The World Cup business gets harder every year — and next year's Russian edition is especially unlucky

“Everything happening in Russia today is a rerun of what happened before Brazil hosted the Olympics. Before it starts, desire outruns reality. After it ends, there's a kind of resentment at having gained nothing.”

Is FIFA turning into a “toxic” brand?

Patrick Nally used that word in an interview with The New York Times. Forty years ago he helped build the International Olympic Committee's sponsorship system, and he was one of the first people in the business of sports marketing.

The jibe is coming true. FIFA is paying for the corruption scandal that broke in 2015, and nowhere does that show more plainly than at the 2018 World Cup in Russia.

Under the sponsorship plan FIFA rewrote after 2015, the tournament has 34 sponsorship packages: 7 global partners, 7 World Cup sponsors and 20 regional supporters.

With just over six months to go before kickoff, 22 of those seats are still empty — and of the 20 regional-supporter packages, exactly one has been sold.

World Cup sponsorship has not been in a bind like this for years.

At the draw for the 32 qualified teams, FIFA had to paint two different FIFA marks side by side on the sponsor backdrop — the FIFA emblem and the FIFA official media emblem — to cover up the embarrassing gaps. Four years ago, by the time of the draw for the Brazil World Cup, every package had already been sold.

For any big brand, sponsoring something the size of the World Cup is not a snap decision; only long preparation and a long run-up make the money worth spending. So the rights still sitting in FIFA's hands lose value by the day, and there is a good chance they will be bundled and dumped at rock-bottom prices in the final stretch. This past May, vivo announced just before the Confederations Cup that it would become an official sponsor of the Russia World Cup, getting in at a relatively good price.

That is not all. A run of coincidences on the pitch is making trouble for FIFA too. Italy, the Netherlands and Chile all went out in upsets. Italy is Europe's third-largest television market, and its exit alone will cost FIFA at least $100 million in media rights. The United States, a team that has been gaining ground for years, missed the World Cup for the first time in 28 years, and The Washington Post opened a piece with the line “No U.S. team — so why care about the World Cup?” And then there is China, the other economic giant, which again failed to reach the finals — something FIFA probably regrets as well…

Broadcast rights and sponsorship are FIFA's two biggest sources of World Cup income. FIFA had hoped to take in $4 billion in the 2018 World Cup year and hit a net profit of $1 billion, covering the losses of the past two years. That is no longer looking likely.

More delicate still is the attitude of the host. A reporter who works for FIFA described the mood on the ground this way: “I have this strange feeling that even though the World Cup hasn't started, the Russian government already seems to be looking forward to it being over, so it can tick the box and move on.”

Russian broadcasters are still haggling with FIFA over a $100 million domestic rights fee — which could produce another first in World Cup history: a host country whose own people cannot watch the tournament on television. Russia's sluggish economy has drained public enthusiasm as well, and going to the stadium is simply too expensive for most people. The national team isn't much of a draw either: it sits 65th in the FIFA rankings, last among the 32 teams in the tournament. Watching the home side get thrashed at home is not most people's idea of fun.

The 2018 World Cup in Russia may be the flattest — and the strangest — you have ever seen.

No Italy, minus $100 million

The draw for the 2018 finals was oddly calm. There was no traditional “group of death,” and the group stage offers very few matches to whet the appetite. One joke going around is that Italy, the Netherlands, the United States and China make up the real group of the dead.

Even though they failed to reach the last 32, these teams keep shaping the tournament in different ways. With Italy, the Netherlands, the United States and Chile all knocked out by upsets, there are fewer teams left to generate a story. Even Ghana, Cameroon and Côte d'Ivoire — regular qualifiers who might have stirred things up — all failed to make it to Russia.

A duller World Cup means FIFA's television rights are worth less.

At Euro 2016, Italy's matches drew a cumulative television audience of 2.2 billion. Each Italy game pulls in 8 million to 12 million viewers on average. At the Brazil World Cup four years ago, FIFA's television rights income from Italy came to 180 million euros; next year it will struggle to clear 80 million.

The Netherlands has a population of only 18 million, but more than a million of them play football, and Dutch passion and spending on the game are among the highest in Europe. The Dutch exit is expected to cost FIFA 10 million euros.

The U.S. team is no traditional power, but its strong run in recent years pulled a lot of young people into the sport. The number of adult soccer fans in the country grew from 59 million in 2010 to 79 million in 2016. A survey by Scarborough, a Nielsen unit, found that 78% of Americans aged 12 to 17 call themselves soccer fans, against 59% for American football and 44% for the NBA. Losing to Panama and Honduras, and with them a place in Russia, is a heavy blow to a sport that had only just caught on in America.

