Posted: Mar 10, 2011
WORLD SOCCER ruling body FIFA presented its current financial report last week at its Executive Committee meeting in Zurich, Switzerland. Covering a four-year period 2007-2010, the report showed that FIFA obtained a total revenue of 4 Billion, 189 million US Dollars, while spending 3 Billion, 558million US Dollars, leading to an overall surplus of 631million US Dollars (about 94 Billion Naira).
The “very positive result,” using FIFA’s own words, “reflected the financial success of the 2010 FIFA World Cup in South Africa which has allowed FIFA to continue with its development programmes and the organization of football competitions and events. The financial result from this period has also helped to strenghten FIFA’s reserves which now stands at a mind-buggling (my words) 1,280 million US Dollars (about 192 Billion Naira).”
In my attempt to research and analyze FIFA’s billions, I stumbled on an article by a Swiss-based British journalist SWISS RAMBLER who maintains an appropriately-named blog on the internet called The Swiss Ramble. Rambler writes about the business of football and I get the impression that his reports are well-researched with facts and figures being quoted with authority.
Rambler’s article which throws a big insight into the income and expenditure profile of FIFA shows that while the Nigeria Football Federation (NFF) claims to operate FIFA-style statutes for its election and administration, there’s virtually nothing FIFA-style about it’s vision for the development of the game.
Despite its huge recurrent expenditure on its operations and its very competitive staff salaries, FIFA statutorily allocates funds for development projects around the world, especially its Goal Projects of which Nigeria is a beneficiary. FIFA also spends part of its surplus on social causes like the Education for All campaign being promoted by President Sepp Blatter.
FIFA’s state-of-the-art new headquarters in Zurich is an architectural masterpiece which cost about 200million US Dollars to build. FIFA’s 360 staff are well paid and Blatter himself reportedly earns about One million Dollars per annum. All signs of a very healthy organization.
True, FIFA is incomparable to the NFF because the opportunities and resources available to each of them are worlds apart. But even from its relatively meagre resources, the seemingly “perpetually broke” NFF can turn its fortunes around with visionary and strategic planning coupled with frugal and focused spending.
To start with, FIFA announced last week that it would pay an additional 300,000 US Dollars (about 45million Naira) to all national FAs from the surplus income realized from the 2010 World Cup in South Africa.
This is on top of the 8million Dollars already due to Nigeria for our first round showing at the Mundial. Since we weren’t expecting the 300,000 dollars bonus, how about using it to kickstart the NFF headquarters project when the cheque arrives from Zurich?
It’s a shame that despite several years of spending billion naira budgets, the NFF is still operating from a rented “Glass House” in Abuja. If the Aminu Maigari executive committee can give Nigerian football a befitting secretariat (plus an hotel where our football teams can stay for national assignments when in Abuja, instead of the millions that is currently spent yearly renting accommodation for them)., we will start believing that we have a visionary NFF that is determined to leave a positive legacy.
It is imprudent and wasteful for the NFF to continue to exhaust its entire resources participating in all sorts of competitions (beach soccer, five-a-side, etc, etc) without setting anything aside for developing the game, investing in physical structures, or contributing to social causes that are beneficial to society.
It’s good to use FIFA-style statutes to win elections into the NFF executive committee. But I think it’s even better to use FIFA-style methods to generate billions of dollars for the game and leave a positive legacy.
Now, to some excerpts from Rambler’s article on FIFA billions (see below). Don’t be surprised to read that FIFA spent 43million Dollars (about N6.5billion) on the 2009 FIFA Under-17 World Cup hosted by Nigeria. What you should ask is how come the Nigerian Government had to spend in excess of another N10 billion on the same competition?
The passage of the Freedom of Information (FOI) bill by the House of Representatives may be the first step towards finding answers to a lot of previously unanswered questions in Nigerian football management. Let’s hope that the Senate concurs to the bill soon for President Goodluck Jonathan to sign it into law.
