World Cup is big business

From a number of different fronts this year's World Cup tournament will be a commercial behemoth unparalleled in the history of the sport business industry.

Tournament expected to be a commercial behemoth

A woman sells soccer merchandise on a market stall in Cape Town, South Africa. ((Dan Kitwood/Getty Images))

Some say numbers don't lie, but others say they can tell whatever story we want them to tell.

Regardless, the numbers around this year's World Cup should tell a story, a very big story. On a number of different fronts, this year's tournament will be a commercial behemoth unparalleled in the history of the sport business industry.

Many Canadians thought the Vancouver 2010 Winter Olympics were a big deal from a commercial standpoint, and the around-the block lineups at HBC's Vancouver store to purchase the iconic red mittens lend ample credence.

That event will be a drop in the bucket compared to the money generated by undoubtedly the largest sporting event on the planet. FIFA general secretary Jerome Valcke said that the organization expects this summer's tournament to generate a net gain of $1 billion US in income.

The World Cup, according to some, is expected to draw a collective audience of around 30 billion from June 11 to July 11. That's a generous estimate, but even half that total would be astounding considering the global population is more than six billion.

Aside from increasing global interest in soccer, media proliferation is helping generate these numbers.

Traditional television once ruled the day, but with multiple media platforms such as mobile and internet giving fans and consumers opportunities to watch matches how they want to, where they want to and when they want to, they've built larger audiences.

The numbers have enticed broadcasters around the world to pay millions of dollars, sometimes hundreds of millions of dollars, for rights fees to FIFA.

Brands and advertisers salivate over the audience numbers generated by the World Cup and have paid hundreds of millions in sponsorship fees to FIFA to simply be World Cup sponsors, not year-round FIFA partners, but just World Cup sponsors.

This doesn't include sponsorship revenue from year-round FIFA partners, which is another revenue stream altogether.

Many advertisers such as Coca-Cola will use the World Cup to launch their most expensive advertising campaigns, while non-official partners such as Nike are using the event as a platform to battle competitors such as Adidas and Puma.

Case in point, the recent Nike YouTube viral ad "Write the Future" that has been lauded by many as the company's best creative work in soccer yet. Not to be outdone is FIFA partner Adidas, which said it will launch its most expensive marketing campaign to date.

A bright light

It's clear they all shine a brighter spotlight on FIFA's flagship property, increasing consumer interest, raising the World Cup's brand equity and ultimately generating revenue for FIFA.

Increased interest should manifest in greater merchandise sales.

Numerous items, from programs to balls to apparel bearing the distinctive 2010 FIFA World Cup logo, will surely generate brisk sales given the significance of this World Cup as the first in Africa.

For example, Adidas' official "Jabulani" World Cup ball has already exceeded 15 million in sales and could generate for FIFA at least an estimated $195 million US in revenues based on a 10 per cent royalty fee on soccer balls retailing for $130 US (price of "Teamgeist" ball at Germany 2006).

The exact percentage doesn't matter, but what does is that merchandise sales are a major cash cow that should keep cash registers ringing and the money coming in throughout the month and beyond.

Recent criticism of the ball's performance by players will only further peak fans' interest and drive sales even higher.

Lost amid broadcast rights fees, sponsorship rights fees and merchandise sales, are ticket sales, which were the original primary revenue stream

Nearly three million tickets will be distributed by FIFA and although media reports have criticized the lack of ticket sales especially among locals, the criticism is not attributable to a lack of interest.

In any case, ticket revenue is a small percentage of FIFA's revenue that it doesn't even matter.

That's just icing on the cake for a World Cup that should be known for its revenue windfall almost as much as its high profile claim to fame.