The World Cup As Big Business
At a party in 1998, João Havelange was asked whether he considered himself the most powerful man in the world. It was a question suitable for a head of state, but Havelange, who was merely the president of FIFA, or Fédération Internationale de Football Association, soccer's governing body, didn't blanch. He said, "I've been to Russia twice, invited by President Yeltsin ... In Italy, I saw Pope John Paul II three times. When I go to Saudi Arabia, King Fahd welcomes me in splendid fashion ... Do you think a head of state will spare that much time for just anyone? That's respect. They've got their power, and I've got mine: the power of football, which is the greatest power there is."
Now, 12 years later, on the eve of World Cup 2010 in South Africa, FIFA and its showcase quadrennial tournament are more powerful than governments or the multinational corporations that queue up to sponsor the games. FIFA was laughably late to tap the reach of mass media, but in the past two decades, it has fully harnessed the technological and marketing powers of a global economy. The World Cup has become such a force that it triggered a cease-fire in a brutal civil war in Ivory Coast, caused stock markets of losing nations to tumble and catalyzed a spike in the birthrate of the 2006 host, Germany. How's that? Hosting the World Cup allowed Germans to express a nationalist spirit that had been understandably dormant for 60 years. They felt the love, apparently.
When FIFA's juggernaut opens in Johannesburg on June 11, it will be South Africa's turn. The rainbow nation expects nothing less than a reaffirmation of its nationhood and the chance to inform billions of television and Internet viewers that the host country represents the thriving future of the continent.
FIFA planted the idea for an international championship at its first meeting, in 1904, but it wasn't until 1930 that it bore fruit. El Campeonato Mundial de Football was hosted by Uruguay, officially in honor of the nation's independence centenary but actually in honor of its willingness to single-handedly cover the tournament's organizing costs.
As the World Cup struggled to find its feet in the postwar years, its biggest boost came in the form of the still nascent technology called television. From 1954 to 1986, the number of TV sets worldwide increased more than twentyfold, from a little more than 30 million to more than 650 million. "The world united by a ball" — once a World Cup motto — was now a world united by the tube.
FIFA's first attempts to cash in on this phenomenon were none too remunerative. In 1954, the European Broadcast Union televised live nine games from the World Cup in Switzerland to neighboring countries, paying nothing for the privilege. However, a marked spike in TV purchases was noted, a hint of the existence of a market eager to consume live soccer.
Just as a Brazilian wizard named Pelé helped change the way soccer was played, so on the business side, Havelange, an entrepreneurial Brazilian who became FIFA president in 1974, would change the way it was paid. Havelange gradually shifted FIFA's TV-rights deals from broadcast cooperatives, which paid very little, to privately owned broadcasters. Initially, the broadcasters reaped major profits from selling advertising during the live telecasts of the games.
Several of these deals under Havelange ended up in the hands of supporters like Horst Dassler, an heir to the Adidas sporting-goods fortune, who had helped Havelange gain office. Dassler had set up his own company, International Sport and Leisure (ISL), which specialized in the nascent business of reselling the broadcasting rights and pocketing a nice markup in the process. This system of corporate patronage would be perfected in the 21st century by Joseph "Sepp" Blatter, a protégé of the duo since joining FIFA in the mid-'70s. Blatter took over the presidency in 1998 and set to work cutting FIFA in on plumper deals.
How central did television become to the World Cup? For starters, it changed the traditional evening kickoffs to maximize European TV ratings. In Mexico in 1986, games kicked off at noon, despite temperatures in some of the venues that topped 100°F (38°C). Argentine star Diego Maradona, who would lead his country to the title, fronted the players' protests, claiming the kickoffs were "ravioli time, not soccer time." The porcine Maradona, then playing for a club in Italy, clearly relished his pasta — but television prevailed.
Blatter made the game truly global, taking it to Asia and Africa, following Havelange's trailblazing decision to stage the 1994 World Cup in what was seen as the soccer desert of the U.S. The still unsurpassed success of the U.S. tourney allowed Blatter to float TV packages for the 2002 and 2006 tournaments to the highest bidder on a country-by-country basis. Under Blatter, FIFA began soliciting only the biggest brands and corporations, and all rights packages and sponsorship deals were sold for two World Cups at a time, guaranteeing fees against volatility in the global economy. The packages don't come cheaply: in 2006, Blatter enticed more than $875 million from FIFA's top sponsors.
Ironically, one casualty in this money-spinning era was FIFA's chosen marketing partner, ISL. It may have practically invented the sports-marketing model, thanks to Havelange and Dassler, but the niche was soon a crowded one. In 1995, ISL surprisingly lost its grip on the rights to the Olympics and was forced to make a dizzying array of wild acquisitions to compensate. Desperation prevailed over strategy, and ISL went bankrupt in 2001.
ISL's bankruptcy was a huge embarrassment that put FIFA deep in the hole, since it was no longer receiving the many tens of millions in rights fees it was owed. Blatter crafted a solution, which included a securitization tied to future earnings, that sustained the organization's cash flow. But his deputy, Michel Zen-Ruffinen, then acting as FIFA general secretary, was convinced that the ISL-FIFA relationship was doomed by corruption, not a dubious strategy. He presented his evidence to Blatter and the FIFA board, alleging that his boss had committed fraud. Some board members backed him, and Swiss prosecutors leveled fraud charges against Blatter, but the case was eventually dropped. Blatter proclaimed his innocence throughout, saying the accusations were lodged to prevent his re-election. Zen-Ruffinen was soon out of FIFA, and Blatter was re-elected president. Since then, FIFA has knuckled down to business relatively scandal-free, although the 2010 World Cup is not without blemish. It has been revealed that resale rights of ticket and travel packages were awarded to a Swiss agency, Match Hospitality, that is partly owned by a company fronted by Blatter's nephew Philippe.
Blatter, it could be argued, has been too successful for his own good. In early May, rights-protection manager Mpumi Mazibuko announced that FIFA had launched 2,500 legal actions designed to stop unlawful use of its brands and trademarks — some 450 in South Africa alone. Despite it all, FIFA has shown record profits year after year under Blatter's stewardship by using market power and the power of the World Cup to seduce the global sports audience.
South Africa 2010 represents a test for the business model that has produced FIFA's vast profits. There have been concerns about safety, security, price gouging and foreign attendance. The tournament will cement Blatter's legacy one way or another, but it is unlikely to weaken his viselike grip on power. With a recent proposal to limit presidential terms rejected by 15 votes to 5, Blatter's opponents in FIFA have been marginalized. "We are comfortable." Blatter said recently. "I would not say we are rich, but we are happy."
David Hirshey and Roger Bennett are the co-authors of The ESPN World Cup Companion, published last month by Ballantine/ESPN Books.
— With reporting by James Tyler