The Business of Soccer

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Overview

Soccer is the one sport that has overwhelming global appeal which transcends national, cultural, religious, and gender boundaries, as well as socio-economic class. Soccer's appeal continues to grow with an ever-expanding audience through out the world in both industrialized and developing countries.

Referred to as football in the rest of the world, professional soccer is truly an international sport. Estimates suggest that there are over 240 million registered players worldwide with fan participation in the billions. The Federation Internationale de Football Association (FIFA), serves as the international governing body of soccer. FIFA is composed of both men's and women's clubs from around the globe, which are organized and compete within a worldwide soccer league. Founded in 1904 in Paris France, FIFA is currently made up of 205 member associations with over 300,000 clubs and 240 million players from around the world.

Heading FIFA is the president, who is elected by the member organizations every four years. The president of FIFA serves as the legal representative of the body and officiates FIFA meetings.¹ FIFA has only had eight presidents since 1904.

Issue 3/4: Summer 2005

The Sports Industry

Table of Contents

Introduction
General Guides and E-Resources
Baseball
Basketball
Football
Golf
Soccer
Tennis

In 1954, FIFA began the creation of continental soccer (international football) confederations. A conference for Europe, the Union des Associations Europeennes de Football (UEFA) comprised of 25 member nations, was the first to be established, followed by the Asian Football Confederation (AFC). The Oceania Football Confederation was the last confederation to join FIFA, initially in 1966 and then becoming a fully sanctioned member in 1996.² All member nations clubs within each confederation compete for the World Cup, the championship trophy awarded to the best soccer team in the international league. There is both a Men's and Women's World Cup competition. Currently, FIFA is divided into six confederations:

• Asian Football Confederation (AFC)
• Confederation Africaine de Football (CAF)
• Confederation of North, Central America and Caribbean Association Football (CONCACAF)
• Confederacion Sudamericana de Futbol (CONMEBOL)
• Oceania Football Confederation (OFC)
• Union des Associations Europeennes de Football

Each confederation is responsible for governing the games of its member countries according to FIFA rules and regulations. Although FIFA is responsible for regulating competition, games and players, individual countries and confederations are allowed some autonomy.

In looking at the confederations, the AFC is made up 45 member nations; the CAF, 52 member nations; CONCACAF, 35 member nations; OFC, 11 member nations; and UEFA, 51 member nations.

FIFA Revenue System

FIFA functions as a non-profit organization with an annual income over US $700 million. According to FIFA's 2003 financial report, event-related revenue generated 96% of the income for FIFA, with over US $30 million coming from TV broadcast rights and advertisements for the World Cup. Marketing rights accounted for approximately US $140 million and Hospitality events generated over US $50 million.³ Annual budgets are submitted to the FIFA Congress for approval each year and are considered cash budgets. These budgets include FIFA expenditures consisting mostly of operational costs and competitions, contributions to players, the confederations, and FIFA development programs.

During the first 20 years of FIFA's existence, it generated annual revenue of approximately CHF (Swiss Franks) 500-1,300, which consisted mostly of subscriptions from its associations and game levies, as well as increasing revenues from the World Cup.⁴ By 1970 FIFA's revenue had increased to CHF 1.5 million. After 1982, FIFA expanded its commercial ventures including advertising and merchandising with the most significant increases in TV and marketing rights for the 1998, 2002, and 2006 editions of the World Cup.⁵ The revenues generated by TV and marketing continue to increase over time.

FIFA's 2003 financial report shows fundamental changes in the way the Federation is now funded. In 1930, 85% of FIFA's funding was from its associations in the form of subscriptions and game fees. However, by 2002 less than 1 % of FIFA's revenue came from the associations. The Federation receives a portion of the gross receipts from "A" matches or games played between national teams. This amount is determined by the Federation.

In looking at FIFA's revenue growth, in 1989 FIFA's revenue totaled nearly CHF 10 million; by 1997 it had increased to CHF 33 million. After that period, revenue jumped to CHF 389 million in 1998 and to CHF 963 million in 2002. This growth was due to TV rights and marketing for the World Cup. This has transformed FIFA from an organization that was initially funded by its associations to a league that now funds its associations and confederations through successful commercial marketing and TV contracts.

Media and Marketing

FIFA's largest revenue generator is the broadcasting of the World Cup. The latest contract is worth approximately US $2.4 billion for the 2002 and 2006 World Cup events. Europe and the U.S. are the two largest markets in generating revenue from television broadcasting rights of the World Cup. In 2003, the U.S. generated an estimated US $40.6 million from broadcasting rights, and the European markets generated approximately US $151 million, with the rest of the world contributing US $146.6 million. The total revenue from television broadcasting rights in 2003 was US $339.7 million.

