Economics of the FIFA World Cup
The FIFA World Cup has a significant impact on the global economy. FIFA, football’s global governing body with 204 member countries, is beginning to view itself as a global “big business”. This self-image is no assumption; it has been proven throughout various World Cups that this football tournament has a global impact.
World Cup sponsorship has risen from two thousand dollars in 1984 to 16 thousand dollars in 1996. The tournament attracts hundreds of millions of viewers on average from beginning to end of the tournament. These sponsors include Coca-Cola, McDonalds, and Adidas. In the United States (the 1994 host), 65% of the total money spent on sponsorship is in sports. Furthermore, 63% of the sponsorship in Germany (2006 Host) is in sports and 80% in South Africa (2010 host). With this value of sport sponsorship, it is evident that hosting a World Cup will strongly impact a global economy.
The 1994 World Cup in the United States was hosted in a number of different cities. In Los Angeles, site of the final, there was a total economic profit of 623 million dollars that went directly into the metropolitan economy. To help one better understand this figure, in comparison of that same year the Super Bowl only accounted for 182 million dollars (Nodell). These figures were calculated over just a one month period in which these games took place. Just in California, reports from the Pasadena Convention and Visitor’s Bureau conclude that 1,700 part-time jobs became available during the preparation and duration of the event (Deady). New York, San Francisco, and Boston received combined revenue of one billion and forty-five million dollars. The overall increase on hotels and food and beverages was ten and fifteen percent from the previous year. This money spent on hotels and restaurants helps the entire U.S. economy in that many of these hotels and restaurants are chains and corporations. Hence, the money made is spread throughout the corporation and it was found to be used for the opening of new facilities and expansions of the corporation.
In addition to the direct impacts of the 1994 World Cup, there are many indirect impacts as well. In order to host the Cup the USA had to develop a national soccer league. This necessity quickly led to the formation of the MLS or Major League Soccer in 1996. This created an ongoing economic factor for the United States. This opened doors for new facilities to be built, sponsorship of new teams, and the revenue of the ticket sales. The indirect impacts didn’t stop there either; the newly introduced professional league in the US engendered one of the fastest growing youth sports in the country. Youth soccer took off and the selling of apparel and gear for the sport was a target for private businesses to focus on selling.
However, a critic has argued that the event cost the U.S. $5.6 billion.
In the 2002 World Cup, several other advantages were discovered when the host was split between Japan and Korea. This was the first time the tournament had been hosted in two countries, with thirty two matches being played in each country with a grand total of sixty four matches. With the three million live spectators ticket sales were an astronomical 1.2 billion dollars. FIFA alone promised each country 110 million for hosting and all revenue from their ticket sales. Also, each country expanded their 20 soccer facilities with an investment of 4.7 billion dollars to prepare for this global event. This gave birth to another realization of hosting this event. A host country in the world cup feels this sense of pride and national exposure with so many people viewing and attending the event. Many times they feel it can show the world their economic success and the progress they have made in bracing the global sport of soccer.
It was predicted prior to the 2002 Cup that the England team's absence would cost the economy 4.7 billion in lost output or about .3% of their GDP (Gross Domestic Product) if they were to win the entire tournament. If the England team loses in just the first two weeks however, the losses are only expected to reach a total of 1.8 billion. A broader scope of Europe suggests that the top ten other soccer enthusiasts may contribute a loss of 8.1 billion of economic output or .3% to .75% of second quarter GDP. This is proven more significant in that of the thirty two nations participating, those nations account for 84% of the global GDP.
The 2006 World Cup was judged a success comparable to that of the 1994 US World Cup. The German government reported that tourism revenue over the month of the World Cup was up roughly 400 million dollars. They made about 3 billion more dollars in retail such as jerseys and other paraphernalia regarding the Cup. Lastly, a reported 500,000 new jobs were yielded in preparation for the tournament. This impact sends ripples through an economy. Restaurants and bars were full to capacity at all hours of the tournament, and 15 million more spectators arrived in Germany than was expected.
This success drew attention to the German professional league, the Bundesliga. As a result, sales of tickets and team paraphernalia have increased dramatically. Many global corporations witnessed the craze in Germany during the world cup and in recognizing the countries passion for the sport they have begun to sponsor many more German teams than prior to 2006. The global viewing of Bundesliga games has increased as well, helping these sponsors and German telecasters the profits they were expecting.
The 2006 World Cup had an operating budget (for staging the event, not inclusive of capital infrastructure costs) of €430 million. The German Football Association announced a profit before tax of €135 million. After tax and repaying the FIFA contribution of €40.8 million - the net profit was €56.6 million which was distributed to the German Football Association (DFB) and the German Football League (DFL).
For Germany 2006 that the host country was entitled to the gross receipts of all ticket sales. In October 2007 FIFA announced : "FIFA has reassumed responsibility for ticket sales and will establish a company named '2010 FIFA World Cup Ticketing Ltd' to this end.".
The 2010 FIFA World Cup was held in South Africa, for the first time in the tournament's history. Even though it may not attract as many foreign visitors as the USA and Germany World Cups, it did have an economic benefit due to the location and already emerging economy.
Any predictions about the economic impact of the 2010 FIFA World Cup on South Africa have to take into account the present state of the South African economy, which still has one of the largest disparities between the rich and the poor. One main factor for South Africa is attracting international investors. To increase the international trade and foreign direct investment, South Africa must have stability throughout their whole region in their economy and government. If this is achieved then South Africa could be in the top choices for foreign direct investment and collect the potential benefits of the 2010 FIFA games. Because FIFA gathers all of its finances through marketing tournaments such as the World Cup, they aim to ensure the event's success, and assist the hosting country accordingly. Since South Africa is still a developing country, FIFA will have an important role in funding the tournament. Along with other developing countries that host mega-events, the investment of larger capital investment is required.
The projected total direct economic value for GDP is approximately $21.3 billion. Also, 159,000 new jobs are predicted, including full- and part- time jobs, both permanent and temporary. The government also plans to spend millions on upgrading stadiums and building a new international airport. The tournament will host 32 teams with an average of 50 people per team, 14,500 VIPs and dignitaries, 500 officials and 10,500 media. A projected number of half a million foreign visitors (located outside of Africa) are expected and staying an average of 15 days.
2018/2022 World Cup Winning Bids
On 2 December 2010, Russia and Qatar were awarded the 2018 and 2022 World Cups, respectively.
The United States was a bidder for the 2018 and 2022 World Cups, although questions were being raised about the US bid and whether its economic impact on the US would in fact be as favorable as promised (http://www.umbc.edu/economics/wpapers/wp_10_121.pdf). A new report argues that the US World Cup in 1994 lost billions of dollars despite a positive economic impact estimate, noted that the same company is creating the estimate for the current bid, and predicts that a 2022 US World Cup could again lose billions of dollars in lost income.<http://www.umbc.edu/economics/wpapers/wp_10_121.pdf>.
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