Understanding FIFA’s business model

Established in 1904, FIFA (Fédération Internationale de Football Association or International Federation of Association Football) oversees, organizes and promotes international football competitions all over the globe. With over 200 member nations, it has the largest fan following of any sport in the world. According to its official website, it aims to “protect the game of football, protect its integrity, and bring the game to all”.

With its flagship product being the FIFA Men’s World Cup, a tournament that consists of 32 teams slugging it out, FIFA has been able to spread its tentacles all over the world, generating billions in revenue, with most of the earnings used to develop the game. Although FIFA is categorized as a non-profit organization, it has tremendous earning power. This is evidenced by its revenue of $4.6bn in 2018, based largely on the strength of the World Cup held that year in Russia.

The organization mainly makes money through the sale of television, licensing, and marketing rights from its competitions. Ticket sales are also a major source, as millions of fans purchase tickets just to see their favourite teams live in action.

This article highlights the ways FIFA makes its money through a plethora of income streams.

READ: Cristiano Ronaldo: The billionaire businessman you probably don’t know about

The World Cup As FIFA’s Flagship Product

Like every business that has a flagship product or service, the World Cup represents this for FIFA. Since its inception in 1930, it has grown in leaps and bounds, and the fact that it is only staged every four years adds to the excitement that builds around it. FIFA has the sole right of hosting the World Cup and the Women’s World Cup, and as such, retains access to all the revenues. These events typically rake in billions of dollars for both FIFA and the host country or countries as the case may be.

There is a bidding process involved in hosting the event, which is fiercely contested. Since 2002, FIFA has tried opening up the competition to other continents apart from Europe, North America and South America, with Korea and Japan co-hosting for Asia in 2002, while South Africa represented Africa in 2010.

READ: Manchester City owner, Sheikh Mansour spends £760k on old FA Cup Trophy

Hosting these tournaments require a lot of investment in infrastructure, especially in tourism, transport, and hospitality. Before a host is announced, FIFA examines the infrastructure in place, as well as the potential available in terms of fan experience. FIFA does not invest in any infrastructure, instead, it pays the Local Organizing Committee for conducting and organizing the tournament. Prize money is also paid to participating nations for travel and accommodation of their entourage, with staff and match officials also getting their part of the largesse. The major costs to FIFA also include personnel expenses, a financial assistance program, as well as development expenses.

There is also a Legacy Fund for the World Cup host, which is used for the development of the game in the country after the tournament.

READ: Top 5 businesses that may be affected by Super Eagles’ loss

Exclusive Rights

FIFA makes the majority of its income from TV rights. 55% (about $2.54bn) of the $4.6bn revenue it generated in 2018 came from TV rights. Being the sole rights holder of the tournament, FIFA gives broadcasting and television stations permission to broadcast football games and related events in selected regions by selling licensing rights to them. With football being a sport widely accepted all over the world, there is fierce competition among broadcasters for these licensing rights.

There is also the marketing rights, which is the next most significant source of income for FIFA. It totaled $1.66bn in the four-year cycle leading to the 208 World Cup. Despite the fact that the cycle coincided with the highly-publicized corruption scandal involving top-level executives of the organization.

FIFA also earns considerable amount of money from the sale of licensing contracts. During the 2015-2018 cycle, it generated $600m in licensing rights, which represented an astonishing 114% increase on its previous cycle. This amount is mainly from royalty payments, as well as brand licensing contracts.

READ: Chiliz, football-based crypto on a hat trick, surges by 380% in a week

Ticket Sales and Hospitality Rights

FIFA’s revenue stream is also helped in part by ticket sales, as well as hospitality and accommodation rights. A subsidiary of FIFA owns 100% of matchday tickets revenue. Hospitality and accommodation rights also contribute, as FIFA reportedly made $712m between 2015 and 2018. The 2018 World Cup in Russia had ticket sales requests up to 10 million.

Expenses vs Income

FIFA also has expenses it caters to as it tries to develop the game. Between 2015 and 2018, it recorded expenses totalling $5.36bn with these costs coming from three main categories, namely:

1. Event-related expenses ($2.56bn)
2. Development and education projects ($1.67bn)
3. FIFA Governance and Administration ($797m)

It also had costs of $124m which included legal costs, building expenses, and information technology. $211m went to Marketing & Advertising.

READ: Billionaire, Uzor Kalu wants to buy 35% stake in Arsenal FC

There is still room for more…

There are multiple ways FIFA can still milk the impact and reach of football around the world. It will continue to generate massive revenue, although its future plans involve the development of the game through various initiatives. The corruption scandal that rocked the football governing body as regards the integrity of the bidding process cast the organization in bad light, hence FIFA is committed to making its host bidding process truly transparent and objective. It is also keen on promoting gender equality in football, reducing racism, as well as ensuring adherence to compliance programs.

FIFA will also try to improve its sponsorship strategy as well as do more in the area of Corporate Social Responsibility (CSR).

Final Thoughts

FIFA, no doubt has a fantastic business model that is sustainable, scalable, as well as having the potential to even be more. With its competitions, it has created a model that is low-risk (in terms of infrastructure) but with high earning power that is sure to increase with proper and innovative ideas.