In 2003, revenue from FIFA marketing rights totaled approximately US $140.2 million and US $9.4 million from licensing rights revenue. The revenue generated from hospitality rights totaled around US $52.4.⁷ The hospitality program involves the sale of VIP packages, and tickets for special events.

The budget for 2005 projects revenue to reach over US $500 million, with TV broadcasting rights generating approximately US $356 million, and marketing and licensing generating approximately US $150 million.

The World Cup continues to be the principal source of revenue production for the Federation. It is also the most widely viewed sporting event in the world. The 2002 World Cup was shown in 213 countries, with more than 41,100 hours of dedicated programming.⁸ This was a 38% increase in coverage over the 1998 World Cup event. The cumulative audience watching the 25 game day 2002 World Cup, reached a total of 28.8 billion viewers making it the most widely covered and viewed event in television history. In 1996, FIFA agreed to a new World Cup media rights contract for the 2002 and 2006 World Cup event, which is worth approximately US $1.3 billion. The cost of the World Cup TV licensing rights agreement is expected to continue rising in the coming years, creating increasing revenue growth opportunities for the Federation.

The Internet is also playing a role in the growing popularity of soccer. FIFA's official World Cup web site reached an unprecedented number of viewers registering over 2 billion worldwide. No other sports web page has approached anywhere near this level of global viewership. FIFA has also begun to utilize the Internet for its marketing strategies through selling and promoting game tickets and other Word Cup marketing products.

Players

The 300,000 soccer clubs worldwide are comprised of 240 million players, 30 million of which are women. The salaries of these players vary dramatically. Some players are paid millions of dollars, while others are paid very little. European players are the most highly paid; however, salary distribution and management varies from club to club, association to association, and from confederation to confederation. For instance, player salaries of many UK soccer clubs account for nearly 60% of club revenues, while the U.S. Major Soccer League (MLS) institutes a player salary budget for each club.

The U.S. Major Soccer League is a member of FIFA. The MLS operates as a single entity, which contracts players with the league rather than individual MLS teams. Each MLS team is given an annual salary budget and is required to manage the roster salaries according to the team budget. MLS's total budget is nearly US $46 million, with approximately US $30 million going toward salaries. The average salary for each MLS team is approximately US $80,000 with salary-cap ceilings set at a maximum US $280,000 and the league minimum at $35,000. According to reports, 80 league players earn less than US $50,000. In contrast, the UK Premier League average salary is equivalent to US $940,000.

In the European premier leagues, total wages and salary costs for the 'Big Five' top divisions stabilized at £2.5 billion (US $4.4 billion) in 2002/03, nearly equal to total of the previous year.⁹ In 2002/03, the European league's top 92 professional clubs generated a total revenue of £1.6 billion (US $2.64 billion), an increase of 4 % from 2001/02. The 2002/03 season saw Premiership club's total wages and salaries grow by 8 % to £761 million (US $1.3 billion), which was the lowest rate of increase since the creation of the Premier League, and significantly below the average annual increase of around 25 % over the previous ten years.¹⁰ The average total wages and salaries cost per European Premier club in 2002/03 was £38 million (US $67 million).

Like many other professional sports, free agency has resulted in the dramatic increase in player salaries and fees paid for player contract purchases.¹¹ This has led to growing income disparities between wealthy and poorer soccer clubs. The vast difference in salaries between the new FIFA member clubs and the older more established soccer clubs has created a rapid outflow of talent to the higher paying soccer communities increasing the player talent gap.

FIFA also contributes funding for player salaries. The 2003 financial report indicates that FIFA paid approximately US $15 million towards compensation for teams and participants. The amount contributed to teams was equivalent to US $16 million. FIFA's financial contribution to local organizing committees totaled approximately US $60 million for 2003. In covering the 2006 World Cup, FIFA contributed a small amount towards teams and participants, which totaled US $3.2 million. The players and teams participating in the World Cup receive the majority of their additional earnings from the World Cup matches rather than the through FIFA contributions.

2 Ibid., 34.

3 Federation Internationale de Football Association official web site available at: http://www.fifa.com/en/index.html

4 FIFA Financial Report, 2003 (Paris: FIFA Congress, May 2004), 39. Available at http://www.fifa.com/events/congress/2004/FIFA_Financial_Report_E_2003.pdf [PDF: 5.62MB / 95p.]

5 Ibid., 39

6 Ibid., 39

7 Ibid., 71.

8 FIFA.com, InfoPlus. Available at http://www.fifa.com/documents/tournaments/CC/IP-207_01E_CC.pdf [PDF: 130.7KB / 3p.].

9 Annual Review of Football, 2004 - Highlights (Deloitte & Touche), available at: http://www.deloitte.com/dtt/article/0,2297,sid%253D2855%2526cid%253D56148,00.html

10 Ibid.

11 Kagan's the Business of Soccer. (2000), 3.

Selected Print Resources

This book consist of a compilation of essays on the economics of sports and attempts to highlight both the similarities and differences in North America and Europe, as well as their implications for economic, policy and social issues.

