don’t see any real impact on Olympics, other than senior management will be focused on other files for a while. You will need to wait for all this to die down before making any big renewal announcement," Payne says.

Samsung Electronics product lines include semiconductor, telecommunication, digital media and digital convergence technologies. Global revenue for 2015 was $177 billion.

Written by Ed Hula, with reporting by Courtney Colquitt.

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