The FIFA World Cup in Qatar is now just a couple of months away.
It’s going to cost Qatar an estimated $220 billion, roughly 60 times the $3.5
billion that South Africa spent on the 2010 edition of the tournament.
So, the pertinent question becomes – is it worth it?
Has it ever been worth it?
How much do the host countries make from the World Cup?
There are two facets to this question – firstly, the revenue or income made by the host country,
and the costs incurred in hosting the event. We’ll look at each of these in turn.
The key revenue streams generated by an event such as the World Cup are:
Hospitality, accommodation and ticketing rights.
Revenue from ticket sales is not shared with the host country and is 100% owned
by a direct subsidiary of FIFA. There is some hospitality revenue (primarily from
accommodation) that aids the local economy but is comfortably surpassed
by the cost and logistical burden of creating additional accommodation facilities for teams,
FIFA officials and more than a million fans. There were multiple reports of unfinished
training camps for instance ahead of the 2010 World Cup in South Africa.
Broadcasting, TV and other media rights.
This is also owned entirely by FIFA and is comfortably the largest revenue stream
generated by the World Cup, given the global viewership. 55% of FIFA’s $4.6 billion revenue
in 2018 came from selling global TV and broadcasting rights for the World Cup.
Sponsorship, marketing and licensing rights.
Collectively, these accounted for 35% of FIFA’s 2018 revenue and are once again not shared with
the host country. Licensing in particular has been growing exponentially and saw a
huge 114% increase in the 2014-18 period vs. the previous four years between 2010 and 2014.
Strong brand licensing performance is cited by FIFA in their annual report as
a key driver – notably, events such as the FIFA eWorld Cup Grand Final in 2018 which
saw participation from 20 million players and digital viewership upwards of 29 million globally.
Tourism-driven boost to the local economy
This is often cited by FIFA publicly as a massive upside driver for the host nation. Yes, it’s true
that during the World Cup months there is upside, especially during the knockout stages. However,
this is a one-time fillip and tourism levels have been shown to stabilize to pre-World Cup
levels within months after the event. There have also been instances of ‘negative tourism’ – most
notably in France during World Cup 1998, where during the group stage in June the number
of non-resident overnight stays actually declined by 13% versus the previous year!
This is because mega-events like the World Cup come with consequences undesirable for
normal tourism – traffic jams, noise, higher prices and potentially compromised security.
Broader socio-economic impact (jobs, infrastructure upliftment, etc.)
This is the real upside for the host nation, and in some cases has left long-term positive
impact. The best example is South Africa and the 2010 World Cup. South Africa spent
around $3.5 billion in total in preparation for the event. Infrastructure in particular
received a huge boost – domestic public transportation was created,
roads were repaired and host cities received significant renovations. All of this created
several thousand jobs and significantly aided the economy for multiple years.
This broader socio-economic impact has been seen by other host countries as well – a report
prepared by the Russian World Cup organizers stated that the tournament created up to 315,000
jobs annually and will continue to impact the nation over five years.
The other side of the equation is cost, and that’s important to consider in the context of the host
nation because FIFA spends nothing on the actual event. The bidding process to host the World Cup
is extremely competitive, giving FIFA all the leverage. Host countries need to spend billions
of dollars to create world-class stadiums and infrastructure (including accommodation for teams,
fans and FIFA officials) and provide lucrative tax breaks to FIFA and all its partners and sponsors.
This is often funded either by taxpayers in the host country (it’s been estimated
that upwards of 70% of the cost for the 2018 World Cup in Russia was funded by taxpayers)
or by host countries taking on billions of dollars in debt to ensure timelines
are met and they can deliver a high-quality event with the eyes of the world on them.
Brazil reportedly incurred $3.5 billion in debt by the end of the 2014 World Cup.
A lot of the infrastructure spend is also wasteful. The largest stadium built for
the 2010 World Cup in Brazil (the Mane Garrincha stadium) now doubles as a bus parking lot. Brazil
also spent $2.6 billion upgrading major airports, far less useful to the local Brazilian than the
long list of promised rail and bus projects which were cancelled or remain unfinished.
The tax breaks in particular impact the host country. The host country would ordinarily
make money from people spending in restaurants or movie theatres and other sources of entertainment
in the absence of the World Cup, but all FIFA World Cup spending (tickets, purchase of sponsor
merchandise / goods) is entirely tax-free, implying millions of dollars of lost revenue.
Notably, all other FIFA-owned revenue streams (TV, broadcasting,
media) are also entirely tax-free. Germany estimated that a whopping $272 million in
tax exemptions were offered as part of its bid for the 2006 World Cup.
So, finally, how much does the host country make from a World Cup and is it worth it?
On average, it’s not. There is some upside from a temporary tourism boost and South
Africa is a good example of longer-term infrastructural and socio-economic upliftment,
but in most cases it’s been a high-cost, loss-making event for the host country.
This seems especially clear when developing nations host the World
Cup as the taxpayer money could have been used to improve facilities for the poorer,
less privileged people of the nation, and debt-payments become crippling over time.