Tag: world cup

TAIWO ALIMI takes a financial look at the FIFA World Cup to pronounce the true winner of the megabuck football showpiece.

The preamble

A classic display of talent, emotion, passion, devotion and memories; The World Cup is second to none. Countries lap up exhilarating feelings, fans cry whichever way the drama on the field goes: victory or vanquish. Host state salivates to welcome thousands of strangers and put up the best World Cup in history. Football Association chiefs pump up for making the finals and get a share of FIFA largesse while the players forever talk about the World Cup glory.

It is only the FIFA chiefs that wear long faces because they are supposed to be neutral. It is only when the host country is playing and the host president is within air breath away that they are allowed to show their teeth, especially when their hosts found the net’s inside.

Yet, FIFA is the only winner of the World Cup, so says Brazil legendary football star, Romário de Souza Faria.

According to him, “The only winner of the World Cup is FIFA itself. They bring the Cup to your country telling you that it would turn around your economy and make the people happy and when they leave, the only place you see economic improvement is their pockets and fat accounts.”

He blamed FIFA for “robbing the Brazilian people,” after the 2014 Brazil World Cup. “FIFA got what it came for: money. Things like transportation that affects the public after the tournament is over? They don’t care. They don’t care about what is going to be left behind.”

Interestingly, Romario’s fame was sparked at the World Cup stage. He appeared at two finals, once lifting the trophy and becoming a hero of the game at home and abroad.

Once a FIFA ambassador, the footballer turned politician, became a villain long before his country hosted the World in 2014. He gathered oppositions against FIFA and Brazil government, delivering lectures and marching into the country side to preach the gospel of ‘FIFA disease.’

“FIFA will only come here to take away our wealth. They will leave us worse than they met us. They don’t care about our people like they say, they only care about the money they are taking away,” Romario observed.

The former Barcelona star is not alone. Russia football enthusiast, Nikolai Merkushin was a strong voice against Russia 2018. He was ferocious against hosting the FIFA mega-buck tournament insisting that the otherwise poor economy of Russia cannot be helped by the World Cup.

Rather, “it would leave our economy worse because whatever they are telling us we shall gain will be short lived. Already we are spending too much and the people of Russia will bear the brunt.” In addition, he said the Russia World Cup was a political manoeuvre by the government, in collaboration, to shore up its dwindling popularity.

At home, economy watcher, Richard Boyo, shared similar sentiment. “I am going to use economic index to answer this question because we must be factual here. Four years after the World Cup in Brazil, the average Brazilian is worse off. Many lost their homes to new stadia and their jobs too because his country wanted to impress FIFA and the world. Whatever jobs that were created during the one month fiesta fizzled out thereafter, and the economy lost more.”

So, beyond the World Cup razzmatazz and France that carted home the trophy, who are the true winners and losers of the Mundial?

Grim figures

Russia will have spent a total of 883 billion rubles ($14.2 billion) on hosting the just 2018 World Cup, according to Russian media report. This is much more than the official cost of 683 billion rubles ($11 billion) with transport infrastructure ($6.11 billion), stadium construction ($3.45 billion) and accommodation ($680 million) initially put out by government.

USA Today, an American newspaper, puts the figure for construction and preparation for Russia 2018 at$11.8 billion with more than 70 percent coming from tax payers. According to ESPN, the cost is put at nearly $12 billion.

By the estimation of CNBC, the cost of hosting the World Cup tournament for the first time by Russia is set at $14 billion.

Justifying the colossal spending, state officials in Russia claim the World Cup will add $26 billion to $31 billion to the national economy. Arkady Dvorkovich, Russia’s former deputy prime minister, claimed that preparations already added about $14 billion to the country’s GDP — the equivalent of 1 percentage point — as well as about 220,000 jobs.

Moscow Times, a Russian newspaper, added that the official cost has been jerked up more than 12 times since Russia won the bid to host the WC in 2010, making the $14million mark realistic.

Experts are, however, downbeat about any long-term benefits. “Russia will only experience a short-lived economic benefit from hosting the 2018 FIFA World Cup tournament,” Moody’s Investor Service said in a report published in May while analysing spending and projected gains from the tournament.

The report reads in part, “Much of the economic impact has already been felt through infrastructure spending, and even there the impact has been limited. World Cup-related investments in 2013-17 accounted for only 1 percent of total investments.”

