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Brands Seek Rio Gold in New Advertising Playing Field

FILE - Carlos Balderas poses for a portrait at the U.S. Olympic Committee Media Summit in Beverly Hills, Los Angeles, California, March 9, 2016.

Dozens of major companies and specialty brands that are not official Olympics sponsors have applied to run advertising campaigns featuring athletes ahead of the Rio 2016 Olympic Games, taking advantage of new rules that are shaking up the business of marketing surrounding the event.

U.S. multinationals including Mondelez International, General Mills, Under Armour, Adidas AG and Gatorade, a unit of PepsiCo, told Reuters they have applied to the U.S. Olympic Committee (USOC), seeking a waiver that will allow them to compete with official Games sponsors during the Olympics in August and the Paralympics in September.

Others that have applied include Austrian energy drink maker Red Bull, camera maker GoPro, footwear brands Asics Corp, Skechers USA, Brooks Running, swimsuit company Speedo, and Johnson & Johnson for a charitable campaign, the companies told Reuters.

The applications underline how the Rio Games are set to herald a radical change for advertisers, even if viewers may not notice much difference as U.S. household names such as two-time gold medalist gymnast Gabby Douglas appear in commercials for everything from banks to cereal.

Thanks to a rule change by the International Olympic Committee (IOC) after years of lobbying by athletes, official Olympic sponsors will have to share the big names with brands that have paid nothing to the IOC or a National Olympic Committee such as the USOC.

Companies running these campaigns will have to operate under detailed restrictions aimed at retaining some exclusivity for official sponsors such as Coca-Cola, Visa and McDonald's.

Still, the change to the IOC's "Rule 40" could have a big impact on the multibillion-dollar marketing engine that drives the Games, said Frank Ryan, head of intellectual property at DLA Piper, a law firm that has worked on sponsorship deals with the IOC and the USOC.

"If 'Rule 40' isn't policed properly, top sponsors will use it to argue for better pricing for top sponsorship deals," Ryan said.

Athletes had long argued that the old rule deprived them of commercial attention and income during their most marketable moments. Whether on TV, online or on billboards, only ads from official sponsors could feature Olympic athletes during the games. Athletes would face sanctions for any violations.

Under the new rules, the USOC is banning unofficial sponsors from using words such as Olympics, and even "summer,, "victory," and "effort" in some contexts. But the average consumer still might not notice much difference between official and unofficial ads, said David Abrutyn, executive vice president at Bruin Sports Capital, an international sports marketing firm.

"When you see Michael Phelps' face in an ad, you automatically think of the Olympics, even if there's no mention of it or any rings," Abrutyn said, referring to the 22-time U.S. Olympic medalist, who has 18 golds.

In March, Under Armour released a commercial showing Phelps swimming to a song called "The Last Goodbye" and then facing a flash of cameras -- images that evoke his Olympic successes. Phelps is aiming to qualify for Rio in what would be his fifth and potentially final Games.

Under Armour will follow the new rules carefully and expects other non-official brands to do the same, Peter Murray, vice president of global sports marketing for the firm, said in an interview. He added that Under Armour will be sponsoring 250 Olympic hopefuls.

The USOC says a team of marketing staff will closely monitor commercials for any rule breaches. For companies without waivers or which end up breaking the rules, it says its lawyers will be armed with letters threatening legal action. It can also bar athletes from competing.

But even though brands have to submit their plans to advertise on social media in advance, it could be difficult to keep tabs on all the activity in real time during the Games.

"Social media is the spot where there's the most opportunity for ambush marketing and commercialization that would be an irritant to a top sponsor," Ryan, the DLA Piper attorney, said.

Brand Police

Lisa Baird, chief marketing officer for the USOC, said in a statement that the new rule allows athletes "to continue their long-term promotional relationships with brands, and helps to curtail ambush of our partners."

Baird added, "It's a new process, but a process we believe is fair to all parties."

Official sponsorship deals with the U.S. Olympic team can cost a sponsor about $40 million for a summer Games, according to sources who declined to be identified because terms of sponsor deals are not made public. Much of that goes to buying ad time from U.S. Olympic broadcaster NBC, a unit of Comcast . NBC declined to comment on the matter.

In addition, the IOC has agreements with a set of about dozen sponsors - including Procter & Gamble and Samsung Electronics - that pay even more for global sponsorship rights.

Seventeen official USOC sponsors have their sponsorship agreements up for renewal after Rio, according to the USOC.

The criteria to receive approval from the USOC under the new advertising rules are strict.

Non-official advertisers are allowed to mention that their athletes are Olympians because the information is biographic, according to documents posted on the USOC's website. But the USOC says the applications are more likely to be approved if the Olympic reference "is balanced with non-Olympic achievements."

Brands had to submit a schedule for their media campaigns with the rule that the advertising had to be up and running by March 27. That gives the USOC enough time to approve, refuse or ask for changes on the submitted advertising before the Olympics start.

Brant Feldman, a sports agent with American Group Management who works with Olympians, estimates that hundreds of brands have applied for the waivers.

NBC is already seeing a boost in ad spending from non-official sponsors thanks to the rule change, according to Seth Winter, executive vice president of advertising sales at NBC Sports Group.

Wheaties, a General Mills brand that competes with official U.S. sponsor Kellogg's, said swimmer Missy Franklin and sprinter Allyson Felix, two former gold medalists expected to compete in Rio, would be part of "Team Wheaties." A General Mills spokesman said it had received approval from the USOC for its campaign.

Official sponsors are sure to be vigilant to prevent non-official brands from "ambushing" them.

Tina Davis, head of corporate sponsorships at Citigroup, said she is counting on the USOC to make sure the new rules don't erode the rights of official Olympic partners like her company.