The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, reviews the business of the World Cup, keyed to its beginning in Germany this weekend.
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“It is the alchemy of sporting genius and marketing prowess, echoing with dozens of languages and fans that include Asian Buddhist monks, topless Brazilian women, chattering Italians, drunken Brits, irreverent Czechs, and dare we say, the nearly giddy Germans.” – Los Angeles Times, June 4
In the four years since the last World Cup, professional soccer has become a bigger global juggernaut than it’s ever been before. The sport now has its own cable channel, a hit movie named after its top star (“Bend It Like Beckham”), and an ever-growing American fan base.
The 2006 World Cup is expected to bring in new hordes of soccer fans, drawn by the increased media coverage – over 30 billion cumulative viewers are expected to watch the 64 matches on ESPN, ESPN2, ABC, and a host of international broadcast partners – and billions spent in global advertising.
Games between the teams that qualified for the tournament kick off in Germany this Friday, and continue almost daily for a full month. Teams from 32 countries will play in 12 stadiums crisscrossing Germany from Munich to Hamburg to Berlin. Three million tickets are in circulation, and the overall economic benefit of the 2006 World Cup is expected to surpass $10 billion U.S.
While the competition on fields in the 12 German host cities is expected to be on an athletic par with this year’s nail-biting NBA Playoffs, it’s the competition off the pitch that holds the most interest for the global business community. Six areas emerge as World Cup business match-ups to watch: International soccer revenues v. U.S. pro sports; Superstar salaries and endorsements (Beckham v. Ronaldinho); World Cup economic impact v. the Super Bowl and the Olympics; global advertising and sponsorship battles; impact of security and racism concerns (officials v. hooligans); and the U.S. v. the rest of the world in soccer passion and participation.
Soccer Revenues on Both Sides of the Pond
While in the United States professional soccer revenues are dwarfed by even the lowliest NFL and NBA teams, there’s a reason NFL owner Malcolm Glazer purchased controlling shares of England’s fabled Manchester United in May 2005: after the transaction, the final valuation of the club was $1.47 billion.
Yet in 2004-2005, Real Madrid passed Manchester United as the world’s richest soccer club, posting revenues of $323.6 million U.S. versus ManU’s $289.5 million U.S. This compares to 2005 NBA revenues of $181 million for the top-earning New York Knicks, and $124 million and $119 million respectively for the NBA Championship-bound Dallas Mavericks (#5) and Miami Heat (#8).
In the U.S., MLS lost at least $300 million in its first six years of operation. However, over $1 billion has been invested in MLS in the last two years, and the league looks to have broken even for the first time in 2005, largely thanks to expansion fees and its 10-year, $150 million sponsorship deal with adidas. The MLS Galaxy and FC Dallas remain the only individual teams in the black, largely due to lucrative soccer-specific stadium deals. (The league hopes to have ten soccer-specific stadiums in place by 2010.)
While numbers are slowly climbing, the U.S. lags far behind the rest of the world in soccer attendance. The U.S. attracted a total of 80,522 fans to its last three World Cup send off games in late May. Conversely, Australia’s send off game against European champion Greece drew a crowd of 95,103.
Salaries, Premier and Otherwise
Soccer salaries parallel U.S. v. world revenue patterns. The average salary of an English Premier League player in 2006 is $1.1 million, up 65 percent from a 2000 figure of $716,017.00. Yet that’s dwarfed by the mega compensation of the game’s top stars.