Moody’s analyst, Kristin Lindow explained that the event will last just one month and the associated economic stimulus will pale in comparison to the size of Russia’s $1.3 trillion economy.

He added that, even the cost of hosting the world was put on the already overtaxed Russians who borne the burden, yet again. 

“For the Russian regions, new infrastructure meant additional tax revenue and decrease future capital spending.World Cup spending had negatively impacted government finances in other regions, such as the city of St. Petersburg and the region of Samara Oblast,” the analyst pointed out.

Russian President Vladimir Putin said that infrastructure spending had to pay off. “With regards to the infrastructure, these eleven stadiums, of course, we spent a lot of money on this and it is imperative that all of this infrastructure, I completely agree, it must work and above all work toward the development of sport on a large scale,” Putin said during his annual phone-in with the public shortly before the start of the World Cup.

Four years ago, the World Cup met with even stiffer opposition than all the finals put together.

To host, Brazil spent an estimated $15 billion to build stadiums and transportation, among other infrastructure. The most expensive of the stadiums, Mane Garrincha Stadium, cost $550 million and only served a handful of events in the months after the tournament.

Report says it is no longer in use for football games but, as a parking lot for buses.

After the tournament won by Germany, Brazil was found to be in a worse state than before prompting Romario to voice out the frustration of his people. “Unfortunately, this sporting event caused damage to the environment, society and did not produce nearly the profit that was initially projected. FIFA President Sepp Blatter pledged to give back some of the 2014 World Cup income to grassroots programmes in the South American country, which spent about $15 billion organizing the World Cup.That money could have been allocated to other departments of the inner communities of this country including health care and education to name a few. But, we did not see anything”

The World Cup came to Africa via South Africa for the first time in 2010, and the economic impact was nil, according to national team veteran, Quinton Fortune.

Analysing the impact four years after, Fortune magazine said spending £2.4billion to host the 2010 World Cup was a huge waste to the rainbow country.  

“Now that South Africans have had the chance to digest the implications of their government spending over £2.4bn on six new world-class stadiums and upgrades to roads and airports, has the outlay been worth it ? Has the game of football grown as it was meant to by hosting the World Cup? Judging by the poor attendances at top-flight games not involving the country’s two most popular clubs, Kaizer Chiefs and Orlando Pirates, who are also by far the most powerful in financial terms, and the poor performances of the national team Bafana Bafana the answer unfortunately has to be a resounding no”.

Community leader and inhabitant of Matsafeni village outside Nelspruit in South Africa, Imaan Milanzi, said they are still waiting for their World Cup legacy four years after a giant orange stadium appeared on their land.

He lamented, “They lied to us and betrayed us. Things didn’t go as planned. They first promised to supply water, upgrade houses and roads. But they just built the stadium and disappeared.”

‘Mbombela’, as the World Cup stadium is locally called is now a shadow of itself and the locals say they are worse than before the Mundial. 

In the 2010 FIFA World Cup Country Report, released nearly two and a half years after the event, South Africa’s government said it spent $1.1 billion on building and upgrading stadiums alone.

Transport was the biggest cost, with $1.3 billion dedicated to improving road, rail and air links and a further $392 million on the country’s main ports of entry.

The report however failed to give definitive figures on how much South Africa earned in total from being the host.

Fortune summarized: “It has not profited South Africa to host the World Cup and it will not profit any country.”  

Meanwhile, the U.S government and independent economic watchers say the 1994 World Cup impacted positively to the economy of the developed country.

It is estimated that the economic impact of the World Cup to the United States is $4 billion, with Los Angeles getting a huge boost of $623 million.

More grim figures  

Likewise, Paul Okoku, a U.S based stockbroker and Nigeria ex-international, believed participating countries and players benefit immensely from attending the World Cups. The benefits, though, are not necessarily financial or economic.

He said: “When assessing the monetary impact a World Cup has on a host country it is incumbent that you look at the assumed benefits and determine whether they are actually indeed monetary benefits or moral boosters and citizen unifiers. Host countries spend millions to billions constructing state of the art stadiums, facilities, etc. But often times once the World Cup is over, countries are left with these overly expensive facilities no use for it. The amount of money spent on the facilities is more so based on the “wow” factor for the World Cup and less on the long term use.”

