FIFA is the acronym for Fédération Internationale de Football Association. It translates to ‘International Federation of Association Football’ in English. FIFA was founded in 1904 with the motto “For the Game, For the World”. It started its journey with a view to overseeing, organizing, and promoting football worldwide. The headquarter of FIFA is located in Zürich, Switzerland.
This article will provide insight into the economies of the World Cup and the business model of FIFA— simply how FIFA makes money. Alongside this, it will also talk about the organization’s future plans and key challenges.
Business Model of FIFA.
FIFA generates revenues in massive numbers, but being a nonprofit organization, it uses most of it for the development of football. International football events are the major source of its revenue. The Men’s and Women’s World Cup are the flagship events organized by FIFA. The Confederations Cup and the Continental Championships are two other popular events.
Despite being held every four years, the World Cup is the major source of FIFA’s revenue. FIFA reserves exclusive rights— such as marketing rights and licensing rights, as well as ticket sales in its major events. The organization optimizes its cost to keep it minimal. According to FIFA’s annual financial report, it generated $4.6 billion of revenue in 2018, of which 49% (about $3.13 billion) came from television rights. Television rights are the licensing right to broadcasting institutions and television stations. FIFA gives them the right to broadcast football events in particular regions.
ESPN and Fox Inc. are two of the top contenders in this market. The latter paid $400 million to FIFA, outbidding its opponent ESPN to buy broadcasting rights for the upcoming 2022 World Cup.
Selling marketing rights is another significant revenue-generating source for FIFA. During the 2015-2018 period, FIFA generated a total of $1.66 billion in marketing rights while being $600 million in licensing rights. It also estimated $712 million of revenue from hospitality and ticket selling rights during the same period. During the 2018 World Cup, FIFA managed to sell more than 10 million tickets.
FIFA went through an estimated expense of $5.36 billion from 2015 through 2018. The event-related expenses were $2.56 billion, and expenses for the development and education projects were $1.67 billion, while FIFA governance and administration expenses were estimated to be $797 million.
During the mentioned time frame, football governance, including legal, IT, and building expenses, cost FIFA a major amount. These wings cost a total of $124 million. Lastly, FIFA spent $211 million on Marketing & TV Broadcasting. Among other expenses, there is a financial assistance program aside from development and personnel expenses.
Economies of the World Cup.
FIFA is the sole organizer of the Men’s and Women’s World Cup. This year, the FIFA World Cup will be held in Qatar, while the next edition is scheduled to take place jointly in the United States, Mexico, and Canada in 2026.
The bidding process for being the World Cup host is a harsh competition itself. The bidding winner nation is offered a lucrative amount of interest from investors. FIFA also developed its sponsorship model, which currently has four World Cup sponsorship levels: FIFA Partners, FIFA World Cup Sponsors, Regional Supporters, and National Supporters. These event partners promote FIFA’s brand.
The host nation of the World Cup takes charge of building infrastructures for the event. FIFA only pays the host nation’s organizing committee. It plans to invest just under $1.7 billion in the World Cup this year. After the world cup, FIFA opens a legacy fund for the development of football in the host country.
FIFA’s Revenue Projection for 2022.
FIFA has projected total revenue of $4.67 billion for the running year. The expected revenue can be divided into three categories: More than half of it, $2.64 billion, would come from broadcasting rights, $1.35 billion from marketing rights, and $500 million from hospitality rights and ticket sales.
Future Plans & Key Challenges
Football is played in more than 200 countries and is the most popular sport in the world. FIFA is on a mission to keep supporting the development of football. The organization aims to improve its world cup host bidding process and make it more transparent. FIFA has headquarters installed at regional and national levels. It collaborates with its partners to develop its brand and run corporate social activities.
Earning a bulk of revenues does not necessarily mean an ever-secured position for FIFA. Despite being the sole leader of the football industry, FIFA also has its own challenges. The 115-year-old organization has seen only nine individuals in the President position, which raises questions about the governing transparency. FIFA was charged with mismanagement and malpractice claims in the 2015 World Cup bidding process. The president and other official executives involved in the scam were arrested over corruption claims.
Conclusion
As long as football remains a favorite sport across the globe, FIFA will keep riding the roller-coaster. The organization must clean its image and keep presenting more exciting events to the football world.
