FIFA World Cup Finance

So, today (yesterday by the time I post this) was the final day of qualification for the 2010 FIFA World Cup.  I had been cheering for the underdogs for the UEFA qualifying, especially after they were seeded using their team rankings, giving the stronger teams all a better shot at making it through to the finals in South Africa.  While Slovakia managed to take down Russia, it looked like Ireland was well on their way to South Africa until a Thierry Henry handball in the 103′ minute of the match cost Ireland the match, and a shot at heading back to the world cup.  Considering the prize money for each World Cup has been increasing, and that the last place squad in the Confederations Cup received $1.4 million, I wonder how much Henry’s handball, and the referee’s giant mistake cost the Irish squad.  Not to mention irate Irish fans, potential sponsors, and television revenue in Ireland.  I’d be curious to see the negative economic impact of the Henry’s imitation of Maradona’s famous “Hand of God” on Ireland, and the possible positive impact for France.

Speaking of economic impact and financial anaylsis, the U.S. Soccer Federation (USSF) has been storming along with their attempts to host the 2018 or 2022 World Cup.  In their latest “study” the USSF claim that bringing the World Cup to the U.S. will bring $5 billion to the U.S. economy, and create between 65,000 to 150,000 jobs.  Now that is a stimulus plan!  You can read the summary of the study here.  What I found strange was the estimate process used a model which had cities generating between $400 million to $600 million per city for an entire month.  In using this model, they generate the $5 billion influx into the U.S. economy through using three prototype markets.  Notably absent are the costs of hosting such an event.  There is a great deal of literature out there about hosting the Olympics and major costs which go along with it.  To me, the World Cup seems to be a better draw and possibly have a higher potential for true economic and financial benefit in developed nations with an existing infrastructure of stadiums.

However, I worry when I read reports such as this in the U.S., especially considering that the USSF wants to use this study to motivate all 27 potential host cities within the U.S. to conduct their own analysis of how much economic activity hosting the World Cup would generate.  As with all these type of studies, the costs of hosting events, repairs and building of roads and transportation, traffic and security issues, and other things are not considered.  Another problem I have with this “model” that the USSF is using, is working under the assumption that fans will come to the World Cup, and stay for a whole month, with each city seeing a constant flux of visitors, and maintaining high levels of spending and tourists for an entire 31 day period.  Looking at the schedule for say, the 2010 World Cup, one can see the group stages where all 12 venues have games lasts for about 14 days.  Following that in the knockout stage, only 16 teams are left (with a large number of fans possibly going home at this point).  With only a select few holding matches during the knockout stages of the tournament, it would seem that visitors coming to watch the World Cup wouldn’t hang around in cities where there is no football being played.  Effectively, maybe 4-6 venues could see a fully sustained crowd for a whole month, but probably most of the host cities would only see people coming in on days matches are played in the first two weeks.

It seems to me like the USSF is doing extrapolation which is way beyond the actual scope of hosting the World Cup.  Of course, this is nothing new with such economic or financial analysis of mega sporting events.

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One Response to FIFA World Cup Finance

  1. South Africa, by virtue of being the host nation, gets automatic qualification. All eyes will be on them, not necessarily on their performance on the field, but on how they manage the 2nd most popular sporting event of the world. I’m a fan of Didier Drogba. I hope his team will get past the quarterfinals- Maureen

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