Blogging has been interrupted a little by the revision of Soccernomics that Simon and I have been working on. For the revision we have updated most of the statistics in the book, and added a couple of new chapters. The US version is due out on Amazon on April 22nd, the UK version a few weeks later probably.
The economic debate over the World Cup seems to grow with each edition. I remember being shocked by the profligacy of the 2002 Japan/Korea event, with so many stadiums built from scratch which nowadays operate well below their capacity, and while there was some press interest, it was not a big story. Germany 2006 likewise attracted little attention on the economic front; I guess everyone assumed they could afford it and in any case the construction bonanza was not that great. Then 2010 in South Africa, a self-evidently poor nation burning hundreds of millions on a lavish event attracted much more attention, and now for Brazil we even have protests on the streets. The optimist in me believes that fans are coming to understand that this extravaganza comes at a big cost, and that maybe the football wouldn’t suffer from a little more frugality.
The fundamental economic problem with the World Cup (and the Olympics) is that the scale of facilities dictated by those control the event (FIFA and the IOC) is far greater than is commercially viable. FIFA And the IOC want grandiose events – even with the huge demand for tickets, global TV audiences and multinational sponsors, the income doesn’t cover the cost of the infrastructure. Even if FIFA and the IOC did not keep most of the money to share out with their members (national governing bodies and Olympic committees) the costs of new stadiums and the surrounding transport infrastructure is so great that it would not make business sense. Legacy values are pure fantasy, because the legacy events are miniscule in size compared to the mega-events. For example, the Kaizer Chiefs play their home games in Johannesburg’s 94,700 seat Soccer City. Last season their average gate was 17,813.
That said, one of the few long term beneficiaries of a major football tournament does appear to be the teams in the top domestic football league. This is a surprisingly under-researched issue. A few years back I wrote a paper on the subject with Takeo Hirata from Waseda University, though in the end it was published in Japanese, and so may not a have been read widely outside of Japan. But it’s easy to make the basic point with some simple stats.
I downloaded the average gates for top division teams in countries that have hosted either World Cup or a European Championship going back to the 1966 World Cup. Mostly the data came from the excellent http://www.european-football-statistics.co.uk/ site, while I also had figures for Japan and Korea. So I included six World Cups (66, 74, 90, 98, 02 and 06) and 8 Euros (80, 84, 88, 92, 96, 00, 04 and 08). Three of these were co-hosted (Euro 2000 in Belgium and the Netherlands, 02 in Japan/Korea and Euro 2008 in Austria and Switzerland). Here is the average change in attendance comparing the year before the event to three years after the event:
The average change is plus 20%. Only three cases have seen declines, two of which were co-hosts. I also ran some simple regressions. Of course, for much of this period football has been growing in popularity anyway. I estimated average annual growth in attendance of just over 1% per year for the sample. But major tournament effects are both positive and significant. In the year of the event and the first two years after the average boost to attendance is 7%, and three years out it is 11%.
It seems fairly obvious that this should be the case. Showcasing the sport in such a dramatic way is likely to increase public interest and so the top clubs in the country will reap the benefit. Moreover, this is just the growth in attendance. It is also likely that ticket prices will rise, broadcast interest and sponsorship interest will grow and so overall revenues will increase for these reasons as well.
Of course, this doesn’t mean that the domestic clubs should be required to pay entirely for the cost of hosting a World Cup or Euros. However, it does suggest that clubs should not be viewed, as they so often seem to be, as distinterested bystanders. They stand to gain a lot from these events, so maybe they should be asked to take some responsibility for seeing that they are properly run as well.