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Friday, June 6, 2014

The 2014 FIFA Football World Cup

This year, Brazil is going to host the FIFA worldcup event. Football is arguably the most popular sport in world and the next 6 weeks are the pinnacle of the sport. You may be wondering what I am doing writing about the football worldcup - right?

Actually, an event like the world cup has a huge economic impact on the country that is hosting and the purpose of this article is to highlight the key financial aspects of the worldcup and the impact of the event on Brazil's economy...

First Things First - The Prize Money


Let us start off with the Prize Money which the teams will WIN.

Winner - USD 35 Million
Runner Up - USD 25 Million
Third Place - USD 22 Million
Fourth Place - USD 20 Million
For the 4 Teams that get Eliminated in the Quarterfinals - USD 14 Million
For the 8 Teams that got Eliminated in the Round of 16 - USD 9 Million
For the 16 Teams that got Eliminated at the Group Stage - USD 8 Million


That is over 350 million dollars worth prize money...


Investments From the Host Nation 


Hosting an event of the magnitude of the worldcup could require huge investments from the country hosting it. Brazil is expected to spend close to 10 Billion US Dollars to host this marquee event. The Investments from Brazil fall into 4 main categories:
a. Infrastructure Facilities
b. Stadiums and
c. Security
d. Tax Sops for FIFA


Infrastructure Facilities:


As part of hosting this worldcup, Brazil is expected to spend close to USD 3 Billion on improving the Infrastructure facilities in the cities where the matches are being hosted. This includes revamp of the Airports, Rail system, Roads, Subways and other public transportation facilities.

Stadiums:


A total of 12 stadiums in Brazil would be hosting the 64 football matches this season. Brazil has spent close to USD 4 Billion on Stadium Works. This cost goes into construction of 5 new stadiums plus refurbishing the other stadiums as well. In order to host events that expect the kind of crowds that a football worldcup brings, these stadiums required extensive revamps and hence the expenditure.

Security Measures: 


The Brazilian government is planning to spend around USD 900 million for Security related expenses. They have declared that the tournament will be "one of the most protected sports events in history".

Tax Sops for FIFA:


FIFA is expected to spend a total of USD 2 Billion to conduct this event and Brazil has offered extensive tax sops and benefits to them in order to facilitate this event. Though the actual figures in terms of tax sops is unknwon, this number is also expected to be huge.


Revenue Generation


Now that we know that billions of dollars are being invested in order to run this event, this article would be incomplete if we dont cover the parts where Brazil and FIFA are going to earn a Revenue, isnt it?

Ticketing Revenue


FIFA forecasts a total of 3,334,524 tickets for the entire tournament. Tickets that are as cheap as 30 Brazilian Reals (Approx. USD 12) and as costly as USD 990 are available for sale. Tickets went on sale on 20th August 2013 and was overbooked within the first 24 hours. As demand exceeded supply, FIFA staged a random draw to allocate tickets with a total of 889,305 tickets being allocated. 71.5% of these were sold to Brazilian residents with the highest number of overseas sales being to those from the United States.

A further 220,000 tickets issued on a first come, first served basis sold out within seven hours of being placed on sale in November 2013. Following the final draw in December 2013, a second phase of ticket sales began and concluded the following month, attracting over 3.5 million applications. Any remaining tickets were then made available on a first-come, first-served basis from March 2014 onward and can also be purchased in person at designated FIFA ticketing centres.

TV Licensing Deals & Revenue


The TV Licensing Deals and Revenue generated out of that would run to billions of dollars. In Singapore, I will mostly be spending approx. 50 dollars for viewing this tournament and fans worldwide will be be shelling out a lot of money to watch this event.

Economic Impact on Brazil


Approximately 3 Million Overseas Fans are expected to visit Brazil during this 5-6 week period to watch the worldcup. Thats a lot of people - isnt it? Imagine the impact this would have on the tourism industry in Brazil. Airports, Hotels, Resorts and almost every hospitable place in the cities that are hosting the event are going to be full. Billions of dollars worth of funds from abroad would get infused in Brazil's economy which would be beneficial for local businesses as well as the country as a whole.

From a purely economic point of view the direct impact of the World Cup is relatively small, given the size of the Brazilian economy. If we take the recently concluded Winter Olympics in Sochi, Russia as a benchmark, Brazil could be actually overspending. Obviously those who are directly concerned with the event will always stress the positive impact, for example the benefits for the country’s image. Brazil’s longtime dream of returning the World Cup to South America after a 36-year hiatus is about to become a reality so, I dont think they would mind if they actually end up overspending. But in general, experience shows that the costs are higher than the economic benefits when such events are hosted...


Some final worlds: Fans around the world are eager to watch this event. Events such as the football world cup have a big short-term impact on the countries economy and this is what Brazil will be go through over the next couple of months...

Happy Footballing friends!!!

6 comments:

  1. I feel that hosting a tournament or cup dedicated to one single type of sport will have less negative impact than an event like Olympics. For ex., the amount spent on footballing stadiums will not go waste - esp. when the country is such a football fanatic one like Brazil. Hope the event brings us the next superstar :)

    As always good research on the statistics and numbers Anand!

    ReplyDelete
    Replies
    1. Yes Rajesh, that is very true. Hosting such type of events is more of a honor and a privilege in comparison to a profit & loss analysis.

      Oh yes, if we get the next ronaldo or someone else, am not gonna complain :)

      Delete
  2. Mostly I think Brazil Footbal Council will get loss through

    ReplyDelete
    Replies
    1. Yes - quite possible. The honor of hosting this event should be sufficient for any country to invest billions of dollars

      Delete
  3. Brazil have to win the world cup. Then only the money they spent will be worth or else everything will be in vain..! 4 billion USD only for the stadiums renovation and rebuild is too much.

    ReplyDelete
    Replies
    1. True Anup. However not all host nations can win the cup :) Hosting such an event is a prestige and most countries wont mind spending 4 billion USD to get that honor.

      Delete

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