"This text presents a detailed economic analysis of football at club level, using a combination of economic reasoning and statistical and econometric analysis. The first economic analysis of the professional football industry. Presents original research and existing literature." Synopsis by Books In Print.

FIFA's official magazine, which includes articles on the latest soccer news and stories, interviews, and information on the World Cup.

The contributors to this volume in the Sport in the Global Society Series examine the state of contemporary football and offer their thoughts on the possible directions that the game might take in the future. The book covers a range of issues which players, fans and administrators will have to confront. This study also looks at the impact of global marketing industries, shareholding and the financial powers of mass media. Synopsis by Books In Print.

The contributors to this study investigate the origin and development of the movement to increase supporter involvement in the running of football clubs. This examination of changes taking place in the world of football focuses on its growing commercialization.

This paper studies regression results identifying the variables influencing a country's performance in international soccer games. The authors indicate the results reveal that economic, demographic, cultural and climatic factors are important.

This text looks at the development of football as a major participatory sport in Japan, Korea and China. It analyzes the complex relationship between sport, culture, society and economy in the East. Synopsis by Books In Print.

An annual publication that serves as a comprehensive source covering the commercial and economic aspects of professional soccer. The publication includes, fundamental business of soccer teams, a snapshot of the soccer industry, soccer's international sanctioning body and its organizations, soccer in the United Kingdom, as well as information on players and the media.

Looking at the changing role of referees and players, the media and how it influences the game, the politics of football and the international game, Football Inc. is a revealing and comprehensive account of the state of British football today.

Stephen Morrows examines the changing face of soccer, looking at issues such as the role of the stock exchange, the stakeholder approach, the Anew economics@ of soccer including the role of media firms.

Electronic Resources

Papers and Reports

The Federation Internationale de Football Association's official annual financial report that contains facts and figures for 2003. The report provides statistics and information on FIFA's income statement and budget. The report also includes annual highlights, forecasts for 2003-2006, budget for 2005, and a section on special topics, which covers 100 years of FIFA financial, and the 2006 Word Cup.

This paper studies the effects regarding player-labor market changes on national and international competitions from both a theoretical and an empirical perspective. The authors attempt to show that the competitive balance in national competition has not been affected.

An annual publication that provides an overview of football finances for Europe's premier leagues. It includes analysis and statistics on the Profitability of English clubs, Player costs - wages and transfers, Stadium development, Financing the clubs, and Football tax information.

This paper utilizes European and U.S. research and data to examine the economics of professional sports and the different structures. The study looks at the industrial organization, labor markets, and regulation of European and U.S. sports.

This study examines the unique characteristics of the professional sports leagues, how they operate and what distinguishes the sporting industry from other industries. Also discussed, are the industries that rely on the professional sports industry, such as print media, national, local and cable networks, food services, marketing, construction, transportation, and other spin off industries.

Official Soccer League Web Sites

The Web sites listed below are the official sites for professional soccer leagues and the international governing body of world soccer, including its organizations and associations. Each web site contains links to official team home pages, league team sites, team rosters, depth charts, game schedules, league news, as well as statistics and scores. The FIFA web site provides links to its official financial reports and magazines.

• Asian Football Confederation (AFC)
  http://www.the-afc.com/
• Confederation Africaine de Football (CAF)
  http://www.cafonline.com/
• Confederation of North, Central American and Caribbean Association Football (CONCACAF)
  http://www.concacaf.com/
• Confederacion Sudamericana de Futbol (CONMEBOL)
  http://www.conmebol.com/
• Oceania Football Confederation (OFC)
  http://www.oceaniafootball.com/
• Union des Associations Europeennes de Football
  http://www.uefa.com/

Professional Soccer News

This list of media sources provides links to the professional soccer homepages. The Web site includes: league news & analysis; team news; player links; scores & statistics; video and other multimedia links.

Library of Congress Catalog Searches

Additional works on professional soccer business in the Library of Congress may be identified by searching the Online Catalog under appropriate Library of Congress subject headings. Choose the topics you wish to search from the following list of Library of Congress subject headings to link directly to the Catalog and automatically execute a search for the subject selected. Please be aware that during periods of heavy use you may encounter delays in accessing the catalog. For assistance in locating the many other subject headings which relate to the soccer business, please consult a reference librarian.

• Soccer
• Soccer teams
• Soccer--Economic aspects
• Soccer--United States
• Soccer fields--United States--Finance