American fans are also generous, and unusually willing to follow the national team abroad. Public figures show that ticket applications from the United States ranked second among all countries, behind only Russia itself. Applications for the first phase closed on October 12; the U.S. team's last qualifier was on October 11. Most American fans, in other words, had their tickets in hand before they learned their team would be staying home. A wave of no-shows cannot be ruled out.

“Every day FIFA is losing potential advertising revenue through one channel or another”

If the coincidences on the pitch are just bad luck, the sponsors' loss of confidence is entirely FIFA's own doing.

After a year mired in scandal and crisis, Gianni Infantino was elected president amid the turmoil. The former UEFA secretary general made a large promise while campaigning: “If FIFA takes in $5 billion but $1.2 billion of it can't go into football, is that normal? FIFA's money is your money.”

Infantino's secret for winning votes was handing money out, and once in office he did exactly that: national, regional and continental associations under FIFA would each receive $5 million from every World Cup, up from $1.6 million.

That deepened FIFA's debt problem. FIFA lost $369 million in 2016, more than twice its $150 million loss in 2015, mainly because the bigger payouts to member associations drove spending too high.

FIFA plans its finances in four-year cycles, each ending in a full World Cup year. FIFA's 2016 financial report projects total spending of $5.556 billion for the 2015-2018 cycle. Set against combined income of $1.66 billion for 2015 to 2017, FIFA has to take in nearly $4 billion in 2018 alone to end the cycle slightly in the black. In the previous cycle, from 2011 to 2014, net income came to $437 million.

More than half of that revenue is supposed to come from selling television rights — which, for all the reasons above, is bound to shrink. Not every broadcaster is stingy: Fox paid $425 million early to lock up U.S. rights to the 2018 and 2022 World Cups, a deal that now looks like a bloodbath.

The other big piece is sponsorship, and that is where FIFA now has to work hardest. The closer the tournament gets, the weaker its hand. Petr Makarenko, who runs a Moscow sports marketing agency, put it this way: “Every day FIFA is losing potential advertising revenue through one channel or another.”

“We reached out to help them when they were at their most difficult moment”

This is the first World Cup at which FIFA replaces the old host-country supporters with regional supporters at the bottom rung of its sponsorship system, covering five regions: Europe, North America, South America, the Middle East and Asia. The rights include LED perimeter-board exposure during matches, access to tickets and brand promotion inside the sponsor's own region.

Sales for Asia are handled by the Chinese company Shuangrenjian Sports. At a pitch event in mid-November, Shuangrenjian president Jiang Lizhang said he was optimistic: “Over the past month my team and I have taken a dozen or more enquiry calls a day. It has really shown me how hungry Chinese brands are for premium assets.”

Compared with a top-tier package aimed at expanding abroad, a regional-supporter deal carries far less risk and costs far less, and the marketing stays in a familiar home market — for this tier, the last six months before kickoff are the period that actually matters. That may be why the regional supporters have been so slow to arrive.

Abroad, though, FIFA's bribery scandal and its aftershocks still have sponsors watching from the sidelines. “I think compliance and price are what sponsors weigh most,” said Andrew Georgiou, chief executive of Lagardère Sports and Entertainment. “The question is whether FIFA can make sponsors feel they can do business with them without worrying.”

Patrick Nally, the veteran sports marketer, was blunter: “Unless you're a Chinese company, nobody thinks it's unimportant that FIFA is under corruption investigation in a New York court. In fact, no company right now believes it is safe to be associated with FIFA.”

“We reached out to help them when they were at their most difficult moment,” Wang Jianlin said in an interview with Reuters. “Two or three years ago, Chinese or Asian companies probably wouldn't have had a chance to become FIFA sponsors, however much we wanted it. Now, because some Western companies have pulled out, we finally have the opportunity.”

Between 1994 and 1999, the Wanda-backed football club won China's top league four times, and Wang says scandal has never frightened him. Wanda paid $150 million in 2016 for its FIFA global partner rights.

Hisense, which holds official World Cup sponsorship rights, made much the same point in an earlier interview with QDaily: the sponsors of the Euros and the World Cup are a fairly closed circle, and without FIFA holding out an olive branch, Chinese companies would find it hard to get in. Chinese-language advertising appeared at pitch-side for the first time at last year's Euros, and judging by the results, Hisense's money was well spent.

