Economics of Soccer: the Halo Effect of Euro 2008

As the final curtain of Euro 2008 has been drawn and Spain have been crowned champions of Europe, it is fitting to assess the economic impact of the world’s third biggest sporting event.

While the tournament brings together Europe's top 16 national soccer teams, its widespread appeal makes the contest a truly global phenomenon. The tournament organizers, UEFA, have been drawing TV audiences of more than 1 billion worldwide. In addition, more than 100 million visitors have visited UEFA’s official Web site, a fourfold increase over the last event held in Portugal in 2004.
Such exposure means big business for Europe's economy. According to Simon Chadwick, director of the Birkbeck Sport Business Centre at the University of London, Euro 2008's economic impact across Europe could top $2.15 billion. That includes extra tourism revenue for Austria and Switzerland, multimillion-dollar TV licensing agreements, and increased food and beverage sales as fans head to bars or host barbecues in support of their home teams.

"Euro 2008 will have a halo effect on the wider European economy," says Chadwick. "This impact will be felt in many countries, principally driven by sponsorship and commercial revenues." No matter who won, Austria and Switzerland are reaping rewards from the hundreds of thousands of fans who descended on the hosting countries. Consultants Rutter & Partner estimate Euro 2008 has contributed $358 million to the Swiss economy, while consultants SportEconAustria expect Austria to have gained $369 million.

Where has the money been spent? Kim Hollywood, a spokesperson for the Austrian tourism board, says the hotel and tourism industries have gained the most. In Austria alone, overnight bookings have surpassed the 2 million mark, while almost 11,000 temporary jobs have been created to cope with the influx of visitors.

However, the tournament's economic benefits won’t accrue solely to the host countries. Along with food and beverage sales, gambling across Europe is rising as soccer fans stake money on their favorite teams. British betting firm Ladbrokes report more than $700 million wagered on matches during the three-week event, mainly thanks to the explosion in Internet gambling.

None withstanding, the economic windfall has benefited some European countries more than others. Since the English team failed to qualify for the Euro finals (along with Britain's other home nations - Scotland, Wales, and Northern Ireland), Britain is likely to lose hundreds of millions of dollars in potential revenue. More than 40 percent of the English express a "strong interest" in soccer, so Prof Chadwick reckons the team's absence could depress the economic impact of the tournament in Britain. For example, when England reached the quarterfinals of the 2006 soccer World Cup, an estimated $3.1 billion was spent in the local economy.

Not only the participating countries are reaping the benefits of soccer’s emotional appeal, but also the sponsors are gaining extra revenue and increased brand awareness. Paul Meulendijk, head of sponsorship at MasterCard Europe, says the company's sponsorship with the previous European championship in Portugal resulted in triple-digit growth in card activation in the target territories. While he won't predict the impact of this summer's event, Meulendijk expects Euro 2008 to lift MasterCard's European business. "Sponsorship is a critical component for us. It drives both profitability and recognition of the brand," he says.

Adidas is set to be among the group stage winners of Euro 2008, according to figures from YouGov’s Brand Index. Adidas’ buzz rating, a measure of whether someone has heard positive or negative things about a brand, has been building steadily after starting the year at 4.9 percentage points. During the first week of Euro, the brand’s buzz has picked up to hit an annual high of 7.5.

Says Adidas’ CEO, Herbert Hainer: “For Adidas, the UEFA Euro 2008 has already proven to be a great success. We have succeeded in carrying on the momentum of the World Cup which took place in our home country and are further expanding our market leadership position in the global football business.”

“This means – to use a sporting analogy – we have not only made it through to the next round, we are already a clear European Championship winner." Compared to 2004, the last European Championship year, Adidas football sales throughout the continent are said to have risen by more than 50 per cent. In comparison to the 2006 World Cup, global sales with football products are reported “to be up at a double-digit percentage rate”.

Adidas is capitalising on this year’s event with a giant sculpture campaign outside the stadia, including a 42-metre-high likeness of the Czech national team goalkeeper, Petr Cech, in Vienna, and the 17-meter-high circle of players (each 5 meter wide) at Zurich’s train station.

This goes to show that the benefits from major sporting events extend well beyond the host nation, and that customer centricity and entertainment excellence will determine the true winners of the 2010 FIFA World Cup.

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Dr Nikolaus Eberl is the author of "BrandOvation: How Germany won the World Cup of Nation Branding". Dr Eberl's research study on Germany's Nation Branding Success Story during the 2006 FIFA World Cup was featured extensively by Carte Blanche (viewers' choice, 1 and 5 July 2007), and he is currently engaged in internal branding for the 2010 FIFA World Cup (including 2010 Commentary for the Business Day and CNBC).

This release was published on openPR.