World Cup Soccer Games – - Boom or Bust?

Yesterday, I talked about some economic problems associated with two of the top soccer leagues in Europe. With the impending World Cup games in South Africa, one might think that this would be bonanza time for the people in that country. Given a few of the numbers that are beginning to surface, that may not be the case.

According to various reports, South Africa budgeted £3.2B ($4.7B) to do things like build stadiums, training facilities, transportation infrastructure and the like to host the games. I will assume here that all of those works were completed with no overruns anywhere; if you really think that was the case, you also probably think that the Tooth Fairy was going to pay for any overruns had they happened.

The estimated GDP for South Africa in 2009 was $281B; therefore, the country was spending 1.7% of its GDP last year on “improvements” for a one-month soccer tournament. According to the CIA World Factbook, the unemployment rate in South Africa is 24%, the GDP fell by 2% in 2009, the country ran a $12B deficit in 2009 and the public debt of South Africa is 35.7% of the GDP. I am not an economist by any stretch of the imagination, but that is not a pretty picture taken in aggregate.

The only way this tournament turns out to be a long-term benefit for South Africa is if people from countries other than South Africa come to the country to see the games and to see other things in South Africa and spend money in South Africa that would not have come to the country without the World Cup Games. Selling tickets to local people is nice, but it does not “pay the freight” here. And that is why some numbers that hit the papers today are frightening:

    160,000 tickets remain unsold for events.

    75,000 of the “Tier One Tickets” (the expensive ones that local South Africans are unlikely to afford) are unsold.

    90,000 tickets had been distributed to sponsors/partners and were returned to FIFA because the sponsors did not want them and/or could not dispose of them.

    Of the 64 games in the tournament, zero games are sold out.

Let me do a little math here. There are ten stadiums that will house the games and the seating capacity averages about 54,000. So, if they sold out all of the 64 games and averaged $150 per ticket (that is a very high estimate even if all of the Tier One Tickets get sold at face value which they will not), the ticket revenue will be in the range of $520M. Assume that 80% of that comes from foreign sources (again a high estimate) and the ticket revenue that can logically offset expenses for the tournament comes to $416M. Remember, the budget for expenditures was $4.7B.

Therefore, the only way that South Africa comes out of this “with a profit” is if those foreigners spend more than $10 in South Africa for other stuff than they did for tickets and that the government collects taxes efficiently to recoup its share of the “profit”. Neither of those conditions is likely to obtain.

In 2004, Greece hosted the Olympic Games and the Greek Government spent loads of money it did not have to become the “beneficiary” of all the money that people would spend there while attending the Olympic Games. Their losses were monumental; those losses surely did not cause the current economic crisis in Greece but those losses contributed to the current economic crisis in Greece in a meaningful way. The economies of Greece and South Africa are of similar size; South Africa cannot lose as much money on the World Cup as Greece did on the Olympics because the Greek expenditures were far higher to prepare for the Olympic Games. Nevertheless, the legacy of the World Cup games for the economy of South Africa looks to be an increase in debt for the country that the country does not need.

FIFA says that the 2010 World Cup will “leave a lasting legacy on the country and the African continent.” They are probably right; that debt will be hanging around for a while…

In case you are interested, the favorite to win it all in the World Cup at the moment (according to BetUS.com) is Spain at 4-1 odds with Brazil the second choice at 9-2 and England third at 5-1. The longest shot on the board is New Zealand at 1,000-1.

One of the local yakkers on sports radio here in the DC area went into a faux rage the day before yesterday about the World Cup and how it was going try to make him interested in soccer and how it was never going to succeed. He did a full three minutes on how boring soccer is with most of the standard complaints. Then he went to commercial…

Since I listen to him when I am driving somewhere, I know that he is a huge golf fan and that he goes into raptures over the Ryder Cup every other year. I am making a note to call him this Fall and point out to him how boring the Ryder Cup is and how he is trying to make me interested in golf and will not succeed. No one can pretend to have a low boredom threshold and still think televised golf is something worthy of attention.

Let me clear up something I said yesterday. I suggested that some folks in the US might watch some of the World Cup games this year to begin to acquire a taste for soccer. I did not say – nor did I mean to imply – that enough people in the US would become real fans of soccer that the game would take on an important status in the sporting firmament here. It will not. Nevertheless, if some folks begin to appreciate soccer the sport can grow here in the US and these impending World Cup games could be the catalyst for a smidgen of growth.

Changing gears for a moment here, I notice that while I was away the good citizens of Connecticut decided that Linda McMahon would be one of the candidates for the US Senate from Connecticut. Linda McMahon is the former CEO of World Wrestling Entertainment. Consider the esteem in which you hold World Wrestling Entertainment – and pro ‘rassling itself. Now consider the esteem in which you hold the US Senate. Question:

    If elected, would Linda McMahon be taking a step up or down in terms of the organization with which she is affiliated?

Finally, here are two comments from Greg Cote in the Miami Herald regarding two of football’s ne’er-do-wells and their recent appearances in the public eye:

“Nutrisystem dropped [Lawrence] Taylor as a spokesman. Apparently, this latest arrest was the last straw, whereas all those previous arrests were tolerable.”

“Adam ‘Pacman’ Jones has signed with the Bengals. His next arrest and suspension have tentatively been scheduled for late July.”

