Today, with a turnover of more than two billion Swiss francs (CHF) every four years, FIFA enjoys a financial status that the governing body's founders could hardly have dreamed of. FIFA Magazine explains where the income comes from and how it is reinvested in football.

FIFA's dependence on World Cup revenue from television and advertising, which constitutes around 90% of its budget, means that one fiscal year for FIFA in reality stretches across four calendar years. Considering how difficult it is for "conventional" enterprises to estimate their business for only twelve months, it is obvious how challenging it must be to draw up a budget for a four-year period. To add to the complications, financial legislation restricts FIFA in a number of ways. Profits cannot simply be added to capital in unlimited amounts, but must be shared out. In other words, FIFA does not stockpile billions of francs, but immediately passes the money on to others. Approximately one third is allocated to development aid.

In previous four-year cycles, FIFA's turn-over from the World Cup has ranged from between CHF 115 million (1979-1982) and CHF 332 million (1995-1998). In 1999, FIFA estimated that the minimum guaranteed revenue from contracts with its partners (television rights, marketing rights, etc.) would push the revenue for the current cycle to over CHF 1.8 billion. Meanwhile, planned outgoings of more than CHF 500 million to cover commitments to development projects (financial support for national associations, Goal), CHF 800 million for the FIFA World Cup" in Korea and Japan, and CHF 280 million for the organisation of FIFA's dozen or so other competitions and the day-to-day running of the general secretariat result in a bottom-line profit of around CHF 240 million.

Securitisation
The current cycle that started in 1999 could in many ways be viewed as a "quantum leap", with forecasts suggesting that the four-year turnover would show an almost seven-fold increase on the period running up to France 98 (1995-1998). Revenue and, more importantly, expenditure have grown considerably as a result of unforeseen events and extraordinary influences. Estimates now set the overall budget at approximately CHF 2.3 billion, primarily because the costs for splitting the 2002 FIFA World Cup" between two nations will be considerably greater than first imagined. The financial situation has been dealt further blows by the bankruptcy of FIFA's long-time partner ISL and the resultant loss of marketing revenue accounted for in the 1999-2002 budget and the increasingly fragile state of the sports rights market since the events of September 11. Another cost-increasing factor was the decision of FIFA's original insurers to terminate the insurance contracts for Asia's first-ever World Cup - a move that has since been challenged by FIFA - and the subsequent rise in premiums for the required cancellation insurance. Despite the ISL bankruptcy, television money, which today makes up around 70% of all revenues, is on target to match forecasts and reach the budgeted guaranteed amount of CHF 1.4 billion (including the USA).

Whereas bank credits were used in previous cycles to bridge the lean years, FIFA has recently been exploring new avenues by refinancing several hundred million Swiss francs. The door to the public capital markets, used by commercial enterprises, is firmly closed to FIFA, and the "securitisation" deal, which has created liquidity of CHF 690 million, must be considered in this light. As part of a transaction arranged through investment bank Credit Suisse First Boston, companies invested the aforementioned amount, which is secured by the marketing rights for the 2002 and 2006 World Cups. This bond, which equates to only 15% of the total revenues from 2002 and 2006 and only involves claims on marketing rights, was awarded the highest rating by the relevant agencies. Any revenue from marketing contracts exceeding the amount of the bond goes directly to FIFA. In 2001 FIFA used the funds generated by the securitisation to pay off an existing bridging loan. The funds also helped FIFA to set up special reserves and invest equity. At the end of 2001 FIFA had a cash flow of CHF 1 billion.

Aid for everyone
In compliance with its statutory obligation to promote football around the globe, FIFA does not hand out money merely to an elite group of successful teams, but offers financial aid to all its affiliated national associations. The national associations whose teams have qualified for Korea/Japan will certainly have no grounds for complaint as each of them has already received CHF 1 million to fund preparations for the tournament in the Far East, and for each game they play in the competition they will receive an additional payment of at least CHF 1.5 million - a 44% increase on what was allocated at France 98 (see graph inset). FIFA will pay out a total of 200 million francs to the teams participating. The 2002 FIFA World Cup" winners alone will receive a record amount of more than CHF 12 million from FIFA. In addition to this, the World Cup budget will also be accountable for the higher costs for the travel, accommodation and security arrangements for the teams.

The Organising Committees in Korea and Japan also receive financial help. Whereas in the past local organisers of World Cups purchased the rights for ticket sales from FIFA for a guaranteed sum, since France 98 all ticket receipts have gone to the hosts. In the special case of this year's co-hosting, Korea and Japan can also count on a FIFA subsidy of CHF 330 million.