A host that has already lost its enthusiasm

The Russians have been tough with FIFA. No host country's broadcasters have ever held out against the FIFA group this long.

In April, The Moscow News reported that Russian channels had turned down FIFA's $120 million offer for broadcast rights, on the grounds that the price was almost four times the $32 million paid by the previous host, Brazil. The figure has since been ground down to $100 million, and the Russians still haven't budged.

Every Russian broadcaster is part of the standoff. Petr Makarenko, the head of the Moscow sports marketing agency, commented: “If FIFA is counting on Russia to pay up in the end, let them wait.” In most countries and regions, broadcast contracts are normally settled three years before kickoff.

The Russian side believes FIFA is naming an outrageous price simply to plug a hole in its accounts. Deputy Prime Minister Vitaly said publicly: “This isn't fair to Russia.”

Measured against total broadcast income across countries and regions, a fourfold rise is indeed above average — though in the United States, an emerging football market, the rise has been roughly fourfold too.

The mood inside Russia today bears no comparison with the mood seven years ago, when it won the bid, and that has to do with the state of the economy. In 2009, the year before the bid, the Russian stock market stood at a record high and relations with the United States were steady. All of it turned sharply for the worse once Russia had the tournament.

First came Russia's position in the wars in Ukraine and Syria, which drew constant condemnation from the West and eventually economic sanctions, and the economy fell off a cliff. Doping scandals in elite sport kept coming, too: earlier today the International Olympic Committee announced its ruling on Russian athletes who doped at the Sochi Winter Olympics, barring the Russian national delegation from the 2018 Winter Games; Russian athletes may compete only as individuals.

“The Russian government's bind today looks very much like Brazil's a year and a half ago,” said the Brazilian football expert Maurício Savarese. “Everything happening in Russia today is a rerun of what happened before Brazil hosted the Olympics. Before it starts, desire outruns reality. After it ends, there's a kind of resentment at having gained nothing.”

Russia's total World Cup spending has already passed $11.8 billion, no small sum for the country right now. Forbes reckons Russia has almost no chance of getting it back. Russian social media is already full of grumbling about the tournament. Figures from the state-run All-Russian Public Opinion Research Center show that about 85% of Russians think their standard of living has fallen.

By FIFA's first-phase sales figures, 742,760 tickets for the Russia World Cup have been sold, with Russians taking 53% of them. Ranked second through tenth are the United States, Brazil, Germany, China, Mexico, Israel, Argentina, Australia and England. Even allowing for a wave of no-shows by American fans, tickets are still hard to come by. The second and third sales phases run from December 5 to January 31, and from April 18 to July 15 next year.

If it can't make the money back, will FIFA keep betting everything?

You have probably heard about the crazy plan already. The 2022 World Cup will be played in winter, a first, because summer in Qatar is too hot for humans to play football in.

That collides with the calendars of Europe's big leagues, and the Champions League would have to shift too. It also lands on top of the NFL season in the United States (the Super Bowl is the country's biggest sporting event), along with the NBA and college football — a serious problem for a U.S. market that has only just begun to warm to soccer. FIFA will also have to pay clubs to compensate for the losses the schedule change causes, another extra cost.

Beyond the much-argued climate question, Qatar is close to a football desert, which means a great many stadiums have to be built from scratch, which in turn raises the question of what becomes of them afterwards — a “post-World Cup” problem that has surfaced at several recent tournaments. Qatar is also tangled in various human-rights disputes and has been boycotted by some countries, and there are rumors that something was not right about how it won the hosting rights — which drags in FIFA's most sensitive issue of recent years, bribery and corruption.

Even with six years to go before kickoff, Qatar is already reluctant to build large numbers of hotels. It is pinning its hopes instead on putting visitors on cruise ships moored near the coast, in neighboring UAE or Bahrain, or even in private rentals through platforms like Airbnb, to soak up what could be a huge surge in demand for beds.

A proposal from Qatar's World Cup organizing committee suggests 350 temporary tents and 300 permanent ones for fans who can't book a hotel room — enough, roughly, for 2,000 people.

Seen that way, Russia looks like a thoroughly dutiful and responsible host.

FIFA controls the most influential, most profitable and most widely watched single-sport event in the world. Football's pull and its earning power are intact; its biggest operator is squandering the trust of sponsors and the patience of audiences. This past January, FIFA announced that from 2026 the World Cup will expand to 48 teams, an expansion expected to bring in $2.1 billion in net revenue.

But isn't that a little too greedy, a little too quick?

Cover image: Pinterest