Think Piece: FIFA World Cup
The FIFA World Cup, normally referred to as the World Cup, is an international football competition contested by the men’s national teams of Fédération Internationale de Football Association(FIFA), the sport’s global governing body. The tournament has taken place every four years since the first championship in 1930, except in 1942 and 1946, because of World War II. Presently the tournament involves 32 teams who compete for the title at venues within host nation(s) lasting about a month. This last phase is often called the World Cup Finals, and is preceded by the three year qualification phase which determines who qualifies for the tournament alongside the host nations. The World Cup exceeds the Olympic Games as the most widely viewed sporting event in the world, attracting an estimated 715.1 million people for the 2006 final.
Up until the 1950s radio existed as the foremost medium for entertaining sports fans. Radio reports were considered the premier destination for football coverage. However developing technology led to the first televised World Cup broadcasted live at the 1954 World Cup in Switzerland. Europe’s media companies learned from the technological advances in the USA, where the first NFL Championship game was televised in 1940 and baseball’s World Series in 1948. On both continents, the events were only seen by a few viewers since the penetration of television sets was relatively low at the time. The television had not yet replaced the press and radio as a main source of information for the general public. Towards the end of the 1950s audiences became more enthusiastic about television programming and television sets became cheaper, which resulted in a significant rise in the number of sets.
In 1961 CBS used the first slow-motion replay during the Gator Bowl. This new invention would revolutionize the viewing experience for football fans. The slow-motion replay allowed viewers to gain an even better view of important plays than the actual attendees. The slow-motion replay was also crucial for post-match commentary where football experts could more clearly analyze the match.
In 1966 the World Cup in England became a truly global event, transmitting pictures and sound around the world. The stadiums had as many as 11 cameras set up, with telephoto lenses that enabled cameraman to focus on individual players. The next major development in television viewing was the widespread use of communications satellites. This allowed the 1970 World Cup in Mexico to be seen live in virtually every country of the developed world. During this time color emerged as the new standard for television sets and the 1970 World Cup saw all games broadcasted live and in color.
The next 20 years of the World Cup was highlighted by the deregulation of European television in the 1980s and the introduction of new camera techniques pioneered by the domestic sports coverage in USA. Cameras began recording continuously which made it possible to have multiple replays from different angles. Additionally the presentation of the sport began to take on a more show-business approach. Televised football moved from the simple long shots of the 1950s to an edited choreography with music, closer shots and more action replays.
With the exponential growth in the popularity of televised football, World Cup rights soared.
In 1982 the TV rights for the World Cup generated $40 million ($80 million at today’s prices). The total revenue for the 1986 World Cup in Mexico was estimated at $100 million ($170 million at current prices). Revenues from the World Cup stem mainly from TV rights and advertising. This has made the World Cup a very lucrative business attracting large investments from Fortune 500 Companies and media conglomerates.
Towards the late 1990s technology significantly affected various aspects of the World Cup. The internet has played a pivotal role in the growing popularity of football and the World Cup. The official FIFA World Cup website has reached 2 billion viewers, which is an unprecedented number of viewers compared to other sports pages. The internet has also been utilized as a marketing device through the promotion and selling of game tickets online.Fédération Internationale de Football Association (FIFA) was created as a joint venture with Yahoo Inc! to promote the 2002 FIFA World Cup in Korea/Japan. Additionally the website secured marketing support from 45 other companies including Budweiser, Mastercard International, United Airlines, Kraft and Nintendo. The website traffic during the month of the World Cup was astronomical, recording more than 1.7 billion page views between 31 May and 29 June 2002.
The Internet has created a new spectrum for the World Cup in the way matches are delivered and marketed to viewers. With live updates and in-game commentary, consumers can follow matches simultaneously. They can receive real-time score updates, allowing them to switch channels to see the replay of the other match. Consumers can watch interviews with coaches and players after the match, and participate in online discussions/forums. Through the advances of Internet technology the World Cup has become an interactive medium where users can exchange information and news. During the World Cup critical news about a team or player is often leaked to the internet before any major news source hears about it.
A high viewership coupled with a high click-through rate has made internet advertising and marketing a substantial revenue stream for the FIFA World Cup. Partnering firms can reach a broad base of consumers and also collect consumer information. FIFA earned €1.9bn in marketing revenue and €700m from sponsorship for the 2006 World Cup. This includes internet, television, print and billboard ads.
Technology has also helped some of the security issues of the World Cup. With over 3 million people attending the 2006 World Cup in Germany the difficulty of security (after 9/11) and crowd control (hooligans) posed a real threat to the sporting event. To solve this problem FIFA partnered with Phillips to incorporate smart-card technology into physical tickets. These tickets have Radio Frequency Identification (RFID) which stores and processes data. This technology added value to the steady progress of the event with more efficient car parking, access to public transportation and purchasing of refreshments and merchandise. The smart-card technology allowed the consumer to use the ticket as an all access card for a majority of their needs. These cards reduced lines and the need for cash, which in the process reduced theft. These tickets also prevented scalping and fraud, which was another problem facing FIFA and the host nation.
