Attention Portugal, organizing the Mundial is far from a profitable business

Portugal will host the final stage of the World Cup in 2030 along with Spain and Morocco.

History shows that a tournament usually turns out to be a bad business for the organizer. Did we learn from the example of Euro 2004? Last November, at the start of the billion-dollar Qatar World Cup, the Economist asked the following question: "Is the World Cup a big waste of money?" For Portugal, which will co-host the Mundial in 2030 along with Spain and Morocco, the question posed by the British magazine should provoke collective reflection.

At Euro 2004, construction costs for some stadiums increased by 200% over the originally planned outlay, and some of them are now so-called "white elephants". "As an investment, sporting mega-events almost always fail," concludes the Economist.

Organizing a World Championship is far from a profitable endeavor. This is shown by data from the study "The Structural Deficit of the Olympic Games and World Cups" by Martin Müller, David Gogishvili and Sven Daniel Wolf from the Department of Geography and Sustainability at the University of Lausanne in Switzerland, cited by the British magazine. Since the World Cup in England in 1966, only one edition of the tournament has generated more revenue than expenses: the 2018 World Cup in Russia can claim to be the only Mundial with a positive ending balance, around 240 million dollars.

On the other hand, not counting the megalomaniacal Qatar World Cup, which will be considered the most expensive tournament in history after a major investment by the authorities, the 2002 World Cup in Japan/South Korea made the biggest loss at $4.8 billion.

In these calculations, the authors took into account the costs and revenues directly related to the organization of the competition without considering other aspects that are usually associated with mega-events, such as the impact on tourism and international reputation, the ecological footprint and investments in public infrastructures such as metros or cities, for example - aspects that will be analyzed in a new project that this research team will start working on in February, concerning the development of the economic, social and environmental sustainability of more than 20 major disputes

Thus, the expenditure plan included the costs of construction and reconstruction of the stadiums and the organization itself. And the revenues included income from ticket sales and commercial agreements concerning sponsorship and television rights. Revenues gradually increased with each edition, but they barely reached a level sufficient to cover the costs of the tournament. The 2002 World Cup in Japan/South Korea cost more than seven billion dollars (the most expensive until Qatar 2022) and generated only 2.4 billion in revenue. In the case of Russia in 2018, the tournament's revenues totaled 5.2 billion and were enough to cover the five billion cost.

Did we learn from the example of Euro 2004? According to David Gogishvili, one of the authors of the study, the biggest risk for a country organizing the final stage of the World Cup is the construction of stadiums and their costs. "Mega-events are unfortunately known for going significantly over budget, and this is often due to the construction of sports venues. In many cases, costs have increased by 100% or 200%," says the researcher.

Gogishvili does not directly refer to the Euro 2004 organized by Portugal, but he could have done so. A 2005 audit by the Court of Auditors showed that the costs of stadiums in Braga, Guimarães, Aveiro, Coimbra, Leiria and the Algarve were 230% higher than originally planned, costing the state more than 320 million. Behind the Dragao, Bessa, Alvalade and Luz stadiums, the costs of the Euro 2004 stadiums amounted to 450 million. And that's not including costs related to accessibility and parking in the surrounding areas. While ten stadiums were well utilized during the month of the competition, only half a dozen now regularly host games in Major League Soccer, and only some of them are fully filled on match days. Others are forgotten. "If you don't need a 65,000-seat stadium, don't increase the capacity of your stadiums and keep what is already in place. The risk of having marginally useful sports facilities after the tournament is over is great.

In the case of the 2030 World Cup, the ball would only have to roll on three Portuguese pitches - Benfica and Sporting Lisbon and FC Porto, which have more than 40,000 seats and are already FIFA compliant - which could mitigate this risk. And also the risk associated with opportunity cost. Public funds are limited and require political elections. Mega-events such as the World Cup divert resources that could be spent on improving people's lives, such as public health or education. Or to reduce the impact that infrastructures can have on the daily lives of local residents and on environmental pressures. "In some cases [building new infrastructure] can lead to displacement of residents. Then we also have displacement caused by gentrification, which comes from investment in certain areas, which causes housing prices to rise. When property values increase, it can become unaffordable for people living in those areas or for companies operating in that area," Gogishvili explains.

Allocation of risks and revenues

So far, only one World Cup has shown positive results, while most have turned out to be "small tragedies" for the countries hosting the event. If the 2002 World Cup in Japan/South Korea and the 2010 World Cup in South Africa are not considered "major failures", they only just barely count. "In general, one of the main reasons why the World Cup does not make a profit for the organizer is the way the revenue is distributed," David Gogishvili points out. "While FIFA may insist and campaign for fair play on the field, it doesn't seem to care that in the current game of mega-events the cards are heavily in its favor," he believes.

Since a large portion of the revenue is generated from the sale of broadcasting rights for the matches, this means that most of the income generated by the World Cup goes into the pockets of FIFA, which owns these rights, while the organizers take on the risks. "The host countries could push for changes in the way revenue is distributed... They should lobby for a fairer distribution of income and risks," suggests the researcher.

To some extent, the distribution of risks and costs for the 2030 World Cup has already been secured, according to David Gogishvili. For the first time, the tournament will be held across three continents in a new model, the effectiveness of which has yet to be proven. Nevertheless, South America will host the opening matches, while the rest of the competition will take place in Europe (Portugal and Spain) and Africa (Morocco). "Co-hosting the World Cup helps reduce the costs of the event. But I believe that the strong football culture of the participating countries minimizes the risk of a bad deal," says David Gogishvili, pointing out that the stadiums of Real Madrid and Barcelona are already being renovated even before the final stage is awarded to the Spaniards.

In any case, it is important to understand that "football will not save the economy," as stated by Portugal's Minister of Economy, António Costa Silva. "It is important to implement measures that bring financial benefits and not just (if any), but they should not be seen as the last resort for solving economic problems or achieving the country's economic goals," says David Gogishvili. "Potential hosts should bet on the event if they understand that it can be used to achieve their goals, rather than the other way around, as is often the case," concludes the researcher.