A football Club World Cup – worth less, but not worthless

FIFA plans to launch an expanded 32 club World Cup in 2025.  Estimates that it could generate a billion dollars in media rights from the start are probably much too optimistic.  But although it will never rival the FIFA World Cup - where whole nations are enthralled - it could well build to be a billion-dollar competition over the next ten years, once hosting and sponsorship are included.

Club World Cup is an event best known in the UK as the cause of Manchester United pulling out of the 2000 FA Cup in order to participate, as part of England’s campaign to host the 2006 World Cup (spoiler alert – United, despite coming off their 1999 treble, were terrible, and England failed to persuade FIFA they should be awarded the World Cup).

This year’s event – just in case you missed it – took place in February in Morocco.  It featured seven teams, the champions of the six regional confederations plus the host, which were Real Madrid, Flamengo, Al-Hilal, Al Ahly, Wydad Casablanca, Seattle Sounders and Auckland City.  You’ll be surprised to learn that Real Madrid won.  Somewhat confusingly, that counted as the 2022 edition, and there will be another iteration later in 2023, this time in Saudi Arabia.

But this will be the last time it’s played as a seven-team competition.  As from 2025, FIFA plans to expand the format to 32 clubs, played every four years, using the same structure as the actual World Cup.

FIFA has high hopes for the competition; an earlier proposal mentioned seeking investment into the tournament at a proposed valuation of “$25 billion,” and while that was probably a little optimistic, the new version has a benchmark of World Cup broadcast revenues in mind (that’s about $2.5bn).  Even if that is the long-term goal, the payments rumoured to be planned for the participating clubs suggest an expected media value of over $1bn. Is that realistic?

Broadcast value will be driven by advertising – and hence audiences

Short duration, occasional sports properties are of limited interest to pay TV or streaming services – they prefer year-round interest that will drive subscription.  Without subscription revenue, advertising and sponsorship will be key – and that depends on audience delivery.

World Cup audiences aren’t the right benchmark

The FIFA World Cup is a globally important sports event – arguably the single most important.  It generates huge interest and captures a groundswell of support.  But while a match between Saudi Arabia and Argentina is watched by large audiences around the world, it’s difficult to see Al-Nassr vs Boca Juniors doing anything similar.

Moreover, even those matches with national participation are likely to be of less interest.  Club football fans are very partisan; all Italian football fans watch Italy matches; but AC Milan fans aren’t going to watch Inter play in the group stages.

So, we can expect Club World Cup audiences to be much lower than the World Cup equivalents.

But neither is the Champions League

If international football isn’t the right benchmark, maybe the Champions League is?  Again, probably not.  UEFA has – very cleverly – created a system where each of the big European markets has four representatives in the competition.  That means that even where fixtures are split over two weeks (i.e. four matchdays), each major market will have one of their teams playing, and that’s the match the TV companies choose to show.  The Club World Cup, on the other hand, will see a lot of neutral fixtures, with correspondingly lower interest.

One more thing

It’s at this point that TV economics take over.  If you can’t guarantee a big audience, you aren’t going to get onto the main networks.  World Cup fixtures – even neutral ones – are shown on BBC1, ITV, ARD, RTL, TF1 and their like, because they reliably deliver mass audiences.  If you can’t do this, then most matches will be relegated to one of the smaller channels.  But these channels are further down the EPG, and so get less casual viewing, which further ratchets down revenues, and they also have lower advertising prices (CPMs), so there’s a further negative impact.

What’s it mean?

Rather than over a billion, we think a more realistic ambition should be in the low hundreds of millions.  That’s not insignificant – but it doesn’t cover the promises made on participation fees or wider distributions.  Other revenues are going to need to fill the gap.  It seems that FIFA understands this, as it is rumoured to be seeking long-term hosting deals in either the USA or Saudi Arabia.  Hosting fees, matchday revenues and sponsorship may be the way to sustain this event while it grows in relevance and popularity.  And maybe, in thirty years’ time, a billion screens around the world will be showing the crowning of the new best team in the world.  But that won’t be in 2025.

O&O has helped rights holders around the world assess the value of new or revised competition formats; from why introducing play offs can enhance value to why a biennial World Cup probably won’t.  Some of our thinking around what drives value – and why simply adding more matches often does not mean more value – can be found here, or get in touch with Sean McGuire at sean.mcguire@oando.co.uk to find out more.