The World Cup Is an Absolute Money Pit
PORTLAND, Ore. (TheStreet) -- It's been 20 years since the United States hosted its first and only World Cup, and the benefits of that year's event are still a point of debate.
It won't take nearly as long to determine the impact of this year's $15 billion World Cup in Brazil. The Nation and Edge of Sports writer Dave Zirin has already published his book about what the displacement of Brazilian citizens by construction, the cost of defending World Cup venues from growing contingents of protesters and the overwhelming debt that this World Cup and the 2016 Summer Olympics will have on Brazil. All of it points to the same conclusion: There is no way the purported economic benefits of the World Cup will prevent it from being the absolute money pit it's always been.
Professor Dennis Coates from the University of Maryland Baltimore County notes that even richer countries such as the United States tend to take a huge hit from hosting a World Cup. In a paper written around the time of the failed U.S. World Cup bids for the 2018 and 2022 installments, he notes that initial projections for the 1994 U.S. World Cup hosting gig put economic benefits at $4 billion. After the event, though, analysts reached the conclusion that the average host city lost $712 million in income relative to predictions. That's an overall loss of $9.26 billion for the entire 1994 World Cup and a $13 billion difference between expectation and reality.How can that be? Well, it's simple. The $100 million a pop paid by official World Cup partners including Coca-Cola, Sony, Visa, Adidas, Hyundai and Emirates goes right to soccer's governing body, FIFA. Same with the $20 million apiece from World Cup sponsors including McDonald's, Anheuser-Busch InBev, Johnson & Johnson and BP's Castrol. Nations get only a small, predetermined cut of that, as well as the nearly $4 billion FIFA is expected to take in from television deals with Disney's ESPN and ABC and other global outlets. Considering that Brazil is expected to pay $1 billion, minimum, for security alone, that $4 billion would come in handy for a host country. Just don't expect FIFA to give away a bigger cut. In 2010, FIFA paid South Africa $483 million to host the World Cup, which certainly would have covered its projection of $431 million for the costs of the event. But stadium costs alone jumped to $2.1 billion as the overall cost of the event soared to nearly $5.2 billion. FIFA didn't offer another dime and, quite frankly, has seen more expensive events. The Japan/Korea joint World Cup in 2002 reportedly cost a whopping $7.5 billion thanks to costly facility construction.