Bad Economics from FIFA

Today, FIFA have confirmed they made $3.655 billion from the World Cup in South Africa.

President Sepp Blatter said that the figures proved it was the right decision to award the 2010 tournament to South Africa, despite fears that hosting the biggest event in football on the continent was a financial risk.

“I am the happiest man to announce that the World Cup in South Africa was a huge, huge financial success for everybody — for Africa for South Africa, for FIFA,” Blatter told reporters after a meeting of the executive committee of football’s world governing body in Zurich on Thursday.

In just two short quotes Blatter makes two collossal economic blunders.

First, just because FIFA made a heap of money on the South African World Cup does not mean that the decision to host in South Africa was the right one from an economic standpoint. The overwhelming majority of the money a governing body like FIFA or the IOC makes from their mega-events is broadcasting rights. Had FIFA hosted the tournament in England or Spain or Italy, broadcast revenues would have sold for essentially the same price and higher ticket revenues may have been generated. Without a counterfactual of what FIFA’s profits might have been had a different location been selected, it is meaningless to say that a profitable tournament implies that the site selection was optimal.

Second, just because FIFA made a bundle does not mean South Africa made a bundle. Indeed, FIFA and the IOC are able to generate such huge profits specifically because they don’t bear the expense of building the sports infrastructure needed to host the event. If the governing bodies, rather than the host cities and countries, were on the hook for the sports facilities, we would see the Olympics rotate among a small number of locations, such as Los Angeles, with existing venues, and the 2022 World Cup would be headed to the United States, with its wealth of  existing state-of-the art stadiums instead of Qatar, a country with almost none of the infrastructure currently in place to host the event.

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Author: Victor Matheson

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3 thoughts on “Bad Economics from FIFA”

  1. The figures don’t “prove” anything..Sepp is full of BS..Not only is SA on the hook for the construction costs..but..ta da..DECADES of maintenance expenses..let us also count the other hooks FIFA stuck into the African hide…

    1. Court costs and policing..these were off the charts in SA….

    2. Infrastructure to accomodate the new stadiums and to haul people around the various sites…Soccer fans are notoriously cheap..they NEVER repay the local communities costs where these events are held.

    The Olympics (Summer and Winter) and the World Cup..are neck and neck as the biggest sports giveaways to governing bodies and the greatest fleecing of the countries involved imaginable. These events are sold by politicians to politicians..and paid for out of the pockets of ordinary citizens.

  2. I agree completely. I’d love to see someone run for FIFA president saying we need make less money. The World Cup is getting devoid of character- all the stadiums feel the same. I would not go back to the US yet (too soon), but let stadiums in countries be imperfect- stop building the white elephants! And get tickets to the local people even if they resell them to teams that travel well. You may get England games full of fans from England, and Korea games full of fans from the host country, and that would be fine, and in both of them the atmosphere would be great. And a good atmosphere makes better TV, and in 20 years you have more fans and a bigger TV audience.

    By the way- the World Cup could still have gone to South Africa, but the Rugby stadiums could have been used more and the new and renovated stadium could be less grandiose.

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