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Analysis/Comment Last Updated: Aug 23, 2010 - 8:24:15 PM


World Cup: A win for FIFA and likely loss for South Africa
By Michael Hennigan, Founder and Editor of Finfacts
Jun 21, 2010 - 5:03:33 AM

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World Cup: FIFA - - Fédération Internationale de Football Association - - is certain to be a big winner from the world's sporting extravaganza but South Africa is likely to be the big loser.

The World Cup is a welcome diversion from the real world and on Saturday evening outside the La Bodgea Spanish-style pub and restaurant in the bustling street section of the Pavilion Shopping Centre in downtown Kuala Lumpur, a group of about 12 young Japanese left down their food and drink to stand for their national anthem before the start of the Japan-Netherlands game. The actual location of the game was likely to have been of little interest to viewers across KL and in much of the rest of the world.

Football in Europe is a huge money-making machine and the leaden performances of European multimillionaire players has also shown its limitations. France and Chelsea striker Nicolas Anelka is reported to have unleashed a volley of insults at coach Raymond Domenech after being criticised at half-time of the 2-0 World Cup defeat to Mexico. L’Equipe newspaper reported that Anelka told Domenech to “go screw yourself, dirty son of a whore,” in the dressing room at the Peter Mokaba Stadium in Polokwane after the coach took issue with his first-half performance. The rest of the prima donnas then refused to train after Anelka was ordered home.

Gate receipts and TV revenues helped England's biggest clubs to generate €2.30bn last year, compared with €1.57bn by Germany's Bundesliga, Italy's Serie A at €1.49bn and Spain's La Liga €1.50bn, a report by business adviser Deloitte said this month.

Europe’s top 20 revenue generating clubs earned over  €3.9bn in 2008/09, 25% of the entire European football market. Amongst the ‘big five’ leagues Spain's La Liga is the most unequal with a revenue spread of 25 times between the biggest and smallest club.

Despite the challenging global economic environment, the European football market grew to €15.7bn in 2008/09. The ‘big five’ leagues’ revenues (England’s Premier League, France’s Ligue 1, Germany’s Bundesliga, Italy’s Serie A and Spain’s La Liga) grew by 3% to €7.9bn. The wage bills of Premier League clubs have now recorded double digit percentage growth for three years running and total wages have grown by in excess of 55% (£474m) in that period. With wages growth outpacing revenue growth in 2008/09, the Premier League’s wages/revenue ratio increased to 67%  --  a record high. This key performance indicator increased in all four divisions in 2008/09.

Operating profits in the Premier League more than halved in 2009 from £185m to £79m as the Bundesliga, overtook the Premier League to be ranked the world's most profitable with profits of €172m (£142m). Other big European leagues remained in overall loss.

So the Bundesliga made more operating profit than England's Premier League, with 68% of the English league's revenue.

FIFA is immensely wealthy and operates from Switzerland and its president, Sepp Blatter, operates like a head of state. Given the competition among countries to host the World Cup, it calls the tune.

FIFA, a non profit-making organisation, said it had made a $196m surplus in 2009, as revenues soared to $1.06bn. The organisation said it spent $172m on development in 2009.

Pravin Gordhan, South African Minister of Finance, recently said the national government has spent almost ZAR30bn rand (US$3.9bn) on transportation (roads, airports, and ports of entry), telecommunications infrastructure, as well as stadiums (building six new ones and upgrading another four).

The ZAR11.7bn rand investment in 10 world-class stadiums alone created 66,000 new construction jobs, generating ZAR7.4bn rand in wages, with 2.2bn rand going to low-income households.

FIFA insisted that the Athlone township stadium in Cape Town could not be upgraded as "a billion television viewers don't want to see shacks and poverty on this scale."

So ZAR4.5bn was spent on the new Green Point Stadium which has more panoramic views for sensitive television viewers  -- at a cost equivalent to 25% of the annual education budget.

Operating in a developing country where poor entrepreneurs would likely cash in on the bonanza, South Africa passed a special law to protect FIFA' multi-billion dollar sponsorship program and special courts have been established to fast-track justice against transgressors.

Broadcasters and sponsors such as Adidas and Coca-Cola have paid $3.2bn to be associated with the World Cup.

La Bodega, Pavilion Shopping Centre, Kuala Lumpur, Malaysia.

In Germany in 2006, FIFA filed 3,600 cases against "ambush" marketeers.  The number in South Africa is reported to be 50,000.

“You are in or you are out,” FIFA Secretary-general Jerome Valcke told reporters in Johannesburg in April. “If you are out, you have to respect the rights of others. We can send people to jail if they try and profit from the World Cup when they have no right to do so.”

The irony of all this is that beyond FIFA's reach, whether in Kuala Lumpur or Beijing, entrepreneurs can use the term '2010 World Cup' with impunity but the poor people in South Africa, who will have to pay in some way for this month-long spectacle, are being hounded by wealthy people who are no doubt first in the chow line to feather their own nests.

The tournament is styled as a celebration of Africa but only 13,000 of the 2.9m match tickets - - less than 0.5% - - have been sold to people in other African countries.

Sales were only made online and had to be paid for via a credit card.

As for the legacy of the 2010 World Cup in a country where millions are without basic housing conditions, James Corrigan wrote in the London Independent last week: "What legacy? The legacy which saw South Korea having to pull down two brand spanking new stadiums built for the 2002 World Cup because no side could afford either the rent or the upkeep? The legacy which saw the famous Greek debt pile on a few more noughts because of the 2004 Olympics? The legacy which says that all these kids will jump off their couches and rush out to participate in sports before discovering non-existent sports fields boasting non-existent sports facilities? The only guaranteed legacy is a few votes for whichever politician fired up the bandwagon."

It is a guaranteed revenue model for FIFA.

Let the host pay the bills and accept FIFA's diktat while the gnomes of Zurich head home with the gold.

FIFA estimates that the 2010 World Cup in South Africa has generated close to $3.3bn in commercial revenue. Mike Laflin, CEO of Sportcal.com, and Bruce Fair, MD of Kelkoo UK, discuss the soccer tournament on June 03, 2010:

 

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