FIFA (Fédération Internationale de Football Association or International Federation of Association Football) was formed in 1904 to oversee, organize, and promote a growing number of international football (soccer) competitions. Because the sport is played in more than 200 countries, it has arguably the largest fan following of any sport around the globe. According to the official website, FIFA aims to "promote the game of football, protect its integrity, and bring the game to all." Although it is a nonprofit organization that invests most of its earnings back into the development of the game, FIFA also has tremendous earning power. Most of these earnings come from organizing and marketing major international competitions, with the most popular being the Men's and Women's World Cup, each of which happens every four years. Other competitions like the continental championships and the FIFA Confederations Cup are also quite popular. In 2018, largely on the strength of that year's World Cup events, FIFA generated more than $4.6 billion in revenue, per the organization's annual financial report.
FIFA's Business Model
The World Cup is not just one of the biggest sports events in the world, it is also a major source of FIFA's revenue. FIFA gains a lot from this and other events by selling television rights, marketing rights, and licensing rights, as well as revenue from ticket sales. Besides that, FIFA's costs are minimal, helping to ensure that the organization has as much money as possible to put back into the development of the sport itself.
- FIFA makes money through the sale of television, marketing, and licensing rights for football events like the World Cup.
- Infrastructure costs for World Cup events are left up to host countries, keeping FIFA's expenses low.
- In 2018, FIFA generated more than $4.6 billion in revenue.
- As a nonprofit organization, FIFA invests the majority of its earnings back into the development of the sport of football.
Economies of the World Cup
FIFA is the sole body charged with organizing the World Cup and the Women's World Cup, and as such retains access to all the revenues. It's common for these events to generate billions of dollars in revenue. The World Cup host country is decided upon by a bidding process, and it is a fierce competition. Qatar will host the World Cup in 2022, while the 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 that 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. 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. Also, it makes available for the host country a FIFA World Cup legacy fund to be used in the future for the 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 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. During this period FIFA reported revenue of more than $6.4 billion. While the majority of this revenue came from licensing contracts, other sources of income include board licensing and investment income.
FIFA's Television Rights
Of the $4.6 billion in revenue FIFA generated in 2018, 55% (about $2.54 billion) came from television rights. FIFA sells licensing rights to television stations and broadcasting institutions, permitting them to broadcast football games and related events in particular regions. Because football is immensely popular throughout the world, competition among broadcasters for licensing rights can be fierce.
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) all offered millions of dollars to FOX for highlight rights.
FIFA's Marketing Rights
The next most significant source of income for FIFA is the sale of marketing rights, which totaled $1.66 billion in the four-year cycle leading up to the current Word Cup. This is an especially impressive figure given that much of this cycle included a highly-publicized corruption scandal involving numerous high-level leaders of FIFA.
FIFA's Licensing Rights
FIFA generated $600 million in licensing rights for the 2015-2018 cycle, 114% more than for the previous cycle. This revenue comes from the sale of brand licensing contracts, royalty payments, and other similar sources.
FIFA's Hospitality Rights and Ticket Sales
The final significant component of FIFA's revenue stream consists of hospitality and accommodation rights, as well as ticket sales. Notably, revenue from ticketing rights are 100% owned by a direct subsidiary of FIFA. From 2015-2018, FIFA reported $712 million in hospitality rights and ticket sales revenue. More than 10 million tickets were requested for the 2018 World Cup events in Russia.
So long as football remains an incredibly popular sport with a diverse fan base spread across the globe, FIFA will likely continue to generate massive revenue from the World Cup and other major events. As such, FIFA's future plans involve continuing to support the development of the sport through various reinvestment projects and—particularly in light of the corruption scandal in recent years—developing its host bidding process in a transparent and objective way, ensuring adherence to compliance programs, and promoting gender equality in football.
FIFA also constantly improves its strategy like it did with its sponsorship model. There are currently four World Cup sponsorship levels: FIFA Partners, FIFA World Cup Sponsors, Regional Supporters, 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. Regional and National Supporters are headquartered in various regions and/or the host nation and have rights to promote their brands within those areas.
FIFA's 2015-2018 expenses of $5.36 billion can be broadly divided between the primary categories of event-related expenses ($2.56 billion), development and education projects ($1.67 billion), and FIFA governance and administration ($797 million).
Other notable expenditures from 2015-2018 are on Football Governance, which includes legal costs, information technology, and building expenses. This came in for a total of $124 million. Lastly, FIFA spent $211 million on Marketing & TV Broadcasting.
There have been times where FIFA was charged with mismanagement and malpractice over the bidding process for the World Cup. The president and other executives who were named in the 2015 controversy were arrested on charges of corruption. Over its 115-year history, only nine people have headed the organization, which begs the question of transparency and good governance. Although the organization led a highly-successful 2018 World Cup, questions about the possibility of continuing or future corruption remain.
Little Cause for Concern
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. It is FIFA that rakes in revenues in huge numbers, primarily from TV and marketing rights.