The business of hosting the Football World Cup

While the business end of the Football World Cup continues this week in South Africa, the bidding process for the 2018 and 2022 tournaments is in full swing.

Due to a continental rotational policy that was implemented in 2000 by world football’s governing body FIFA, only Africa could host this year’s event and similarly South America will host in 2014 (Brazil).

This policy has since been withdrawn by FIFA. However, Africa is still ineligible to bid for 2018, while South America is ineligible for both 2018 and 2022.

This opens the door for bids from Europe, Asia and North America.

Encouragingly for the European Federation (UEFA), the president of the Asian Football Confederation (AFC), Mohammed Bin Hammam, has pledged the AFC’s official support for a European bid for 2018.

By doing this, he hopes to get reciprocal support from UEFA for an Asian 2022 bid.

Soon after Bin Hammam’s comments, Australia decided to withdraw its bid for the 2018 World Cup and focus its attention and resources on the 2022 tournament, along with the competing Asian nations of Japan, Qatar and South Korea.

This leaves the United States and European bids of England, Russia, Belgium-Holland and Portugal-Spain as those to contest for both tournaments, while the AFC is putting all its eggs into the 2022 basket.

What each of these countries is vying for is not just a football tournament. They are chasing the far-reaching and long-lasting benefits of the event, both economic and otherwise.

But the victorious country in the bid faces a series of rules set forth by FIFA.

These address a number of issues including the structure of the draw, the nature of the stadiums, and even the shortest allowable distance between each stadium to the nearest international airport (150km).

These rules represent a great cost to the host country and its taxpayers.

Central to FIFA’s demands are six to twelve stadiums of at least 40,000 capacity for the group games through to the quarter-finals, as well as three stadiums seating at least 80,000 for the semi-finals, third-place playoff and final.

In the case of South Africa, several new stadiums were built, while others were refurbished to a set specification – all at great cost to the taxpayer.

Beyond the football grounds, there is the matter of improving infrastructure to the degree that local, regional and national transport systems can cater for the influx of tourists – 373,000 visitors are expected in South Africa for the month-long tournament.

Accommodation must also be sufficient in rejuvenated cities and regions.

The effect of Cup-related spending on South Africa’s economy is expected to provide a boost of approximately 0.5% of GDP (economic output), which is a huge chunk of the country’s forecast growth of 3% for the year.

Much of this spending has been done before the Cup, with only 16% to come from tourist expenditure. The rest comes from the already mentioned investment in stadiums and infrastructure.

But with such exorbitant expenditure from the host country, where is the revenue expected to come from?

FIFA owns and controls all commercial rights related to the World Cup, leaving only ticket sales as the major source of revenue for a host country.

England’s projected ticket revenue of US$897 million for their 2018 World Cup bid will likely mean a larger profit because they won’t need to pour as much money into stadium development as South Africa.

The 2006 host Germany recorded a net after tax profit of €56.6 million. However, this excludes any major infrastructure costs associated with the tournament, rendering the figure deceptively pleasant.

So is hosting the World Cup the lucrative business that it has been made out to be?

Indeed it’s foolish to think that FIFA’s interests lie in developing the host country; their interests are in growing the ‘world’s game.’ And nowhere is this clearer than in the figures outlining what FIFA stands to earn from this year’s World Cup.

FIFA’s main source of revenue comes from television rights, sponsorship and marketing. In 2006 it was US$1.8 billion which represented 0.7% of South Africa’s entire 2010 GDP.

Regardless of whether that figure grows this year, it’s significantly more than what South Africa will make.

Yet while FIFA has a social responsibility to its 208 member football associations, many in South Africa are grumbling at FIFA’s windfall while nearly half their population live on less than $3 a day.

But FIFA will be pouring much of its earnings from the tournament back into football development worldwide.

And although investment in its country is much-needed, South Africa must remember the many long-term benefits that come from hosting such a monumental event.

By Eddie Macky