Will FIFA Scandals Cause Major Sponsors to Pull Out?

If the allegations are true, FIFA could be the most corrupt sporting organization in the world. Will its sleaziness have consequences?

Jul 11, 2014 at 7:03AM

Soccer is the most popular sport on the planet, and FIFA is its gatekeeper. The international body has governed the beautiful game for more than a century, though its grip may be loosening. Between match-fixing allegations, illegal ticket scalping, bribery, and a high fatality rate among World Cup laborers, its critics have a seemingly endless stream of ammunition. There's no telling which, if any, of these scandals will be too much for FIFA to bear, but a day may come when its name is no longer synonymous with soccer.

Will sponsors turn away?
Roughly 35%-40% of FIFA's revenue is sponsorship-related. It booked close to $1 billion during the 2010 World Cup cycle, with a large portion coming from companies like Coca-Cola (NYSE:KO), McDonald's (NYSE:MCD), and Visa (NYSE:V). For the 2014 Cup, the number is expected to hit $1.5 billion.

All sponsors desire positive exposure, even more so during an event that draws half the world's attention. But just take a look at this year's Winter Olympics in Sochi, Russia, to see the potential perils of aligning with a troubled sporting event.

In FIFA, the laundry list of issues mentioned above only scratches the surface. Corruption is rampant, if respected sources like The Guardian and BBC are to be believed. The former, in fact, recently reported Visa, Adidas (NASDAQOTH:ADDYY), and Sony (NYSE:SNE) are chiding FIFA for the controversy surrounding the 2022 World Cup. Qatar was chosen to host amid allegations it paid officials millions for the bid. 

"The negative tenor of the public debate around FIFA at the moment is neither good for football nor for FIFA and its partners," Adidas said in a statement last month. Sony and Visa, meanwhile, expressed hope that the governing body would investigate the situation, while Coca-Cola shared the following (via Bloomberg): "Anything that detracts from the mission and ideals of the FIFA World Cup is a concern to us, but we are confident that FIFA is taking these allegations very seriously and is investigating them thoroughly."

This echoes what sponsors harped on three years ago, when news of Qatar's victory first broke. McDonald's, at that time, called on "FIFA and its leadership to reform and strengthen the game of football," according to The Telegraph.

Qatar

A World Cup qualifying match between Qatar and Japan, 2008. Tsutomu Takasu, Flickr.

So, will companies turn their backs on FIFA? If the organization can't get a handle on corruption, sponsorship loss is possible, though it likely won't happen overnight. Adidas is under contract with FIFA through 2030, and Visa and Coke are committed for another eight years.

Coke has left a high-profile soccer deal before. It parted ways with Wayne Rooney in 2011 after the Manchester United forward faced allegations over the use of prostitutes. Visa competitor MasterCard is also no longer a World Cup partner.

What about fans?
After sponsorships, the majority of FIFA's remaining revenue is squeezed from television rights -- more than $2 billion this Cup cycle. This tournament is shaping up to be the most-watched in history, so TV viewers have yet to indicate they have an issue with FIFA corruption. Still, there's an obvious risk.

A recent study conducted by the Global Language Monitor finds nearly one in 10 mentions of FIFA and its sponsors on the Internet are now associated with words like "corruption" and "disarray." Similar research from SMG Insight and YouGov reports that public perception of the World Cup worsened after new evidence of Qatari misconduct surfaced last month. Little by little, it appears fans are taking note of FIFA's wrongdoings, but it remains to be seen if any will stop watching football as a result.

In the current environment, sponsors are likely to act first. At the moment, viewers "don't care," as The Independent's Tom Peck recently admitted.

"When the whistle finally blows in Arena Corinthians in Sao Paulo on Thursday night," he wrote in June, "a football-addicted planet will get its first sweet quadrennial pull on the World Cup crack pipe and all will be right again. It is this addiction that hides from the football fan the extraordinary truth."

He's right. For now, soccer's popularity is its saving grace. The prospect of a rigged game should, in theory, drive fans away. Reality is often less predictable. Professional baseball weathered the steroid era, and basketball largely survived the fallout of the Tim Donaghy refereeing scandal.

Looking ahead
At least three outcomes look possible. First, sponsors and fans may choose against initiating change at FIFA. The drama of the current World Cup could overshadow the criticism. If that happens, a doomsday scenario in Qatar may not even carry enough weight to shake up the governing body.

It's also feasible that sponsors could toughen up and force a broad, systematic investigation of FIFA, followed by a reorganization with improved internal controls. As mentioned above, McDonald's has requested "reform," in its words. Because sponsors account for nearly half of FIFA's revenue, the mere threat of an exit could be enough to institute meaningful change. 

There's also always a chance FIFA dies, and a new, more transparent governing body takes its place. Mel Brennan, a former CONCACAF executive, alluded to the possibility in a 2010 BBC interview. Peck discusses it as well, writing, "The leading national football associations and the powerful clubs know, if they acted together, they could break it."

The bottom line
Soccer existed before FIFA; it can certainly prosper after it. Ultimately, its fate rests in the hands of the people. In a sport watched by millions of children each year, it's prudent to set a correct example for them, and for all fans. Corruption should have no place in their future.

The radical change coming to TV
Did you know cable might be going away for good? There's a $2.2 trillion market out there to be had. Currently, cable grabs a big piece of it, but there's reason to believe that won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, McDonald's, and Visa. The Motley Fool owns shares of Visa 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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