But don’t get me wrong, I love sports…

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Comments

  • Helen  On May 28, 2010 at 1:50 pm

    IMHO, it is players of the game (doesn’t matter which game) who become the fans of the game. I think this is why football is so big in the U.S. and hockey is so big in Canada. Almost every boy in the U.S. has played football at some time, just as almost every boy in Canada has played hockey at some time. If this is true, it would stand to reason that if World Cup soccer gets more kids into soccer in the U.S., then more U.S. soccer fans will eventually result.

  • Ed  On May 28, 2010 at 3:48 pm

    That doesn’t follow. Soccer was pushed hard in the 70s on – the days of Pele. Those kids played soccer as an alternative to football. They are in their 30s and 40s now, prime watching ages – and not watching. And you’d have to account for women who are football fans, and ice hockey fans outside of the northern tier of states. And there are plenty of golfers and bowlers who will PLAY, but not WATCH their own game.

  • The Sports Curmudgeon  On May 29, 2010 at 3:11 pm

    Helen:

    Welcome.

    There is a logic to the argument that kids who play a game will become fans of the game. The problem is that the numbers of kids playing soccer has been increasing for the last 25 years – - and in fact more kids play soccer now than play baseball. However, soccer has yet to make any inroads into the attendance figures for major sports in the US nor has it generated significant TV watching interest.

    The World Cup games and the Confederation Cup games have drawn TV audiences; MLS games and FOX Soccer Channel ratings are still minuscule.

    As I said, I have acquired a taste for soccer played between top-shelf teams – - and I never played soccer myself. But I recognize that I am in a minority here and if others come to join me in this minority in large numbers, it will take a lot of time for that to happen.

    Ed:

    Your reading of the playing/fan dynamic for soccer is on point.

    The best example I can think of for a sports popularity tracking participation levels is men’s tennis. There was a popularity boom for tennis in the 70s and early 80s. Tennis club memberships were widely prevalent. People also watched and followed men’s tennis closely. Then tennis participation faded and so did men’s tennis “fandom”.

  • Rob  On May 30, 2010 at 12:38 pm

    I will have to comment on the DC area “yakker.” I’m not a big fan of soccer. Outside of the World Cup, I rarely watch the games. I did enjoy playing soccer when I was younger and will admit the soccer is a lot of fun to play. It just doesn’t seem to lend itself well as a spectator sport. I think part of the reason for that is that the market is already full. I, for one, really only follow football regularly. That said…

    There is NO WAY that golf is a better spectator sport than soccer. Not by any stretch of the imagination. I would rather watch a 24 hour soccer marathon than watch one hour of golf. I would rather watch the Home Shopping Network. If they televised spelling bees, and I only had a choice between that and golf, I would get my dictionary and get set for rivetting spelling action.

    At least soccer has a clearly defined goal, a lot of movement (even more than football) and clearly defined athletes. Golf moves at a pace that would frustrate a tortoise. Tell that to Mr. Yakker.

  • The Sports Curmudgeon  On May 31, 2010 at 10:32 am

    Rob:

    We are in agreement about golf as a spectator sport.

    I cannot wait for this yakker to complain about the slow pace of baseball games – - as he surely will one of these days. Since I only listen to him sporadically, I might not catch that rant and try to get through to him on it.

  • Ed 2  On June 1, 2010 at 1:50 pm

    Ed wrote: “That doesn’t follow. Soccer was pushed hard in the 70s on – the days of Pele. Those kids played soccer as an alternative to football. They are in their 30s and 40s now, prime watching ages – and not watching. And you’d have to account for women who are football fans, and ice hockey fans outside of the northern tier of states. And there are plenty of golfers and bowlers who will PLAY, but not WATCH their own game.”

    In my experience, people who have played a sport are more likely to watch it. In my experience, there is a positive correlation between the two. However, obviously, there are many exceptions on both sides.

    On a different note, soccer is a fairly popular spectator sport in the U.S. For instance, combined the English and Spanish-language telecasts of the final match of the 2006 World Cup (between France and Italy) attracted an estimated 16.9 million viewers in the U.S., comparable to the average viewership of the 2005 World Series of Major League Baseball.

    Also, there are 48 million Latinos living in the U.S. And soccer is overall the most popular spectator among Latinos living in the U.S.

    Finally, there are men’s and women’s professional soccer leagues in the U.S. And last season MLS averaged about 16,000 fans per game over a 30 game regular season. MLS is on pace to beat that number this season.

  • The Sports Curmudgeon  On June 1, 2010 at 10:32 pm

    Ed 2:

    Welcome.

    Soccer is growing in popularity in the US. The numbers prove that unequivocally. And the numbers also show that it has a lot of headroom to grow into…

    Soccer remains a minor sport in the US in 2010. As you said, MLS averaged 16,000 fans per game last year. The lowest drawing team in MLB in 2010 so far (Cleveland)draws 15,600 per game. There are five major league teams whose average attendance this year is 2.5 times last year’s MLS average. And baseball plays 5 or 6 games a week not 2.

    If you want to argue that soccer is poised to overtake the NHL in terms of importance in the US, I would listen to your arguments. But even if that were the case – - and I am not convinced that is the case in 2010 – - that would leave soccer many many lengths behind the NFL, college football, MLB, the NBA, college basketball, NASCAR and probably PGA Golf in the US. That makes it a minor sport now with plenty of growth needed to overtake some of the sporting entities ahead of it on the food chain.

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