While what happens on the field will doubtless please, disappoint, and frustrate World Cup spectators, there are many who are more interested in the action off the field, hoping to see economic wins from what is purportedly the world’s most-watched sports event. Much has been and will be written about the economics of the World Cup. Some feel the organizer, FIFA—Fédération Internationale de Football Association—has scored a hat-trick, while as the host nation, Brazil actually scored an own goal. For many, especially perhaps us accountants, that is the real question—who will walk away with the greatest profit margin. Let’s take a closer look at some of the contenders:
Brazil (Host)—the host country was a popular choice of venue for football (aka soccer in IFAC’s country of domicile) fans, but it’s somewhat less clear whether the economy will come out in the black. USA Today reported that the host is predicted to spend $14 billion in total on building and renovating 12 stadiums, upgrading public infrastructure, and keeping the 32 teams and around 600,000 expected visitors safe. The host is arguing that the infrastructure is more of an investment than a cost as it stands to leave a lasting legacy for the benefit of local communities (similar legacy claims were made and hotly debated by London for the 2012 Olympics, and many Brazilians feel hospitals and schools may have been a better use of the money). In addition, Brazil expects to attract substantial tourism-related earnings. Certainly, these earnings will boost the economy, but the International Business Times says it won’t be a game changer. In fact, The Economist reckons tourism-related earnings will be dwarfed by the output lost due to productivity dips during the games.
FIFA (Organizer)—much has been said about how much FIFA, the international governing body of soccer and organizer of the World Cup, will make. Some have estimated that FIFA’s revenue, mainly from the sale of television and marketing rights, will exceed costs, largely in the form of prize money, to the tune of $2.6 billion for the 2014 World Cup. According to Forbes, most of this money goes back to the organizational bodies, after expenses.
Sponsors—many of the world’s biggest brands have paid large sums for the right to be official sponsors. The premier league of sponsors, the six top-tier partners of Adidas, Coca-Cola, Emirates, Hyundai, Sony, and Visa, are paying a combined $177.125 million annually, $708.5 million in total over four years. Then there is the second division, the eight second-tier sponsors of Budweiser, Castrol, Continental, Johnson & Johnson, McDonald's, Moy Park, Oi, and Yingli, who together are paying $524 million and finally Brazilian national sponsors with another $120 million according to 2011-13 financial reports. But these sponsors have doubtless made sophisticated assessments and concluded that they expect to add to their bottom line. For example, Adidas has said it expects to be the most visible brand during the event and will benefit from record sales in the football category. Indeed Bloomberg Businessweek reckons the biggest non-soccer rivalry at this World Cup is Adidas against Nike, creating a shadow competition through their elaborate ad campaigns. Finally, there is Panini, an Italian firm, the darling of children worldwide past (like the author) and present, for having produced sticker albums for World Cups since the tournament in Mexico in 1970.
Winning Team—there are many awards, from Man of the Match to the Fair Play Award, but the big prize is of course the winner of the FIFA World Cup Trophy and accompanying $35 million winner’s purse on July 13 in Estadio do Maracana, Rio de Janeiro.
Clearly it’s no easy task determining who will profit the most from the 2014 World Cup. The calculations are complex and controversial, and hard to quantity, let alone verify. Accountants might argue that the above players should have used investment appraisal techniques or cost-benefit analysis before committing their or their taxpayers’ dollars. While the winner of the FIFA World Cup Trophy will be clear for all to see on July 13, much less clear will be who or what profited the most.
Who do you think stands to score the greatest profit? Answer the poll, and join the conversation below.
