FIFA Profile
Friday, April 23, 2010
It may carry a lower profile than the International Olympic Committee, another Swiss-based international sports body. But the Federation Internationale de Football Association, or Fifa, is the overseer of international football, and has repeatedly shaken off regional in-fighting as well as a global recession to become arguably the most powerful sports organization on the planet.
It's all down to the World Cup—the quadrennial extravaganza that crowns the world's football champion and is rivaled only by the Olympics as the world's most watched sporting event.
Fifa President Sepp Blatter holds up the organization's annual financial report during a news conference at the Fifa headquarters in Zurich.
Joseph "Sepp" Blatter, who heads Fifa, last month was able to brag that annual revenue passed the $1 billion level in 2009 for the first time in its history, leaving the organization with a $196 million surplus.
SportCal, a London-based tracker of sponsorship and marketing deals, says Fifa is on target to see total revenue of around $3.4 billion over the current four-year World Cup cycle. That's up from the $2.3 billion in revenue raked in during the 2006 World Cup cycle that culminated in the championship played in Germany.
Founded in Paris in 1904, Fifa was created to help organize the growing number of international football matches.
The organization is essentially a federation made up of national football associations, which elect the president and other members of the organization's powerful executive committee. More than 200 national associations are members of Fifa.
Fifa's influence is wide. The organization recognizes regional federations—such as Europe's UEFA and CONCACAF, the Confederation of North, Central American and Caribbean Association Football—that oversee the game at the regional level.
Fifa also has four seats on the International Football Association Board (IFAB), which gives it enormous influence over the body that sets the world-wide rules of the game.
Mr. Blatter, who was first elected president of Fifa in 1998, came in for sharp media criticism this spring after IFAB rejected a plan to introduce goal-line replay technology—a move he defended as impractical on a global level due to high costs and potential interruptions to games.
Although the technology would be used only to determine if the ball crossed the goal line, the push for some type of replay capability had been reinvigorated by the fallout from Thierry Henry's handball in France's World Cup play-off victory over Ireland last fall.
Fifa and Mr. Blatter are heavily courted by world leaders and dignitaries. Critics charge that Mr. Blatter's ability to distribute largesse to member associations has helped him gain immunity from challenges to his role.
Controversy surrounded the 2001 collapse of International Sports & Leisure, a marketing firm that handled merchandising and stadium commercial rights for Fifa. The collapse put a strain on Fifa's finances, though the exact size of the impact was never made clear.
Swiss prosecutors dropped a related criminal investigation into allegations of corruption against Mr. Blatter in 2002, clearing the way for him to win his second term at the helm of the organization later that year.
Fifa suffered a bloody nose in 2006 when a U.S. district judge ruled that Fifa had breached a contract agreement with MasterCard Inc. and sharply criticized the organization's business tactics. Fifa had dropped MasterCard as a sponsor, awarding the slot to rival Visa Inc. MasterCard charged the move violated its first-refusal rights under its existing contract. The judge found that Fifa had lied to both MasterCard and Visa during the negotiations.
Fifa declined to make officials available for an interview.
"On the one hand, you have to credit Fifa for making a number of bold and smart business decisions" over the years, said Adam C. Silverstein, a New York-based partner at Golenbock Eiseman Assor Bell & Peskoe who represented MasterCard in the trial.
For instance, Fifa now requires sponsors to sign up for two World Cup cycles, a decision that now looks smart in the wake of a global recession that could have made it more difficult to hold onto top-tier partners headed into the 2014 World Cup, he said.
"On the other hand, as the judge made plain and exposed in the decision through the discovery and the trial that we conducted, their operating procedures, their tactics, are not appropriate," he said. "They conduct themselves as if they are accountable to no one."
An appeals court later vacated the ruling and remanded the case to a lower court. In the end, MasterCard walked away with a $90 million settlement.
Alan Tomlinson, a University of Brighton professor and expert on world football, said the clout associated with the World Cup has served as a shield for the organization.
"People are still chasing what Fifa gives," he said.
Meanwhile, Fifa has successfully rebounded after foundering in the wake of the International Sports & Leisure collapse.
When it comes to revenue, television rights are the big driver, projected to rise by $1.1 billion from the 2006 cycle to $2.5 billion by the time a new champion is crowned in Johannesburg, SportCal estimates. "It's must-have television," said Simon Ward, deputy editor of SportCal.
The growth in part reflects changes in how FIFA awards television rights, Mr. Ward said.
In Europe, for example, FIFA used to award rights to the European Broadcasting Union, a confederation of mostly public-service broadcasters, for a lump sum. That's not the case for the 2010 World Cup.
Instead, Fifa sold rights to individual nations in Europe's biggest markets—France, Germany, Italy, Spain and Great Britain, Mr. Ward said. Then they completed a separate deal with EBU for other European territories.
"Being able to sell territory by territory can get individual broadcasters to compete against each other, and you can raise a lot more money that way," he said.
On top of that, Fifa has also managed to take advantage of new or growing revenue streams, including mobile and Internet rights, he said.
Then there are sponsorship revenues, which were boosted by the decision to make top-tier sponsors, known as partners, sign on for two consecutive World Cup cycles.
It isn't clear how much the current crop of Fifa partners—Adidas AG, Coca Cola Co., Emirates Airline, Hyundai Motor Co., Sony Corp., and Visa—pay for the privilege.
Not only is the take thought to be quite huge, most of the sponsors in the top tiers are also heavily involved in football through other sponsorships.
And after securing a position as a sponsor, they're keen to spend further money through events such as Coke's World Cup Trophy Tour, highlighting their involvement in the competition, said Robert Tuchman, executive vice president of Premiere Global Sports, a New York-based sports-marketing firm.
As a result, the sponsors "leverage more dollars into what they're already paying Fifa and Fifa benefits from the promotion," he said.
Bringing the 2010 World Cup to South Africa was decided amid worries over the nation's infrastructure and other concerns. But the decision appears likely to be another winner for Fifa, which is enjoying a very successful World Cup from a marketing standpoint, Mr. Tuchman said.
—William L. Watts is a reporter for MarketWatch in London.
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