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How Does FIFA Make Money From World Cup?

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 2018 World Cup is being held in Russia and 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. The World Cup host country is decided upon by a bidding process, and it is a fierce competition. U.S., Canada and Mexico have been chosen to host the event for its 23rd edition in 2026.

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.  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 by the 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 stood at $734 million in 2017, totaling over $5.65 billion between 2015-2018. FIFA records its revenue in a four-year cycle leading up to World Cups, therefore most of these figures are for a period between 2015 and 2018. Most of the revenue, 98% came from revenue contracts, other sources of income include board licensing and investment income. Out of the event-related revenue that is recorded in the period between two world cup events, $3 billion was attributable to sale of television rights during the 2015-2018 cycle.

In a bidding war between ESPN and Twenty-First Century Fox Inc. (FOXA), FOX outbid Disney's ESPN and paid $400 million to FIFA for television rights through the 2022 World Cup. Facebook Inc. (FB) Twitter Inc (TWTR) and Snap Inc. (SNAP) are all offering millions of dollars to FOX for highlight rights.

The next biggest source of income is the sale of marketing rights which totaled $1.45 billion in the cycle leading up to the current Word Cup.

How Does FIFA Make Money From World Cup? How Does FIFA Make Money From World Cup? Reviewed by mujeeb Olagunju on June 22, 2018 Rating: 5

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