The Economics of the World Cup

Tanay Jaipuria
Jul 15, 2018 · 5 min read
Source: Unsplash

As the World Cup comes to an end, I thought it would be a good time to write a quick piece on its economics.

The once-every-four-years event lasts about 30 days, and generates almost $5B¹ in revenues. Its expenses tend to be less than $2.5B, meaning that it brings in a surplus of over $2.5B, making it a true cash cow for FIFA, the international governing body of Football which hosts the tournament. Below is a breakdown of the economics.

Revenues

There are four main ways FIFA makes revenue through the World Cup: TV Rights, Marketing Rights, Ticketing and Hospitality and Licensing.

  • TV Rights: With the World Cup having a global reach of ~3B people from over 150 countries, its not surprising that the sale of TV rights is the biggest source of revenue. In the cycle leading up to the 2014 World Cup, the sale of TV rights accounted for 2.4B. They are estimated to bring in ~$2.93B in this World Cup.
  • Marketing Rights: This refers to the revenue from the sales of event-related media and advertising rights as well as some partnerships with sponsors who want to benefit from an association with the FIFA brand. The sales of marketing rights is the second biggest source of revenue. In the 2014 World Cup cycle, it accounted for 1.5B in revenue. Based on projections for this cycle, it will be close to the same.
  • Ticketing and Hospitality: Over 10M tickets are requested and >3M sold in a typical World Cup. In Brazil, 99% of the available inventory was sold out (3.2M tickets), with a 98.3% average attendance rate. For Russia, figures are expected to be slightly lower, but at slightly higher average prices. FIFA made $711M from the last world cup (527M from ticketing and 184M from hospitality), and will make an estimated ~$585M at this one.
  • Licensing: This involves the revenue from the licensing of the FIFA brand elements to various companies, such as to EA Sports for the Fifa 18. This accounted for $107M in the 2014 cycle, and will bring in ~$330M in this cycle owing to the World Cup.

Expenses

The main sources of expenses for FIFA are contributions to the local organizing committee (related with on-the-ground expenses for the world cup), contributions to participants including prize money, TV production, ticketing and hospitality related expenses, the legacy fund established to provide long-lasting benefit to the host nation as well as other costs which include things like referees, goal-line technology, team travel, marketing and digital costs.

  • Contributions to the Local Organization Committee: This includes the direct expenses related to hosting the World Cup including transportation, security, stadium operations, conducting the draw and so on. For the 2014 World Cup cycle, this amounted to $453M.
  • Prize Money: The prize money for 2014 varied from $8M each (for the 17–32nd place teams) to $35M for the winner for a total of $358M. For 2018, the total prize money is $400M, with the winner receiving $38M.
  • Contributions to Participants: Aside from prize money, each teams receives 1.5M to prepare for the World Cup. In addition, FIFA pays the clubs whose players play at the World Cup. In 2014, this amounted to $118M, but it is estimated to rise to $258M because of increased payments to clubs.
  • TV production: TV production costs include the cost of production of the TV signal as well as the costs of the broadcasting centre. In 2014, it cost $370M and it is estimated to cost $240M in 2018 thanks to increased efficiency and fewer stadiums in use.
  • Ticketing and IT solutions: The cost to provide the ticketing solutions cost 157M for the 2014 World Cup and an estimated $140M for the 2018 World Cup.
  • Legacy Fund: FIFA budgets $100M which is provided to the host nation to help advance football in a way that also provides societal benefit through development programs.
  • Other: Other expenses including digital, referees, travel and accommodation and 668M in the 2014 World Cup but only an estimated 283M in the 2018 World Cup.

Putting it Together

Taking the revenue and expenses above, one can see that the World Cup generates a pretty sizable surplus for FIFA, which is shown below².

If you’re wondering what FIFA uses the surplus generated by the World Cup for, it is largely invested into Football development and training programmes. In fact, FIFA plans and budgets itself on a four year cycle, and plans its investments such that it generates very little to no net income over a four year period since it has adequate reserves.

The World Cup is their main source of “surplus”, which is invested in the same four period into governance and football development and training to realize FIFA’s strategic vision, which is currently the following:

1. Grow the game

2. Enhance the experience

3. Build a stronger institution

Concretely, FIFA has been investing in the following to realize the vision above:

  • Developing and growing Women’s football through competitions, training programmes and making the game more accessible
  • Development programmes to grow the sport across the globe
  • Investing in e-sports and new technologies to improve the experience of watching the game (e.g., V.R and fan interaction systems)
  • Providing oversight in development and other matters related to FIFA’s 211 Member Associations

Footnotes

¹ Source for all figures are the financials reports of FIFA

² All figures for the 2018 World Cup are estimates

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Tanay Jaipuria

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Product @Facebook. Previously @McKinsey. I like tech, econ, strategy and @Manutd. Views and banter my own.