The 2006 World Cup in Germany was the first major sporting event to be exclusively produced in high definition format. This was a major technological advancement for the World Cup as more consumers are expecting the best in technology. The technological boom that we have experienced in the 21st century has curtailed consumer demand to the most high-tech products available. Around the world broadcasters’ primary objectives are to fulfill the specific needs of their consumers and they rely on new technologies that improve picture quality and sound. Host Broadcasting Services (HBS) was in charge of producing the content for HDTV. HBS utilized a minimum of 20 HD cameras to cover the match with close-ups; alternative vies of the game play, special camera in the goalmouths for replays and a camera covering the team bench. This content was then shipped to 180 other broadcasters around the world.
The 2006 World Cup also saw the introduction of streaming video content of the games using 3G networks. Millions of people around the globe can access the games using their mobile devices, which is particularly useful when matches are in different time zones. Industry analysts predict that by 2011 more than 210 million people will regularly watch TV on their mobiles. Although this technology is far from mainstream adaptation, it does give some indication for future distribution methods. This would be assuming that the video content on the cellular phone is comparable to a TV output for a given match.
This could be a potential partnership for FIFA and mobile operators around the globe to attract millions of new customers by offering cellular phones that allow them to watch the games for free using television signals. This was used by Chinese telecommunications firms during 2008’s Olympic Games. Mobile operators could sell time between games for ads and other marketing products. Nevertheless it is still a fact that a majority of people prefer to watch television on bigger screens. A switch to mobile TV for World Cup matches would require better video quality and other services such as On-Demand or services like TiVO that allow users to watch content how they want.
Another viewing alternative created by technology is webcasting or WebTV. This allows viewers to watch live World Cup games on their desktop computers or laptops via a broadband internet connection. In Britain BBC employed a free streaming service of most games during the 2006 World Cup. In the United States ESPN360 provides streaming video service of the games but only on certain Internet providers. There are a number of websites on the internet that offer streaming video of World Cup games, both legally and illegally, and this is a major concern for the World Cup governing body and the broadcasters.
The broadcast rights for World Cup coverage limit streaming over the internet. The cable companies want control over the video distribution rights but the internet has challenged this standing. With recent changes in consumer attitudes towards peer-to-peer distribution in other media like music/movies, it might more difficult to persuade consumers to pay for online video content. In this scenario the internet prevails as a disruptive technology that causes concerns over the rights for content. With more video available over the internet for free, broadcasters face declining revenues. This will also affect the relationships between FIFA and the broadcasters, who have paid money to own those rights.
Although almost 90% of FIFA’s revenues come from the sale of distribution rights, a small proportion of their revenues come from their hospitality rights. The commercial hospitality program for the 2010 South Africa World Cup has already approached over USD 150 million worth of sales. These hospitality packages are primarily sold to large and small businesses across the world offering the best tickets, top-quality service and exclusive access to the matches. Technology has changed this hospitality industry because in today’s world consumers demand more state of the art technology. They expect fast broadband connections and wireless connectivity. Many business travelers who use these hospitality packages are still on business during the World Cup so it is essential that they have access to the technology they need, when they need it. Increasing broadband speeds and more secure networks have resulted in a more efficient internet experience. A customer could set up a Bloomberg terminal in the comforts of their hotel suite, allowing them to work while on vacation. These technological advances have propelled the success the hospitality industry in a business sector.
Currently the majority of broadcasters produce World Cup video content for free, and it is highly probably that this model will not change in the future. The future of World Cup viewing will therefore be on free-to-home broadcasts. Within the next 10 years the television will continue to remain as the staple for worldwide entertainment and sporting events like the World Cup. With technological advances the cost of HD televisions and plasma screens will drop, which will allow more high definition sets in consumer households. In the future new TV technologies will almost certainly include digital video recording software. This will allow consumers to pause live television, and rewind and playback in-game action. The technology will add considerable value to the viewing experience, allowing broadcasters to compete with the other new media technologies.
These events often carry social interactions in the viewing process, and this cannot be replaced by mobileTV or web content on the computer. The World Cup is often associated with being a social event, with families and whole communities watching the games together in front of the TV. These social connections cannot be experienced in the same way with other media, which is why broadcast content has a competitive advantage in producing television content. The average consumer will still prefer to watch a match on the TV as opposed to other media.
With that being said, there will be a significant increase in the viewership of World Cup video content on other media. This media includes webcasting on laptops/computers, mobileTV and virtual 3D products that are yet to be introduced. All of these mediums will steal market share from the broadcasters, as most of their content will be based on free streaming. Over the next 10 years WiMAX technology is proposed to revolutionize the technology industry with high-speed broadband Internet access across the country. WiMAX technology is essentially a WiFi hotspot with an increased range and strength, enabling internet access up to a 30 mile radius. With this technology consumers could view the World Cup in more places at their own convenience, as the WiMAX would be utilized with laptops and mobileTV to deliver video content.
