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How FIFA Make Money online

Football (soccer) over the years has become the most popular sport in the world. It is played in over 200 countries and no other sport has managed to achieve such a fan following. In the early part of the 20th century, there were more international competitions, and with them, more need to oversee, organize, and promote. As a result, FIFA (Fédération Internationale de Football Association or International Federation of Association Football) was formed in 1904.

FIFA says that its mission is to develop and improve the game of football everywhere and for all. FIFA is a non-profit organization that invests most of its earnings back in the development of the game. The earnings come from organizing and marketing major international competitions, with the most popular being the World Cup, which happens every four years. Other competitions like the continental championships and the FIFA Confederations Cup are also quite popular. We look at the simple and effective business plan that has helped FIFA become a successful corporate leader.

Economies of the World Cup

The football World Cup is a huge event in terms of the numbers it achieves for everyone involved. Of course, FIFA is the sole body charged with organizing the event and has access to all the revenues, but everyone is happy as long as they get a cut from the billion dollar revenues the event generates. (For more, see: World Cup By The Numbers.) The World Cup host country is decided upon by a bidding process, and it is a fierce competition.

Organizing such a huge and popular event requires a lot of investment, especially in building and enhancing world-class infrastructure. Thus, the country wins the bid attracts a lot of interest from investors, which can help to boost the economy. (For more read: Blowing Their Own Horn: Will The World Cup Lure Investment Capital To South Africa?) With so many countries vying to host the World Cup, FIFA naturally gets a big bargaining chip and gets away with dictating most of the terms. FIFA does not invest in any infrastructure created for the Cup; the onus for that lies solely on the host nation. However, FIFA gains a lot by selling television rights, marketing rights, and licensing rights, as well as revenue form ticket sales. And FIFA’s costs are minimal. FIFA pays the local organizing committee for organizing and conducting the World Cup. It also pays prize money to the participating nations, accounts for the travel and accommodation of players, and supports staff and match officials. In addition, it makes available for the host country a FIFA World Cup legacy fund to be used in the future for development of the game in the country.

Apart from the cost related to FIFA events, FIFA's major costs also involve development expenses, personnel expenses, and a financial assistance program.

FIFA in Numbers

FIFA has adopted the International Financial Reporting Standards (IFRS) reporting standards as part of a good governance policy. The numbers are reported around its marquee event—the World Cup. FIFA's revenue totaled $5.718 billion from 2011-2014, 89.8% of which came from event-related revenue. The rest of the revenue came from board licensing and investment income. Out of the event-related revenue $2.484 billion was attributable to sale of television rights, of which $2.428 billion was for the men’s World Cup in Brazil in 2014.

The next biggest source of income was sale of marketing rights of $1.629 billion, of which $1.580 billion was generated by the World Cup. Revenue from ticketing rights for the 2014 World Cup was $527 million and the rights are 100% owned by a direct subsidiary of FIFA. FIFA also gained from sale of hospitality rights and other licensing rights. Other income and financial income accounted for $271 million and $310 million.

All in all, there is a clear trend—93.9% of FIFA's event-related revenue during the period 2011-2014 came from the FIFA 2014 World Cup ($4.826 billion), of which 50.3% is from sale of TV rights, 32.7% from marketing rights, and a mere 10.9% from ticketing sales.

FIFA's 2011-2014 expenses of $5.380 billion can be broadly divided between event-related expense of $2.817 billion (52.3%), development projects of $1.052 billion (19.6%), and operating expenses of $861 million (16%). Event-related expenses were mostly related to the World Cup. A total of $2.224 billion was spent, including $453 million in contributions to he local organizing committee, $370 million in TV production, $358 as prize money with winners and runners-up receiving $35 million and $25 million respectively.

Other notable expenditures are operational expenses on ticketing, IT solutions, and hospitality for a total of $157 million and contribution to a legacy fund for Brazil of $100 million. The funds will be used for development and advancements in the game of football and related infrastructure in Brazil over the coming years.

Business Strategy

After analyzing the above numbers, it can be easily concluded that organizing the FIFA World Cup alone is a very profitable and low-risk venture for FIFA, which resulted in a net profit of $338 million during the period 2011-2014. Overall, FIFA has thus been able to accumulate reserves of $1.523 billion with cash of $1.038 billion. With relatively cheap inputs in players, personnel, and ready infrastructure (created by the host country), FIFA manages revenue of over $5 billion.

FIFA also constantly improves its strategy like it did with its sponsorship model. There are currently three World Cup sponsorship levels: FIFA Partners, FIFA World Cup Partners, and National Supporters. FIFA Partners help develop the FIFA brand and engage in corporate social responsibility. FIFA World Cup Sponsors are given the rights to promote their brand and the World Cup. National Supporters are headquartered in the host nation and have rights to promote their brands within the host country. FIFA is tweaking the model a bit, keeping the top two tiers intact and changing the “National Supporters” to a regional model with up to 20 companies from five regions (North America, Africa, Asia, South America, and Europe).

The Bottom Line

FIFA has recently been charged with mismanagement and malpractice over the bidding process for the World Cup. (For more, see: Financial Fiasco of the 2022 Qatar World Cup.) Recently, the president and other executives were named in the controversy and arrested on charges of corruption. Over its 110-year history, only eight people have headed the organization, which begs the question of transparency and good governance. Nonetheless, with its little-to-lose business strategy, FIFA is turning out impressive earnings numbers. It does not have to invest in or take on the financial risk of building infrastructure for competitions. Yet, it is FIFA that rakes in revenues in huge numbers, primarily from TV and marketing rights.

Content created and supplied by: PsalmuelB (via Opera News )

FIFA FIFA Confederations Cup Fédération Internationale de Football Association International Federation of Association Football World Cup


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