The Economic Benefits of the World Cup
The World Cup that is currently being held in Russia, is one of the most important sporting events in the world, followed by half of the world’s inhabitants. That great popularity, translates into a LOT of revenue for many businesses.
Many countries are interested in opting to be the host country of the World Cup. But is the World Cup really profitable for the host country? What economic benefits does the World Cup haave?
Benefits for the host country: The case of Russia
Russia’s development preparations for the World Cup totaled 867 million rubles, which represents about 1% of the total investments made by the country in the last five years. Therefore, this public investment should be recovered with the tax collection of the event and the future utilities of the transport infrastructures and the construction of the stadiums for the Russians.
If we take into account the investments made and the income derived from the flow of the estimated 570,000 fans who visit the country, it is still difficult for Russia to obtain a positive return. Russia has admitted that it will not realize economic benefits as a host nation, but considers international football an opportunity to make a long-term investment in a sport that has suffered in Russia for many decades.
It also wants to avoid getting stuck with so-called “white elephants”, stadiums built for big events that are eventually abandoned symbols of mismanagement and excess. This problem has attracted attention recently after the 2014 World Cup and the 2016 Summer Olympics in Brazil.
To avoid the fate of Brazil, Russia has planned more spending on infrastructure that could add between 150 and 210 million rubles to the Russian GDP every year for the next five years. The big question is whether there will be any real profit for the Russians behind this public spending – time will tell.
Let’s look at the macros figures. According to the World Bank, Russia’s GDP growth in the second quarter could potentiallu increase by 0.1-0.2% points thanks to the World Cup. Nor is it expected that inflationary tensions exist in the country, because, despite the avalanche of tourists, it is a short-term effect that will only impact certain cities and sectors – food, hotels, telecommunications and transportation.
This very limited impact at the national level is due to the limited duration of the World Cup – from June 14 to July 15 – and the large size of the Russian economy -11 cities in which the tournament is being played.
Although there are no inflationary tensions, in the cities where the tournaments are being played, there has been a boom in the prices of hotel rooms. The Federal Tourism Agency of Russia published a list of hotels that have increased the price of their rooms by up to 5,000%.
The World Cup: Another piece of Russia’s foreign action
Russia is not known for being a country whose citizens are huge football fans so it does not seem like it should be interested in an event of this kind. However, economic figures fail to account for intangibles such as the brand of a country, more often than not.
Vladimir Putin has always been interested in external action policies, as a way for Russia to increase its influence on the global economic table. 47% of the global population follows the world either via the internet or on TV; in other words, having half of the world’s population’s eyes on Russia is a unique advertising opportunity.
Foreign action has been a priority for Russia. Recall that, in recent years, Russia has been accused of interfering in foreign elections, sponsoring cyber warfare, poisoning secret agents, invading Ukraine and inciting and promoting a dictatorship in Syria.
For the annexation of Crimea and the crisis in east Ukraine, the United States and the European Union initiated strong sanctions to Russia. These sanctions have contributed to Russia having been in a recession for two years.
FIFA: The monopoly event
The real winner of the World Cup is the organizer, FIFA, which has a monopoly on a unique product in the world. As a result of this strength, this organization has been surrounded by strong corruption by other events it sponsors, such as three editions of the Copa América and its Centennial tournament.
Let’s examine the revenue a bit more closely.
- If we focus on the sporting event that is the World Cup, FIFA made $2.6 billion. And for the World Cup in Russia, they’re estimated to take in $6.4 billion dollars.
- The main revenues streams consist of TV licensing rights, the income of the main sponsors, the sale of the license rights to use the symbols of the world championship, and the ticket sales for the games themselves.
- According to forecasts, the total television audience of the championship will be 3.3 – 3.6 billion people in more than 200 countries around the world.
- The total revenue from the sale of tickets for the World Cup in Russia in the 64 games of the championship totals 782 million dollars.
- The cost of selling a license to use the world championship logo is directly related to the cost of the “World Cup 2018” brand. The higher the value of the brand, the higher the percentage of income from the sale of products.
I could continue but I think you get the point by now. The Superbowl, NBA Finals, World Series….all very big sports in America. But you need to get out and see the world my friend. The World Cup trumps them all.