June 14, 2018 / 9:57 AM / 5 days ago

Breakingviews - FIFA’s $25 bln backers could end up on losing team

LONDON (Reuters Breakingviews) - Gianni Infantino, president of FIFA, is cooking up a $25 billion payday for soccer’s governing body and the sport’s top players. However, his financial backers will only make their money back in extra time - if at all.

Football - FC Barcelona v Juventus - UEFA Champions League Final - Olympiastadion, Berlin, Germany - 6/6/15 Barcelona's Lionel Messi celebrates with the trophy after winning the UEFA Champions League Reuters / Darren Staples - 13792244

Almost all the $5.7 billion in revenue FIFA expects to generate in its current four-year cycle comes from the World Cup, which kicks off on Thursday. Infantino’s plan is to supplement the 32-nation tournament with a revamped Club World Cup, involving top teams like Manchester United. Meanwhile, national sides like Germany and Argentina would compete in a new Nations League.

There’s logic to the idea. The last Club World Cup, which pitted Europe’s Real Madrid against minnows from other continents, generated a measly $37 million in revenue. Compare that with Europe’s Champions League, which brought in about $2.5 billion by matching star-studded sides like Real Madrid and Paris Saint-Germain. A bigger Club World Cup featuring more stars and games might be as lucrative as the Champions League. And competitive leagues for national sides would draw more fans than current friendly exhibition matches.

The problem is prize money. Soccer associations and top clubs are mostly interested if the tournaments bring in more cash to help them pay for players. Step in SoftBank, the Japanese tech conglomerate led by Masayoshi Son, and private investors from China, Saudi Arabia and the United States. The consortium has promised to put up $25 billion over 12 years from 2021 to fund the two new tournaments, the Financial Times reported.

The investors are underwriting about $3 billion of revenue per Club World Cup and $2 billion for each Nations League cycle, according to the Associated Press. That means they’ll only begin to earn a return if the Club World Cup generates more income than the last Champions League and the national tournament taps into new sources of revenue, or sucks viewers away from other competitions.

It’s a huge risk. Traditional broadcasters are losing out to streaming services like Netflix and Amazon. The new entrants, however, are yet to spend much on sport. Staging matches in fast-growing markets like China and India may help, but fans there aren’t used to paying through the nose to watch live soccer.

Infantino’s plan may yet fail: a vote on the new tournaments has been postponed until after this year’s World Cup, and European leagues oppose his plans. But if it goes ahead, Son and his fellow investors will take all the risk, while soccer’s insiders walk away with the match ball.

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