This creates a real problem in the relationship between FIFA and the broadcasters. The threat of new entrants will decrease profitability for both FIFA and the broadcasters. Companies that market products over the broadcasted TV will demand lower prices for advertising because their content might reach less people, or they might just negotiate a deal with the other mediums who supply content. This results in less ad revenue for the broadcasters, which in turn leads to a decrease in revenue for FIFA (unless they too partner with the other mediums).
As the years go on the broadcasters of this video content should be able to achieve some economies of scale, as they become more efficient at shooting and producing the games. This will lead to lower production costs and higher profit margins for the firms. These broadcasters could sustain revenues by focusing more on the production side, allowing other medium to broadcast their content. In this situation FIFA will still control the distribution rights and receive ad revenue from broadcasters who produce the content and the cable/ telecommunication/ broadband companies that distribute the video.
In a legal framework FIFA would not want to undermine the television rights it has sold to the broadcasters for millions of dollars. FIFA therefore has a need to safeguard its television rights, so distributing content for free is not an option for them. They could take legal action against websites who broadcast the video content without rights, and sue telecommunications firms that show matches without the distribution rights. FIFA could also change the way it sells its broadcast rights, to incorporate webcasting and mobileTV more efficiently so that they distribute video content legally. However, FIFA acts as a large corporate organization, with a board of trustees, senior management and thousands of employees. Undoubtedly this change will take longer to implement, and will be faced with opposition on all sides of their business relations.
Football will continue to become more popular with increased viewers around the world. The cost of World Cup TV licensing rights agreements is expected to continue rising in the coming years, which will result in increased revenue growth for FIFA. New emerging markets will also have a profound impact on World Cup business as football becomes more popular in different countries around the world. The United States is a country that has seen a recent growth in popularity of football over the years. ABC/ESPN and Univision paid a record $425 million for the men’s and women’s World Cups through 2014. The 2010 World Cup in South Africa is expected to earn $3 billion from TV rights. FIFA will continue to have a steady revenue stream in the future.
The fundamentals of the business model will not change profoundly in the next 10 years, as FIFA will still control the viewing rights for the World Cup. FIFA will therefore see a steady revenue stream as corporations will utilize the global event to market their consumer products and services. The real change in the business structure will occur in the distribution of the video content. New medium such as mobileTV and internet webcast will offer consumers an alternative to watching the games on the television. Nonetheless television will remain as the staple medium for viewing the World Cup as consumers embrace the newer technologies offered in high definition television.
In my life I could not fathom going a day without the internet and consequently I have had nothing but admiration and gratitude for companies likes Virgin Media who have offered no less than the highest quality of speed and value for the internet. In the increasing technological era that we find ourselves in, internet has been at the forefront of all mediums changing the way we live and think about our lives.
As a daily user of the internet I appreciate the valued broadband service your company and others have made accessible. Not only has the internet become faster over the years with the introduction of new technology and software, but it has also become relatively cheaper. This is a classic example of the powers of the market structure as increased supply of internet has lead to increased output and a cheaper price.
In 2006 Virgin Media Inc. became the first “quadruple-play” media organization in the United Kingdom, incorporating together a media service consisting of television, internet, mobile phone and fixed-line telephone services. More specifically, Virgin broadband ranks as the second largest UK internet supplier. Virgin Media’s 3.6 million customers comprise almost 35% of the market share of broadband across the UK.
The CEO of your company, Virgin Media, has recently attacked the principles of net neutrality. I am sure you are most aware of the fundamental principles of network neutrality where a given broadband network is free of restrictions from content, sites, connectivity speed and where communication is not unreasonably degraded by other communication streams. More specifically however is the fact that through net neutrality, any user of the internet is able to access all websites at the same speed whether it is the website of a big corporation or the blog of a small shop owner.
A different-from-usual topic today: technology.
This week my Chromecast dongle** arrived, and we got to play with it this weekend. So far, we have used it to stream YouTube videos to the TV. Mostly, these were videos about the game Minecraft**, which my sons love to watch. [**Note: for those unfamiliar with Minecraft or Chromecast, at the end of this post I have given some background information that you can go read, and then pop back up.]
We have for a few years now been one of the (fast-growing) "streaming-only" TV families. This means, we have no cable. In fact, we don't watch regular TV. I suppose we could get regular broadcast channels, but why? Between Netflix, Amazon Prime, and DVD/Bluray, we have more to watch than we ever could. With no commercials. (The only downside to which seems to be that when we are watching regular TV at someone else's home, my boys find the commercials more interesting than anything else. Kids and novelty, sigh.)
In addition to streaming to the TV, though, my boys sometimes want to watch videos on YouTube, on a computer. At first most of these were funny and marginally-inappropriate videos they found out about at a friend's house or something. Nowadays, though, mostly the boys want to watch YouTube "channels" about Minecraft and/or other video games.
When we first started playing Minecraft, my older son found a great set of "introduction to Minecraft" videos called "Survive and Thrive." Visiting it just now, I see that in just the year since we first found it, the channel has gotten way swankier and more elaborate.