The first question I will like to ask under the FOI bill is: Where is all the money Nigeria realized from it’s previous participation at the FIFA World Cup?
Money Makes The World Cup Go Round
So just how much cash does FIFA expect to pocket (from the 2010 World Cup in South Africa?). It budgeted a truly impressive revenue of $3.2 billion with event-related costs of $1.2 billion, leading to a “surplus” (please don’t call it a profit) of a cool $2 billion for the 2010 World Cup.
Some reports talk of a profit of “only” $1 billion, but that is after allocating half of the gross profit to the budget for development programmes, financial assistance to national associations and other events.
In any case, it’s a shedload of money, but it was greeted with unusual understatement by Blatter, who said, “We are comfortable. I wouldn’t say we are rich. A good result has been achieved.” FIFA General Secretary, Jerome Valcke, toed the party line, “Yes, it’s a lot of money, but just to be clear, we are not sitting on profit. All the money is going back to be football.”
While this could be considered a feeble attempt to mask their discomfort at being thought of exploiting South Africa, actually they do have a point. Finance Director, Markus Kattner, said that 95 percent of FIFA’s total revenue comes from the sale of rights relating to World Cup, leading to a “high exposure” and this was again confirmed by Jerome Valcke, “We are not rich. We are making quite good money thanks to the World Cup, but that’s the only money we have.”
These executives obviously have a vested interest in under-playing their large profits, but the independent analysts Sportcal have supported their views, “FIFA is quick to point out that its profits from the World Cup go towards funding its many other activities over the four-year cycle between World Cups, including less lucrative competitions such as junior and women’s World Cups and the quadrennial Confederations Cup between continental national teams champions.”
These tournaments tend to make losses, which are only covered by the profits from FIFA’s premier competition. For example, in 2009 alone, FIFA incurred significant expenses for the Confederations Cup in South Africa ($44 million), the U-17 World Cup in Nigeria ($43 million), the Club World Cup in UAE ($30 million) and the U-20 World Cup in Egypt ($21 million).
Not to mention $30 million for women’s competitions the year before.
If we take a look at FIFA’s complete profit and loss account, this is easier to understand. The budget for the four-year cycle leading up to this year has the $3.2 billion revenue from the 2010 World Cup, but the overall profit is only $0.2 billion after deducting costs for all events, football development and operational expenses.
Of course, let’s not forget that these are very big numbers, so the profit is still a far from shabby $240 million, which every Premier League club would regard with envy. Having said that, this profit is actually considerably lower than the $0.7 billion recorded in the previous cycle, but then again the 2003-06 financial period was FIFA’s best-ever overall result.
Many of you might be wondering why I am presenting the financials for four years, but this is simply because this is how FIFA views its budget, given the total reliance on the World Cup for its revenue. It works with a four-year financial period, beginning on 1 January of the year following each World Cup.
That’s why FIFA’s $2 billion profits from the 2010 World Cup are more than a little misleading, as they have to cover expenses for four years.
Most of FIFA’s revenue is derived from the sale of broadcasting rights and this has increased by nearly 50 per cent for this World Cup to $2 billion, mainly due to improved contracts in the USA with the Walt Disney company (which owns ABC and ESPN) and Univision paying a combined $425 million for exclusive broadcasting rights for 2010 and 2014.
The growth also reflects the success of FIFA’s decision to sell TV rights on a country-by-country basis for the largest European markets instead of the previous consolidated deal with the European Broadcasting Union.
These are considerable sums of money, but the television companies do get a lot of bang for their buck. According to FIFA, more than 26 billion viewers watched the 2006 World Cup. As Kevin Alavy of international analysts, Initiative Futures Sport + Entertainment , said, “No other media property delivers the same spikes in audience delivery, day after day, sustained over a month as the World Cup.”
FIFA also earns $1.2 billion from the marketing of the World Cup rights, though there has been no growth since the previous event (unlike TV), as hospitality packages have been affected by the economic downturn and possibly fears of crime.
