The Finance of the Football (Soccer) World Cup 2018

I’m sure there are countries throughout Europe and Asia that don’t quite realise the difficulties for Australia in hosting the Football Wold Cup in 2018. However, in Australia, Football is far from the number 1 sport in the country. Depending on what state you are from. Rugby League (NRL) or Rugby Union (ARL) or Australian Football League (AFL) are easily the most common winter sports.

Given that the Football World Cup will run at the same time as these ‘more popular’ winter sports, this poses a significant issue. Federation Internationale de Football Association (FIFA) stipulates that for a country to host the world cup it requires 12 stadiums of at least 40,000 person capacity. Australia currently does not have this and requires a further $2.7 Billion to be spent on stadium upgrades. In addition to this, FIFA mandates that all stadiums are to be ‘clean’ – this does not mean ‘hygienically clean’ – but refers to ‘no sponsorship’ – FIFA control all of the sponsorship and ticketing and catering to the events and then, after the event, will pay a dividend to Soccer Australia at their discretion. The actual dividend payment is most likely not as important, in terms of viability of hosting the world cup, than the tourism dollars and job creation that the Football World Cup will bring with it.

Sponsorship and ticket revenue for venues such as the Melbourne Cricket Ground (MCG) are the biggest hurdles that the AFL and Soccer Australia need to overcome. The AFL has obviously signed contracts with its major sponsors, namely Toyota & NAB, whilst the teams which play at the MCG also have their own individual sponsors that: (a) want to see their branding and advertising around the MCG and (b) would like to have spectators in a venue the size of the MCG watching the teams which they have financially supported.

To negotiate this – there is going to be a significant contract buy-out from Soccer Australia to the AFL, NRL and ARL. This is exactly why Andew Demetriou, CEO of the AFL, is causing such an issue about it now, the more he talks about the issue prior to negotiations, the higher the contract buyout will be. He is looking out for the AFL (which he is entitled too), but neglects to mention the positive stadium upgrades which benefit the AFL as a result of the Football World Cup, a very one eyed approached to negotiations.

A report by Price Waterhouse Coopers (PWC) suggests that the Football World Cup will have a net benefit to Australia of $345million. This figure has been plucked from thin air, on a bunch of assumptions that PWC will have a lot of trouble quantifying. The same report also suggests that the government will need to pay $100million in compensation to the AFL, NRL and ARL to allow the word cup to take place. I would estimate (without intense calculations) that revenue lost in ticket sales, sponsorship and catering for the AFL, NRL and ARL during the 4 weeks that the World Cup is on will be at least 5 times this figure.

The Football World Cup would be a special event for Australia to host. The benefit to the country would be enormous. There are just a couple of contractual issues that need to be smoothed out.