FIFA’s capacity to manufacture income and capital through the World Cup brand is the key factor behind the crisis in global football.
Association Football as it was originally known is wrongly described as the most lasting legacy of the lost culture of tangible good manufacturing that made the UK in the mid-19th century the workshop of the world.
The rules approved in 1863 were in fact shaped by English public schools and Britain’s upper classes, but manual and skilled workers provided most players and practically all the spectators after professional football was allowed in 1885. By the end of the century and the coming of half-day working on Saturdays, a pattern was established which involved professional football games kicking off at 3pm. It created a uniquely proletarian culture.
Despite huge crowds watching football and the rapid spread of football to Europe and Latin American, the game was always poor compared with the gentlemen’s sports of horseracing, hunting, cricket and tennis. Until the 1950s, many footballers were originally factory workers and miners. Their pay was modest
By the end of the 1960s, with crowds diminishing, there was talk of football’s terminal decline.
It was a disaster that made the difference. Deaths caused by a crowd stampede before the 1985 European Cup Final involving Liverpool at the Heysel Stadium led to a ban on English clubs from the competition. During an FA Cup semi-final at Sheffield’s Hillsborough Stadium four years later, 96 were killed and almost 800 injured in another disaster. The British government intervened and ordered every professional club to upgrade the safety of their grounds. All-seater stadiums became compulsory and ticket prices went up.
With costs rising, professional clubs sought new sources of revenue. In 1992, the biggest English clubs created the Premier League. Its members were allowed to negotiate commercial deals directly and broadcasting rights were sold to a satellite television company that was subsequently taken over by Sky. Broadcast rights for Premiership games now generate more than $5bn a season.
These trends have been matched elsewhere in the football world. The 54 members of UEFA, the European football association, enjoy revenues that are now approaching $20bn a year. FIFA earned $5bn from the 2018 World Cup Finals in Russia. All told, revenues generated from football broadcasting rights are probably greater than $30bn a year and growing.
There have been coruscating criticisms of professional football for decades. Charges include the toleration of racist chanting, misogyny, bad fan behaviour, cheating by players, conspiracies with gamblers, questionable refereeing decisions, doping and cronyism. But the most persistent is the way the billions pouring into football are managed.
Major sporting events have a unique capacity to engage audiences that cross borders, ethnicities, religion and, increasingly, gender. The intense involvement of spectators provides the opportunity for corporations to imprint their brands in the minds of millions
Sport is seen as a positive activity. It’s healthy, usually fairly cheap to organise and allows the involvement of women and men. Even at its worst, it’s harmless to everyone apart from participants.
The US has led the way in commercialising sport. A 30-second spot during the annual Super Bowl American football final this year cost more than $5 million. This is the most expensive advertising you can buy.
The huge revenues televised sport can produce have inevitably opened the door to unethical practices. Sales of broadcasting rights for individual games and tournaments are often secured through special deals with executives and officials. The Olympics and other sports events have been scrutinised and some regulated. FIFA’s getting unprecedented attention because of its success.
FIFA has grown into a multinational business with global political clout. It has 209 members, which is more than the UN. Unlike in the UN, the IMF and the World Bank, each member has one vote. Some say it’s the most successful non-profit transnational organisation on earth. It organises complex events in many locations and does it without direct government support.
FIFA’s objective under its former president Sepp Blatter was to break down the grip Europe and Latin America held over the World Cup. Finals have now been held in the US, where soccer is probably only the fourth most popular sport; in Asia in the form of finals hosted by Japan and South Korea, and in Africa in 2010. The next stop is Qatar, the first hosts in the Middle East.
FIFA has defended itself against charges that it shouldn’t host tournaments in dictatorships by arguing that football’s a sport not politics. It brings people together, like international trade.
In defence of the decision to pick Qatar for the 2022 finals, FIFA says the overwhelming majority will view games on television not in Doha. It was time for the Middle East to host the finals and Qatar was prepared to invest in facilities. Qatar’s time zone is convenient for both Europe and Asia. Complaints about the weather have been addressed by shifting the tournament to the autumn. European clubs say this is disruptive, but FIFA says that sticking to June and July would permanently exclude many countries that lie within the northern section of the tropics.
Such disputes pale into insignificance compared with the tornado that has swept FIFA since arrests and indictments of FIFA officials for bribery and corruption in 2015 which led to Blatter’s resignation at the end of that year.
There are many suggestions about how FIFA might recover from these events. Some call for the organisation to be abolished or replaced. But so far none have identified the key issue at the heart of the scandal: the role of intangible capital.
This works in two ways. The first is FIFA’s own intellectual capital formation. It exercises total control over the FIFA brand and the commercial use of its logos, including those specifically developed for each tournament, and not just the World Cup. This is the source of its income — not the skills of the players, the passion of the fans or the appeal of the venues.
The second way is more significant. This is the massive spending by corporations to bolster and protect the value of their brands. The marketing sponsors for the 2018 finals were Adidas, Coca-Cola, Hyundai, Visa, Budweiser and McDonalds plus Gazprom, the Russian energy company that has signed up for the tournament.
But corporate sponsorship and advertising go way beyond this. More than 1 billion watched the 2018 World Cup final match won by France. This was the largest television audience in history. Total advertising revenue for that game alone was probably around $1bn worldwide.
Without the billions paid by corporate sponsors and advertisers that are received by FIFA, football associations, clubs and the media, the potential for corruption would be lower. Interest in the issue would evaporate.
Economics2030 argues that the idea of intangible capital lacks sound intellectual foundations. Arguments in favour of intellectual property based on natural rights and utility are flawed. FIFA has no right to the proceeds of every football game played. It doesn’t own the idea, nor should any individual or organisation ever be allowed to do so.
Private ownership of intellectual rights over football played little role in stimulating the game. The first World Cup finals were held in 1930, long before there were significant revenues from advertising. Public broadcasters were screening the tournament to large audiences when not a penny was spent on sponsorship.
Intangible capital, which FIFA and corporations have been allowed to manufacture by intellectual property rights legislation and incremental accounting codes, have made FIFA what it is today. Like banks and other businesses that are based on intangible capital, it increasingly has little to do with the activity it was originally set up to promote.
Whether FIFA stays, falls or is replaced won’t change the fact that in sport and all areas of human life, intellectual capital is a way of making money from nothing.
For an article about the role of intangible capital in tax havens, click here.