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It will all end in tears; businessofsport.


With a surfeit of facts and statistics gushing from an abundance of World Cup handbooks and wallcharts, most foot W -t ball fans are now mentally prepared for South Africa v Mexico, a match which ordinarily would struggle to find a berth on an obscure satellite channel.

We're ready for the tournament opener, with our handy supply of facts, many of which will be useful only for future pub quizzes, but there are some facts that will have an impact upon many of us.

For example, we can expect to be bombarded by comm ercials and newspaper ads extolling the virtues of one of the tournament's 15 sponsors. These companies them have paid FIFA an estimated total of EUR600 million - three times more than the amount generated from ticket sales - in order to enjoy access to a staggering global audience.

During the 2006 World Cup in Germany, more than 26 billion football fans in 214 nations watched on TV; the final alone attracted an incredible 715 million viewers. Sponsors - and FIFA - expect those figures to be at least matched over the coming month.

That football has such a colossal worldwide following is hardly a revelation, although the fact that it has a direct and measurable impact upon stock markets - especially in the USA - might raise a few sceptical eyebrows.

Closer to home, one survey conducted last week reported that in the first five months of 2010, no fewer than 33 companies had made specific stock ex-x change announcements in which they said that the World Cup would have a material impact upon their business.

Not surprisingly, eight of these firms were bookmakers, each of which anticipates another World Cup bonanza. Nor did ITV's announcement that it expect-t ed the tournament to be beneficial to its business come as a complete shock.

During the last World Cup, retail sales rose by pounds 1 billion and, although pubs are engaged in a fierce alcohol sales war with supermarkets, more than one fifth of people watching the World Cup on TV will do so in a pub, according to a report by PricewaterhouseCoopers (PWC).

But the tournament is not necessarily welcomed by all. For example, cinemas are not expecting 'House Full' signs too often over the next few weeks. If pubs and bookies might expect to do well from the World Cup, one sector that continues to benefit is insurance.

Insurers have become an integral part of any major sporting event, though none is as valuable as the World Cup.

The financial consequences of the event being cancelled, abandoned altogether or postponed following natural catastrophe or terrorist attack are ultimately too great a risk for organisers to carry. According to one underwriting manager at Munich Re, a company committed to underwriting $350 million worth of World Cup cover, demand for cancellation insurance "... could be in the region of $5 billion".

Some of these figures are as staggering as another batch of World Cup stats; as the tournament gets bigger, so do the numbers, but away from these bulletpoint facts, there is enough academic research to suggest that every World Cup tournament has a negative stock market effect - on the USA.

In a study published in May 2008, two academics, Guy Kaplanski and Haim Levy, examined the impact of the last 15 tournaments on America's domestic stock market. They found that on average, the US market has fallen by 2.58 per cent during each of the month-long events.

Why, one might ask, would the US market fall so predictably when football (soccer) is nowhere nearly as popular as it is in other parts of the world? There are, it seems, several reasons.

Starting with the premise that the US is the world's most important stock market (which it is), they discovered that around one third of transactions on it are conducted by overseas investors. Kaplanski and Levy then tested their theory, ie that if the moods of overseas investors are affected by World Cup results, particularly when their country loses a match, it could have a direct impact upon how they behave when mak-k ing investment decisions.

Moreover, as the number of losing countries increases as the tournament goes on, the cumulative effect builds.

The authors note: "As the tournament progresses, the number of fans experiencing disappointment - which for some involves sadness, stress and grief - also increases. Eventually, the majority of fans, comprising hundreds of millions of people, belong to a losing party and hence they are potential contributors to the global negative stock market effect."

The pair called their analysis Exploit-t able Predictable Irrationality: The FIFA World Cup Effect on the US Stock Market.

Hardly a snappy title, but its conclusions are unequivocal.

And so, it would appear that the World Cup is not a one-way bet to commercial riches, particularly for US equity investors, although one suspects that will not prevent 26 billion-plus fans from enjoy-y ing it, even if they are presently overloaded with facts.


Members of the England squad are put through their paces during training in South Africa but most nations will return home
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Title Annotation:Sport
Publication:The Birmingham Post (England)
Date:Jun 10, 2010
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