The Financial Express


World Cup economics: Qatar calling

| Updated: July 23, 2018 22:08:23

The Khalifa International Stadium's "air-conditioned" capability helped Qatar's World Cup bid. -Reuters Photo The Khalifa International Stadium's "air-conditioned" capability helped Qatar's World Cup bid. -Reuters Photo

Europe monopolised Russia's World Cup Championship on the field, accounting for all four semi-finalists, but financially the pendulum swung elsewhere. More than one-third of the 20 sponsors were Chinese, a seven-fold increase of the sole Chinese sponsor in Brazil four years ago. Ultimately, this helped the Fédération Internationale de Football Association (FIFA) to boost revenue 10 per cent more than was initially expected this year and reap $1.3 billion more than in 2014. The FIFA institution also wiped off almost a billion dollars in arrears, all accumulated since the Brazil championship, to end 2018 on a positive balance (all figures from Tariq Panja, New York Times, June 12, 2018).

Those overall figures may be globally sunny but posed local challenges. Russia, for example, could only muster $11 billion for tournament expenditures, as compared to $15 billion by Brazil. Yet, when tourist revenues are all added up, and all the political benefits accruing to Vladimir Putin, the championship's key patron, get tabulated, Russia may end up a winner, compensating for its gloomy reputation abroad. It is being persistently accused of cyber espionage in the United States and spy poisoning in Great Britain. Yet, net earnings of $6.1 billion from the championship went up almost nine times from those in Germany 12 years ago, and 10 times higher than in South Africa eight years ago (though just under 10 per cent more than in Brazil's $5.72 billion four years ago). Though Russia's glow may be short-lived, the vibrant psychological tailwinds and infrastructural effects may sustain some enduring benefits. Similarly for the world body, recovering, as it has been under President Gianni Infantino, from the serious Sepp Blatter plunders, scandals, and corruption cases until 2015.

Commanding 40 per cent of the world's population as viewers (over 3.2 billion), the pre-eminently recurring tournament is more than a straightforward business transaction. Ticket-sales, notwithstanding, could not reach the three million mark set in both South Africa and Brazil in 2010 and 2014, respectively, due largely to the smaller stadia, some with merely a 35,000 capacity (St. Petersburg's had only a 65,000 limit). Even sponsorship targets fell short: FIFA officials sought 14 in the top-tier category, for instance, but got only 12; and the 20 earmarked for the bottom-tier only attracted five corporations. Key absentees were from North America, Europe, and Japan, all likely for political reasons given Putin's brazen Ukraine penetration, Syrian intervention, and other globally unpopular foreign policy moves before the espionage accusations, and for over four-odd years. Even though it did not participate in the championship, China bailed Russia out big time, but perhaps as a dress-rehearsal for a future date as a tournament host itself, or even with a Chinese team as a championship participant before China hosting it.

Nonetheless, China's robust Russia presence highlighted a fast-expanding global interest in the tournament, not the least in Asia. Indeed, a country as far away from any championship participation as Bangladesh, has emerged as a die-hard supporting bloc of rival Latin giants, Argentina and Brazil. This is where the corporate shortfall may find its silver lining: global broadcasting. One USA Today report noted how the 2011 entry of Al-Jazeera and Latin America's Telemundo 'cushioned' the financial gaps (https://www.usatoday.com/ story/sports/soccer/2018/06/05/world-cup…). Though the elimination of Argentina and Brazil from the semi-finals lowered the global audience and interest, just thinking of what their presence, or any African teams advancing to that stage, might mean for the global future of a game hitherto dominated by European and Latin players and teams. The championship's stock-market value may be rising faster across Africa and Asia currently.

A larger global reconfiguration of the game and tournament seems well underway. As was evident, France's success lay in its African players, who represented three-quarters of the team. They also supplied just under half the Belgian and English teams. With African players, Chinese finance, and all continents being represented in a rare global joy amid the populist outbursts on either side of the Atlantic, we may be witnessing a turning point in not only the hallmark of the game (on-field performances), but also the financial fulcrum.

That may help bail out the staggering costs and nature of expenditures any tournament must grapple with.

As we note, more than one-fifth of the $6.2 billion FIFA earnings this year went into local organisation ($627 million) and prize-money ($400 million). Each of the 32 teams to qualify for the tournament received $1.5 million (as against $1.0 million in 2014), just for preparation. In the group-stage, each eliminated team received $8.0 million (same as in 2014), whereas those eliminated in the Round of 16 got $12 million each (as against $9.0 million in 2014). Quarter-final losers got $16 million (against $14 million four-years ago), the 4th place team, England, $22 million ($18 million), 3rd place team, Belgium, $24 million ($20 million), runners-up, Croatia, $28 million ($25 million), and winner, France, $38 million ($35 million in 2014). When we add the player-by-player payments to parent-clubs and insurance fees of $209 million ($170 million in 2014) and $134 million ($100 million), respectively, we can see the financial depth and intricate logistics also expanding.

In 2022, the tournament will go outsides traditional European and Latin American venues (as well as emergent African), to its smallest historical host: Qatar. It is clear Asian finances will be spurred, and unless the brouhaha between Saudi Arabia and Qatar subsides, we expect a financial bonanza, particularly if China ends up qualifying. By then we may have to find a more Asia-friendly namesake for Jules Rimet. Other enhancing developments could include the likely return of Atlantic financiers, hopefully with piqued-up European players from Africa, as well as the United States as qualifiers. By then, the new division of labour should become clear for all to ponder: African feet buoyed by European club finances entertaining an increasingly Asian fan-base to surpass Latin records, abide by European standards, using US technologies.

Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.

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