Note: This article has been adapted from a work submitted for a post-graduate course, Strategic Capabilities for Technological Innovation. It is my own analysis based on information I could access and has not been endorsed by FIFA or any of the mentioned organisations.
The Fédération Internationale de Football Association (FIFA) is the governing organisation of international football. It was created in 1904 under Swiss law to create an international structure for football governance. FIFA was initially designed to be an international sports organisation and was supposed to administer rules and regulate competition, but since the mid-1970s the federation has moved to commercialize and professionalize international football.
FIFA’s business model revolves around the quadrennial FIFA World Cup tournament, a product which the international federation sells to commercial partners, media broadcasters and fans obtaining billions of dollars in revenue. The tournament draws billions of viewers from around the world and is considered the second biggest sporting event in the world behind the Olympics. The 2014 FIFA World Cup reached 3.2 billion viewers with 1 billion watching the final between Germany and Argentina. FIFA’s main revenue stream has been through the sale of hugely expensive television rights. This is further boosted by granting marketing rights to companies such as Coca-Cola, Visa and Hyundai Motors, its main partners.
FIFA, which is registered as a non-profit association committed to the improvement of the sport, invests the money it earns back in the sport through various development programmes aimed towards constant improvement of football.
We next take a look at the FIFA business model using the three dimensions proposed by George and Bock (2011): resource, transactive and value structures.
Resource structure refers to the static architecture of the organisation, production technology, and core resources used to serve customers and other stakeholders. FIFA is a membership-based International Non-Governmental Organisation (INGO). However, according to Eisenberg (2006), FIFA’s approach to business has been thoroughly capitalistic, accumulating revenue for its own use. This has worked well for FIFA as it has allowed the Zurich headquarters to maintain a strong hand in the administration of the sport globally. This is in stark contrast with other INGOs which are purely executive.
Further, non-members also benefit from FIFA’s football development aid programmes enabling the international federation to profit from Swiss laws exempting public benefit business from taxation. This factor has greatly benefited the organisation financially.
FIFA’s main product is the FIFA World Cup which it organises once every 4 years. The host country is in-charge of all preparations but benefits from FIFA’s expert support in areas such as infrastructure, technology, logistics, etc. Apart from its huge revenues, FIFA also boasts a very strong brand, a huge market (spectatorship) with a potential for growth, a deep knowledge of football having been custodians of the game for over 100 years and a highly skilled professional workforce. All these are key in FIFA’s business model and innovation strategy.
The transactive structure is the configuration and set of characteristics of the organisational structure that determines and defines key transactions with partners and stakeholders. FIFA is a federated organisation with its key stakeholders being member associations, regional confederations, corporate sponsors, media companies and spectators. FIFA partners, including Adidas, Coca-Cola, Wanda Group, Hyundai and Visa, sponsor FIFA World Cup tournaments and in return are able to showcase their brands to millions of viewers globally.
Further, they are able to use FIFA’s official marks in co-branding ventures and also benefit from hospitality opportunities. FIFA engages with its commercial and broadcasting partners through marketing companies that serve as intermediaries.
This dimension of the FIFA business model has worked well since the 1970s when FIFA moved to professionalize and commercialise football. However, with the rapid development in information and communication technologies FIFA needs to reexamine its transactive structure. People’s attitudes and behaviour with regard to entertainment consumption have drastically changed and corporates now have access to people, for example through social media channels, and might not be willing to pump the same huge amounts of money into the sport. This situation is compounded by FIFA’s recent scandals that have resulted in increased reputational risk. Corporates might be asking whether it is still worth it to be associated with FIFA while other organisations/events such as the UEFA Champions League present an equal if not higher value proposition. The marketing intermediaries have also been at the centre of these scandals something that does not bode well with FIFA’s future business model and strategy.
Value structure is the system of rules, expectations and mechanisms that determine an organisation’s value creation and capture activities. FIFA’s main approach to value creation and capture has been through the development of football, constantly improving quality as well as the geographic and demographic reach of the sport. This approach is aptly captured in article 2 of the FIFA statutes, which says in part, “to promote the game of football in every way it deems fit”.
To improve the quality of the game, FIFA runs the FIFA Quality Programme that offers “an internationally recognized industry standard for quality and reliability in the areas where it matters to football players most: the equipment, surface, technology and services used for their game”.
As noted earlier FIFA runs development programmes in non-member countries mainly to expand its geographical reach and spectatorship. We have also seen a recent push in the development of women’s and girls’ football, an area that represents great potential in the expansion of the beautiful game.
To conclude it can be said that FIFA has done well in all 3 business model dimensions despite finding itself in a crisis situation occasioned by long-standing governance issues that have bedevilled the organisation. As FIFA seeks to navigate away from the crisis it is important that they carefully consider the risks and challenges that lie ahead. In my next article, I plan to outline some of these risks and challenges.
- Eisenberg, C., 2006. FIFA 1975-2000: the business of a football development organisation. Historical social research 31, 55–68.
- FIFA’s business model: Corporate sponsors may rethink big-money soccer deals [WWW Document], n.d. Nikkei Asian Review. URL http://asia.nikkei.com/Business/Trends/Corporate-sponsors-may-rethink-big-money-soccer-deals (accessed 3.18.17).
- George, G., Bock, A.J., 2011. The Business Model in Practice and its Implications for Entrepreneurship Research. Entrepreneurship: Theory & Practice 35, 83–111. doi:10.1111/j.1540-6520.2010.00424.x