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For an organisation with its headquarters on Sunny Hill, the outlook for Fifa, custodian of the football World Cup and the most important body in global sport, has suddenly become much darker.
“Broadcasters and sponsors are not going to be dissuaded from supporting the World Cup, a massive global event, which will go on and on,” said Patrick Nally, a sports marketing executive who worked with Fifa to develop television rights for football.
The football federation, a global clearing house for television rights and sponsorship deals for a phenomenally popular sport, made $5.7bn in revenues in the four years leading up to last year’s World Cup in Brazil.
In a report to Fifa delegates ahead of this week’s Congress, Sepp Blatter, Fifa president, said the football body had finished its four-year financial cycle “on a great high”. “The healthy capitalisation for our organisation, as well as solid levels of turnover, puts us in a very secure position from both a financial and operational perspective,” he added.
Its pool of money is so deep that after disbursing $453m to Brazil as payment for organising the 2014 World Cup, $358m in prize money, and $397m in staff costs for four years, it had enough left over to buy the four-star 72-room Hotel Ascot in Zurich. As a sporting association, Fifa enjoys a favourable tax regime and is not obliged under Swiss law to publish its accounts. In the four years to the 2014 World Cup, Fifa paid $75.3m in tax on a gross income of $2.32bn.
Much of the credit for Fifa’s financial success lies at the door of the previous president, Brazil’s João Havelange, who took over in 1974, ousting Sir Stanley Rous and ending years of English rule over world football.
Mr Havelange transformed the World Cup from a largely European affair into a global contest, funding the expansion with the help of Horst Dassler, the head of Adidas, which was to become Fifa’s most important partner.
After the 2006 World Cup in Germany, Fifa created three tiers of sponsorship options: six “partnerships”, eight “sponsorships” and then “national supporters”, a strategy that was to prove wildly successful. In the four years leading up to the 2014 World Cup, Fifa earned $1.63bn from its marketing deals, a near 60 per cent rise from the previous four-year cycle.
Mr Dassler also helped create Fifa’s television market. “I worked with him [Mr Dassler] in 1978 to create this concept of rights for football,” said Mr Nally. “We radically changed it so that there would be exclusive rights and there is a value in having these rights for broadcasters.”
And as the appeal of football has widened, so has Fifa’s earning potential. Nearly half of its revenues come from TV screening, with Fifa earning $2.43bn from TV rights around the world for the 2014 World Cup, with the US now Fifa’s fourth-largest market for screening rights.
US prosecutors said that as the value of Fifa’s TV and marketing rights went up, so did the bribes. In one deal alone, two sports marketing groups allegedly paid $100m in bribes — nearly one-third of the contract’s $352.5m value — to South American football officials to obtain rights to four Copa America tournaments.
Certainly, Fifa’s delegates live the high life — Fifa spends more than $30m a year just on the travel, accommodation and organisational costs of its annual congress. Tales of the largesse of football officials have become legendary. Chuck Blazer, the former general secretary of Fifa’s North American federation who is now co-operating with US investigators, used to keep an apartment in Trump Tower, New York, largely to house his cats.
Jeffrey Webb, the Fifa executive committee member who was arrested on Wednesday, allegedly had an intermediary transfer $1.2m in bribes into an account belonging to a swimming pool builder to create an oasis at his Georgia residence. Another unnamed Fifa official received an expensive painting from an art gallery in New York for allegedly facilitating a bribe payment to Mr Webb.
Even before Wednesday’s arrests, there were frequent questions about the organisation’s finances, centring on how it allocates sponsorships and TV rights. Nike has said it is co-operating with US authorities after American investigators said an unidentified sportswear company took part in bribing a Brazilian football official for a sponsorship deal. Like Fifa, Nike has ridden the wave of football’s popularity. Last year, its earnings from football were $2.27bn, up from $40m in 1994.
While many World Cup sponsors feel it would be disastrous to pull out of deals with Fifa, some have allowed their ties to lapse. Last year Sony, Emirates, Continental, Johnson & Johnson and Castrol all chose not to renew their sponsorship contracts with Fifa. In the light of Wednesday’s news, other companies may be forced to reassess their sponsorship plans, though only Visa has so far indicated it could drop its deal.
Fifa has long-term deals with Adidas, Hyundai and Coca-Cola. And with the next World Cup already coming into view, it has signed energy group Gazprom as a partner for the Russia World Cup.