FIFA strikes gold in South Africa

Record revenues are set to make the 2010 World Cup profitable for FIFA and the developing host nation

In May 2010, the British Broadcasting Corporation revealed that FIFA had made another USD 100m available to the local organising committee (LOC) to ensure South Africa would be ready to host the World Cup. The money was used for sports infrastructure, despite the fact that FIFA had already given USD 1bn to the host nation for infrastructure developments.

Viewing figures for the 2009
FIFA Confederations Cup were strong

FIFA secretary general, Jerome Valcke explained: “We had to add some money for the team base camps, where some teams were unhappy about the level of the services or the level of the pitches.” The news fuelled speculation that hosting the 2010 FIFA World Cup would come at a loss. However, Valcke insisted that the 2010 World Cup would be one of the most lucrative events in history, with revenues of more than USD 3.2bn.

The only revenue generator that has fallen short of target is ticket sales. After the international economic crisis, tickets did not sell as well as expected. As of May 2010, 10 per cent of tickets remained unsold, while 85 per cent of sold tickets had been sold at local rates to South Africans. To make the event accessible for South African football fans, ticket prices were much lower than for previous events. However, this does not affect FIFA as revenue generated from the ticket sales goes to the LOC.

So where does FIFA make its money? A large proportion of revenue comes from World Cup sponsors. Six companies signed up as FIFA partners are believed to each have paid over USD 100m to secure exclusive rights, while the eight FIFA World Cup sponsors and five national supporters have also paid handsomely.

Broadcasting bounty
But where FIFA gains most is through the sale of media rights to television, radio and digital media. And the world’s appetite for footage of this year’s event is stronger than ever.

South Africa was excluded from the international sporting community for four decades, during which coverage in the world’s media was restricted and mostly negative. Audiences are still curious about the country and broadcasters are eager to capitalise on this interest. As of May 2010, FIFA had already generated USD 2bn from the sale of broadcasting rights.

Even without the added attraction of an emerging host nation, the World Cup is the most widely viewed sporting event in the world. The 2006 World Cup in Germany was broadcast to 214 countries and territories on 376 channels. Each edition generates more and more footage: over 73,000 hours of total coverage was achieved in Germany 2006, an increase of 76 per cent on Korea and Japan 2002 and a 148 per cent increase on France 1998.

FIFA changed its television strategy in 2007, successfully bringing broadcasting activities in-house, ranging from the actual sale of rights, the development of a comprehensive in-house footage archive to overall event operation and client servicing. For the 2010 World Cup, FIFA is spending USD 150m on television production to reach new heights.

According to FIFA, matches are being broadcast by approximately 500 media rights licensees, including in excess of 200 radio stations and 50 new media licensees in more than 200 territories worldwide. For the first time, FIFA has allowed public viewing sites around the world for fans who don’t own a television, or who want to enjoy the vibe of being part of the event without spending the money on airfares and tickets. These fan parks are in Mexico City, Rio de Janeiro, London, Paris, Berlin, Rome and Sydney and are funded by local governments.

The growth of viewers in rapidly emerging markets means that the 2010 event is expected to create new records. China, Brazil and Vietnam formed the largest group of viewers in 2006, and access to televisions and other viewing platforms in these nations has rocketed since then.

The rise of new media platforms, including mobile telecommunications and the internet, is another reason why revenues are set to reach new heights. During the 2010 FIFA World Cup, 32 matches will be televised in high definition (HD) quality, with 31 multilateral HD widescreen cameras per match.

Like other rapidly developing countries, South Africa has one of the highest densities of mobile phones in the world. This communication platform will be used for the first time in World Cup history to distribute dedicated content. Video content is available for download, while statistics and other information can be requested by SMS.

The total number of cameras per match is at an all-time high, as different cameras provide feeds for television, internet and mobile broadcast platforms, which require different specifications. Each team will also be followed by a dedicated television crew that will ensure comprehensive footage, which FIFA intends to monetise after the event.

With such high premiums on sponsorship and involvement in the event, FIFA has to come down hard on any trader or organisation that has tried to get a free ride. At one month before kick-off, FIFA had launched 2,500 court cases against companies that had infringed exclusivity rights. The actions are aimed at protecting the exclusivity of FIFA’s sponsors for the event and therefore its revenues. “Without the commercial affiliates, FIFA would not be in a position to run the event,” said FIFA marketing director, Thierry Weil, at a news conference.

Reinvesting profit
Not everyone is happy that the 2010 FIFA World Cup is set to be so profitable. There have been complaints about price of tickets, hospitality and accommodation, which drove the South African government to launch an investigation to find out whether some companies were overcharging.

FIFA says the large sums of money generated from the television and sponsorship rights to its flagship event are reinvested in development programmes and national football associations around the world. Without the World Cup, FIFA would not be able to fund this work. Valcke told the Times of South Africa: “For FIFA, the World Cup is the only way to finance all that we are doing.”

All net proceeds from a FIFA World Cup kick-off concert held at the Orlando Stadium the evening before the opening match have been donated to the 20 Centres for 2010 campaign. The campaign aims to build 20 centres across Africa offering education and healthcare services, as well as football training, to disadvantaged communities. According to FIFA, approximately USD 10m is needed to finance the centres. FIFA has also donated to the project USD 500 for every goal scored during the World Cup qualifying matches.