Sportcal Global Communications, the independent sports business and financial information consultants, state in their report The Sports Market Insight: 2010 Fifa World Cup in South Africa that,
The 2010 Fifa World Cup will set the benchmark for global sports events on many levels. Not only will it be the first truly global event to be staged in Africa, it is due to smash previous records for media rights revenue, audiences, new media coverage, broadcast quality and sponsorship income.
A year before kick off at the 2009 annual Highway Africa Conference the 2010 FIFA World Cup Local Organinisng Committee (LOC) hosted African journalists for an evening at the then newly-built Nelson Mandela Bay Stadium in Port Elizabeth. The 2010 LOC’s Chief Executive Officer, Danny Jordaan, stressed again and again that the World Cup would be a financial success for FIFA. It was clear that this was one of the key messages that Jordaan and his committee wanted African journalists to take and spread at home. Why is it so important that the World Cup made money, a lot of money, for FIFA?
FIFA’s Finance Director, Markus Kattner explains that 95 percent of FIFA’s total revenue comes from the sale of rights relating to World Cup, a very risky venture leading to a “high exposure”. This is confirmed by FIFA General Secretary, Jerome Valcke, who states, “We [FIFA] are not rich. We are making quite good money thanks to the World Cup, but thatâ€™s the only money we have.”
In other words if the World Cup flops financially it would be catastrophic for FIFA and the organisation would probably not survive. For example, profits from the World Cup go towards funding its many other activities and less lucrative competitions such as junior and women’s World Cups and even the very popular and hig profile Confederations Cup between continental national teams champions.
All these important tournaments make financial losses which are only covered by the profits from FIFAâ€™s premier competition. For example, in 2009, FIFA spent a significant amount of money on the Confederations Cup in South Africa USD 44 million, the under 17 World Cup in Nigeria USD 43 million, the Club World Cup in United Arab Emirate USD 30 million and the under 20 World Cup in Egypt USD 21 million. FIFA also spent USD 30 million for womenâ€™s competitions in 2008. Without the profits from the World Cup these tournaments would not be possible.
That FIFA was “allowed” to make all this money, tax free at that, has been labelled obscene. Especially when it is portrayed as FIFA makes this money at the expense of the ordinary South African, who is excluded from the football party due to high ticket prices, high food and breveage prices at official FIFA FanFests, and dracorian FIFA marketing rules.
The true impact, positive or negative, of the World Cup on the South African economy of the improved transport infrastructure, tourism, job creation, sporting legacy, country branding and nation building will not be known for, perhaps, another 10 years when it is possible to conduct reliable costs-benefits analyses to get an accurate assessment.
One group of people who we know will not be complain about FIFA’s healthy finances are the six FIFA confederations which each get an extra USD 2.5 million, and the national football associations which each get a USD 250,000 bonus from the windfall.
I am taking part in the “Blogging the 2010 FIFA World Cup” project. Highway Africa in partnership with Global Voices and supported by MTN will provide coverage of the 2010 World Cup from a citizen media perspective through the use of on-the-ground reporting and the aggregation and amplification of online conversations across the continent, with a special emphasis on development issues. The content will be published on our own blogs and on the Reporting Development News Africa blog. Check out the other bloggers taking part in this project Eduardo Avila and Rebecca Wanjiku.
Cross posted at http://reportingdna.org/blogs/blog/2010/07/20/show-me-the-money/