Okoku elucidated: “In spite of the cost, most host countries regard stadiums as investments because they generate profits from game tickets during and after the Cup. While the ticket revenue during the World Cup is quite considerable, the revenue after the Cup is assumed to be even more substantial. After the World Cup, the tentative plan normally entails stadiums to be used by domestic soccer clubs as home stadiums. Since some developed host countries like Germany and France have top soccer leagues that are more attractive than common leagues, fans coming to future games can fill the stadiums almost every following competition. But the reality is for most countries these stadiums/facilities are rendered useless, and unless they demolish them, they will have to spend tens of millions of dollars every year on maintenance.”

The broker is of the opinion that host countries should look beyond financial gains. “The World Cup is a cultural unifier. It is the one sporting event other than the Olympics that has the entire world captivated. Citizens of their respective countries gather together during this period of time in harmony. Temporarily forgetting their local government’s transgressions and corruption, the moral of the people heightens to an all time high. To be the host of this magnificent event will bring great pride and billions of eager eyes to that country. Those eyes will see the good and the not so good. So all in all, from a sense of pride and exposure, the World Cup will impact a host country positively; however, not so much financially. It is a bad investment if the host is attempting to gain monetary value in the short and long term.”

Aside from host countries, participating countries also expend huge monetary cost to appear at the World Cup.

Participating countries

So how about participating countries since qualifying for the World Cup is assumed to be the biggest thing that could happen to any country?

Last December, Sports Minister, Solomon Dalung, disclosed that the federal government budgeted N3 billion ($8.3m), for Super Eagles to attend the Russia World Cup.

Of the sum, he disclosed that FIFA would make N900 million available; N600 million would be gotten from sponsors, while the federal government would provide N2 billion.

Two months to the Mundial, Nigeria FA president Amaju Pinnick noted that it has secured a $2.8million budget for the Super Eagles’ 2018 World Cup campaign. “This is from an early release of $2m from FIFA with an additional US$800,000 raised by the federation to ensure Nigeria is perfectly on track financially for the tournament in Russia.”

By June of 2018, the amount had moved up to over N4billion ($11.1million). This, according to Pinnick, was collected from the Nigerian government and FIFA ahead of the World Cup.

A breakdown of what has been spent on Super Eagles ahead of the World Cup shows that qualification and friendly matches gulped N3 billion, while part payment of allowance took a chunk of N1.08 billion.

At the World Cup proper, The Super Eagles were paid N1b ($2.8m) bonus for the first round of Russia 2018.

In total, Nigeria used up in excess of N5billion (13.8million) on Super Eagles to prosecute the World Cup from qualifying stage to the final.

This, of course, excludes the anonymous enormous government travelling expenses for federal government officials and those of the FA.

For participating, Nigeria however, raked in $8million (N2.8 billion) from FIFA for crashing out in the Group Stage plus $1.5million (N540million) leaving a negative balance of over N2billion, if the estimated travel expenses of Nigeria officials is added. Therefore, it is safe to sum up that participating at the World Nigeria set Nigeria back by over N2billion. 

While this story may be same for developing countries and third world countries like Mexico, Argentina, Peru and others, it may be a buoyant story for some European countries like France, Croatia, Belgium and England that made it to the semi-final stage.

These countries earn as much as $22million for playing up to the last-four stage.  Even, France earned $16million extra for winning while Croatia got $6million extra for finishing as runners up.  

While Nigeria could only salvage a paltry N600 million ($1.6million) from sponsors, these countries had secured huge endorsements for their teams going to the World Cup. According to Sports Sponsorship Insider, World Cup winner, France receives a whopping $54 million annually from Nike.

England followed with their $46 million contract, while Brazil got paid $32 million.

Germany and Spain have the biggest deals with adidas, with both European giants pocketing $30 million.

One cannot compare these figures to the meager $3.75m that Nigeria FA is getting from Nike. 

Bottom line is that these FAs do not have to rely on government. They run their bodies independent  

of government with profit at the back of their minds.

The real winner

So who makes all the profit at the World Cup?

Okoku offered an answer. “So who’s the big winner, one may ask. An event this grand does have a grand beneficiary – that lucky organization is FIFA.”

Yes FIFA.

All the monies that go into the pockets of World Cup qualifiers are just a tiny fraction from the bigger pot. They pale into insignificance when compared to the ocean that FIFA is fishing from.