FIFA is keen to emphasise that the majority of its expenditure is on football, though it would be fairly surprising if it weren’t. In fact, their most recent financial report notes that 73 per cent of FIFA’s overall expenditure in 2009 was invested directly in football – defined as the World Cup, other events and development. This is entirely consistent with FIFA’s stated objective of “organising international competitions as well as constantly improving and promoting football.”
Of course, that’s not enough for President Blatter, who went much further in a recent magazine article, when he pompously wrote, “FIFA is no longer merely an institution that runs our sport. It has now taken on a social, cultural, political and sporting dimension in the struggle to educate children and defeat poverty.”
Just in case, his doubters in England were unclear on his motivations, he also put the boot into the greedy Premier League, while extolling FIFA’s noble virtues, “Richard Scudamore is working to make money, while I’m working to have football as a social, cultural event around the world, being a school of life, bringing hope, bringing emotions. That’s the difference.”
So how well has FIFA done in its attempt to emulate Mother Theresa ? To be fair, they have dedicated $700 million to the development of football in the latest four-year budget. Indeed, they take great pains to highlight the fact that spending on development programmes in 2007-10 was 50 times greater than the $14 million in 1995-98, while the revenue growth was “only” 12 times greater over the same timescale.
Impressive stuff, but I can’t help noting that total expenses have risen by $1.1 billion since the 2003-06 period with only $0.2 billion of this increase attributed to development.
It’s difficult to know how to react to this. On the one hand, there is no doubt that FIFA has spent a lot on development, but on the other hand, there is a feeling that it could have done a lot more with the funds available.
Although there is no shortage of worthy-sounding projects, it does feel a little like this merely camouflages the relatively low investment and certainly not enough to support Blatter’s outlandish claims, “We resolved to instigate a range of projects designed to aid the entire African continent. Football is a force for change. For Africa, for the game, for the world.”
The snappily titled “Win in Africa with Africa” initiative is designed to leave the continent with a proper football legacy, including laying many artificial pitches, and has a hefty $70 million budget, but other projects seem less meaningful.
For example, FIFA’s contribution to the Football for Hope centres in 2009 amounted to just $2 million, while the Goal programme, described as the “cornerstone of FIFA’s development work” has completed more than 400 projects in the ten years since its launch, but the expenditure averages out to only $17 million a year.
Blatter has frequently declared that FIFA can make a difference, but I would suggest that it could have an even stronger impact if it cut its own costs. After all, the organisation spends more on operational expenses ($0.8 billion) than football development ($0.7 billion), including $0.3 billion for “governance” (congress, committees and administration).
That’s no surprise, if you have seen FIFA’s palatial new offices in Zurich, which cost around $200 million – or more than the $170 million spent on the Goal programme in its ten-year life. Of course, we cannot say whether FIFA’s 360 employees are over-paid, as they do not publish details of their salaries. Three years ago, Blatter confessed that his salary was “$1 million”, which admittedly does not seem that steep for a man in his position, but then again we only have his word for it.
FIFA is classified as a non-profit organisation in Switzerland, though, as we have seen, it has a highly commercial outlook, e.g. it has its own official range of FIFA branded merchandise. Its status allows it to enjoy a tax-free lifestyle, though this does oblige it to spend its profits on fulfilling its football objectives.
This is probably why they say that the media should not describe the surplus from the World Cup as profit, but as a reserve to insulate the organisation from any unforeseen circumstances that may arise.
However, FIFA’s gravy train shows no sign of being derailed with their provisional budget for 2011-14 increasing revenue to a staggering $3.8 billion, of which $3.2 billion is already contracted.
Just in time for next year’s presidential election, Sepp Blatter promised to double the funding to national associations over the next four years. The healthy finances also allowed him to award each of the six confederations an extra $2.5 million, while every national association will be given a $250,000 bonus.
Blatter smilingly explained, “It is a gift, if we can say this.” While others might find different words to describe these payments, Blatter was unperturbed, “The whole family of football is happy.” If you’re in FIFA, there’s absolutely no reason to disagree.
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