3 Ways FIFA Is Squeezing Billions out of the World Cup

Football isn't the most commercial-friendly sport in the world, but FIFA is still squeezing billions out of the World Cup. Here's how.

Jun 28, 2014 at 7:20AM

Including pre-game coverage, the average soccer match has between 10 and 20 minutes of commercials. That pales in comparison to sports like football, basketball, and baseball. The same characteristics that attract fans to the beautiful game -- fluidity and non-stop action -- limit its advertising opportunities. A 30-second World Cup ad costs no more than a few hundred thousand dollars, about one-tenth what the Super Bowl yields.

Because of this inherent disadvantage, FIFA has been forced to get creative. And for the most part, it's worked. The governing body estimates it will make around $4 billion in revenue from this year's World Cup, an increase of a few hundred million dollars from the 2010 tournament, and a near billion-dollar jump from 2006.

So how is FIFA squeezing the most out of the World Cup? Let's take a look.

Wc

A.C. Moraes/Kelly Sato, Flickr.

1. A revamped TV strategy
Historically, FIFA split World Cup broadcast rights into two pools: U.S. and international. This strategy changed, however, beginning with the 2010 tournament. It now sells international World Cup broadcast rights on a country-by-country basis. This year, for example, FIFA's U.S. partners include Disney's (NYSE:DIS) ABC and ESPN, while international partners range from Sky Italia in Italy, to DirecTV (NASDAQ:DTV) in Peru.

Although the exact value of every country's TV deal is unknown, FIFA says close to 60% of World Cup revenue will come from broadcast rights. That's about $2.4 billion in full, and if the estimate holds, it will dwarf what the governing body made from broadcasters before it revamped how rights are sold. FIFA reports it made about $1.8 billion from TV rights during the 2002 and 2006 tournaments.

Going forward, it's probable these values will continue to increase. Twenty-First Century Fox (NASDAQ:FOX), which outbid ESPN and NBC for U.S. broadcast rights during the 2018 and 2022 World Cups, is thought to have paid four to five times what this year's Cup cost ABC and ESPN, Bloomberg reports.

2. A broader online presence
In 2010, FIFA made roughly $1 billion from marketing and sponsorships. That number is expected to rise to $1.5 billion this year. But why?

The answer appears to lie online. As Business Insider points out, consumption of World Cup ads on Google's (NASDAQ:GOOG) YouTube is four times what this year's Super Bowl registered. And social media discussion is off the charts. Facebook recently told CNN the tournament has generated the "highest level of conversation" in its 10-year history. Twitter also expects to break its tweet-frequency records by the time the Cup is awarded next month.

A broader online presence boosts sponsorships in two ways. First, it gives marketers more opportunities to reach football fans. Nike and Coca-Cola are just a couple of World Cup brands to generate enormous Twitter interest in recent weeks. Second, and perhaps more important, it opens up the tournament to more viewers. The USA-Germany match, for example, set WatchESPN records by notching more than 3 million unique viewers, according to Sports Business Journal's John Ourand.

3. Better TV scheduling
In that same light, a final advantage in FIFA's corner is better TV scheduling this year. I discussed the subject a few weeks ago:

Because Brazil's geography places it just one hour ahead of New York, even the earliest matches begin at noon Eastern. That's an enormous contrast to past World Cups in South Africa, Germany, South Korea, and Japan, which required fans to watch some matches in the wee hours of the morning and others late at night.

Last Sunday's USA-Portugal epic aired between the prime-time viewing hours of 6 p.m. and 8 p.m. EDT. There's no coincidence it was the most-watched match in American history.

The bottom line
FIFA won't always have an advantageous TV schedule. But its revamped broadcast-rights strategy and online improvements are probably here to stay.

Given this -- and the fact that soccer continues to be the world's most popular sport -- it's easy to be optimistic about the future of the World Cup. Now if only the U.S. men's national team could advance beyond the Round of 16. A deep run for the Americans would likely create even more fans.

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Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Facebook, Google (C shares), Nike, Twitter, and Walt Disney. The Motley Fool owns shares of Facebook, Google (C shares), Nike, and Walt Disney and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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