How FIFA Makes Money? | How It Impacts the Global Economy?
🔍Insights
The year was 1872 when the first official football match was played between England and Scotland. From there on, football spread across Europe, giving birth to the Scottish Football Association in 1873. This was the second National Football Association, the first one being the Football Association, as the world’s only governing body for regulating the game.
As the love of the game spread, and the number of international matches increased, there emerged a need to set up a global governing body and FIFA (Federation Internationale de Football Association) was founded on May 21st, 1904 in Paris. It is one of the oldest and largest NGOs in the world. It united the Football governing bodies of France, Belgium, Denmark, Netherlands, Spain, Sweden, Germany, and Switzerland.
FIFA continued to grow and expand in federations and influence. The first non-European member to join FIFA was South Africa in 1909. In 1912, Argentina and Chile joined, and the US and Canada joined just before World War I in 1913. Since then, FIFA has continued to grow, being able to monopolize international matches. FIFA currently has 211 member associations. According to its official website, FIFA is "modernising football to be global, accessible and inclusive in all aspects. Not just on one or two continents, but everywhere."
How Does FIFA Impact the Global Economy?
How FIFA Makes Money?
As a non-profit organisation, FIFA invests a large portion of its earnings back into the development of the game. Having said that, FIFA also has tremendous revenue-generating power. Most of FIFA’s earnings come from organising and marketing major international competitions, continental championships, and the FIFA Confederations Cup. The most popular competitions are the Men’s and Women’s World Cups, which are played every four years.
The World Cups are one of the biggest events across the globe and also one of FIFA’s primary sources of revenue. There are other sources like television rights, marketing rights, hospitality and ticketing rights, and licensing rights that generate revenue for the federation. FIFA also makes strong efforts in minimizing costs, which allows for the majority of their revenues free to be reinvested in the development of Football.
Television Rights
The competition for broadcasting rights between television stations is often serious due to the global popularity of the sport. FIFA gives the rights once the negotiation between the television station and the federation is completed. FIFA is generally able to win its demands due to the sport’s large fan following.
Marketing Rights
FIFA's revenue generated from selling marketing rights is expressively high and it is also one of the major reasons for the increased corruption. This revenue is generally generated in the four years, leading up to the World Cup.
Hospitality and Ticketing Rights
FIFA’s direct subsidiary company enjoys 100% of the ticket sale rights. The federation also generates significant revenues from hospitality and accommodation rights.
Licensing Rights
The four-year period between the World Cups generates a large sum as licencing rights for FIFA, increasing every year as the World Cup draws near. This amount of the licensing fees includes the sale of brand licensing contracts, royalty payments, etc.
PV Vyshnavi
How Does FIFA Impact the Global Economy?
To host the FIFA World Cup, which takes place every four years, countries enter into a bidding war against each other in a harsh competition, after which the host country is decided by the federation. Each World Cup attracts a large audience, domestic and foreign. This puts huge pressure on the country’s infrastructure.
However, it also attracts investors, facilitating financial development. The World Cup also acts as a catalyst to attract more tourism to the host country. The FIFA World Cup elevates the global economy by creating jobs, generating billions in total economic activity, and strengthens economic development opportunities by generating tax revenues for local communities, not only in the host country but across the countries where the sport is most celebrated.
A few facts on how FIFA affects the global economy are:
- More than half the population of the globe either tunes in or travels to the host country to watch the FIFA World Cup.
- Figures indicate that the FIFA World Cup of 2002 generated a revenue of USD 9 billion for Japan and South Korea, USD 12 billion for Germany in 2006 and USD 5 billion for South Africa in 2010.
- 222,000 jobs in Russia were created and supported by the FIFA World Cup.
Damini Bhandary
However, wherever there are advantages, there are also disadvantages. There are ways in which FIFA also negatively impacts the local economy of the country hosting the World Cup.
- Alternate expenses are not considered as the money which people would have otherwise spent on other activities like holidays, dinners and movies are diverted towards football.
- FIFA has a whole host of conditions for the country hosting the World Cup, like state of the art stadiums, hotel accommodations for the players, etc., which are borne by the government and can run into large sums. This puts stress on the country’s economy.
- A large part of the earnings from hosting the World Cup is taken by FIFA. The host country rarely gets any part of the profit. This results in the host country bearing the expenses while FIFA gets the profits.
- Economists argue that the boost to tourism is only temporary, which falls back to previous levels once the World Cup event is over. This does not significantly affect the tourism industry.
- The biggest loss to the host government is the tax it might have earned on FIFA’s earnings. However, whatever FIFA earns is tax-free and the government loses significant earnings.
According to a report, many economists have questioned FIFA’s practice of bidding for selecting the host country for the FIFA World Cup. They have not been able to find any conclusive benefits of hosting the event.
Conclusion
As long as there is a craze associated with Football and the World Cup, FIFA will continue to exert its power over countries who are willing to host the World Cup event. Although FIFA receives many complaints over its bidding process or the resultant corruption, the sport itself enjoys a large fan base across the globe. FIFA is working towards making its bidding process more transparent and significantly reducing corruption. They are also working towards improving sponsorship levels as well as continuing to work for the betterment of the game.
FAQs
How FIFA makes money?
Around 95% of FIFA's revenue comes from:
- Selling Television Rights
- Marketing Rights
- Hospitality and Ticket Rights
- Licensing Rights
Is hosting FIFA profitable?
The major source of profit in the FIFA World Cup comes from selling tickets and television rights. However, the profit generated here is taken by FIFA and the host country does not get a part in it.
What does FIFA do with their money?
FIFA runs and generates profits in a four-year cycle. FIFA spends most of its money on the development of football all around the world.
In which country FIFA 2022 will be held?
The 2022 FIFA World Cup is scheduled from 20th November 2022 to 18th December 2022 in Qatar.
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