Forbes, the independent world business tracker, pointed out that out of a FIFA went to Russia with $791million, out of which $400m was allocated based on how teams perform.

Each of the 16 teams eliminated from the tournament’s group stage received $8million. The 16 teams that progress got $12million each for competing in the next round. Those that reach the quarter-finals earned $16million, while fourth placed got $22million and $24million went to the bronze medalist.  Both finalists will receive $28m, with the winner receiving an extra $10m.

The remainder of $391million is distributed between the organisations and clubs that players participating belong to. Competing nations receive $1.5million ahead of the tournament just for taking part, at a cost of $48million to FIFA. The vast majority of what remains is distributed between clubs that agree to release players for the tournament. FIFA distributes $209m to players’ clubs. However, with a total of 578 clubs represented in Russia, they will receive approximately $362,000 each, assuming an individual fee hasn’t been agreed with certain clubs.

The remaining $134m is put aside to fund FIFA’s “Club Protection Programme”, which compensates clubs should their players suffer any injuries while playing in the World Cup.

It is fine to presume that this money will go back into FIFA’s purse since no serious injury occurred in Russia.

For an association that is designated nonprofit, according to FIFA statute, it is unimaginable to know the size of the pool that FIFA is fishing from.

Forbes informed that every four years, FIFA raked in overwhelming profits from the World Cup.

In 2014, it hauled in $4.8 billion in revenue, turning a $2.6 billion profit for the association. “Broadcast revenue topped $2.43 billion, while sponsorships and ticket sales brought in $1.6 billion and $527 million, respectively.”

According to FIFA’s 2014 Financial Report, it generated revenues of $5.72billion from when the qualification phase of the 2014 World Cup started in 2011, to when the tournament reached its conclusion. Of this amount, $4.83bn, or 84%, was generated by the World Cup itself.

In 2010, FIFA reportedly earned income of $3.65 billion from World Cup contracts and it made a $631 million profit from the 2007-10 World Cup cycle.

FIFA is projected to make $6 billion in revenue from Russia World Cup, up 25 percent from 2014.

WNBC put the figure at a higher $6.1 billion: “Projected revenue for FIFA for the 2015 to 2018 budget cycle, 10% higher than projections thanks to gains in China. More than $4 billion of the total is racked up during the World Cup year of 2018.

The end result is that FIFA takes away the meat of World Cup earnings and leave the bones for countries, players and hosts to fight over.

Out of the projected $6.1 billion income from the just concluded World Cup, FIFA only made available $791million for those who made it happen. Billions go into other businesses while the remains rest in the FIFA cooler.

However, for Adegboye Onigbinde, former FIFA instructor, it does not matter if FIFA is pocketing all the profit. “We have to remember that at the end of the day FIFA is a company and just like any other company; their goal is to maximize their profit. FIFA benefits greatly from the money that comes from fans all over the world, but the overall positivity that a country can gain from publicity associated with the World Cup is a reward that makes simply being a participant worthwhile. The World Cup doesn’t make a country poorer, and the money nations give to football teams should be allotted because it is being given to people who excel at their craft just like in any other country. At the end of the day, it isn’t about making the country richer, because only the finalists really get a significant differential from the awarded money minus the costs of participating. The World Cup is a way for nations to build themselves up with the outpouring of love and support that they receive from fans worldwide. A competition like this is a unifying event that people from all walks of life can participate in, and I don’t think you can quantify that.”

An Economist Henry Boyo feels the same way: “FIFA have designed methods of taking their revenue higher in succeeding World Cup. They are making the tournament more interesting, more engaging and more dramatic. Host countries give them tax exemption and when they live they go away with the profits. This is what great corporations do and that is legal.”

Another U.S finance broker, Godwin Odiye, is of the opinion that Nigeria should take a cue from FIFA. “Countries that develop their football tend to make huge profit too at the World Cup. You don’t have to spend tax-payers money to prosecute the World Cup if you do what you should do right. Countries like U.S, England, and Spain make profit, just like FIFA is doing.”

Nigeria ex-international, Taju Disu expressed similar sentiment. “The World Cup is FIFA’s money roulette. You cannot blame it for selling its prime product and making profits. If Nigeria football is run the right way, we should be talking about profit too every four years.”