The price of a Wavin’ Flag

**Akshara** (0:04)
In today's episode, we'll break down two important stories. First, we'll talk about the price of a Wavin Flag, and then we'll talk about India's state budgets being a mixed bag.
Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Wednesday, 17th June. Coming to the first story.
It's that time of the year where we're playing iconic songs like Waka Waka or Wavin Flag. The 2026 FIFA World Cup is currently underway across the United States, Mexico and Canada. And it's the largest tournament in the competition's history. The FIFA World Cup is the most watched sporting event on the planet. The 2022 final between Argentina and France drew a whopping 1.5 billion viewers, a fifth of the world's population. That scale also enables the World Cup to become an extraordinary money machine. Nearly a billion dollars in ticket and hospitality revenue alone flowed into FIFA's coffers that cycle. Corporate sponsors paid 1.8 billion dollars to slap their logos across the tournament. Yet, it rarely makes any economic sense for any country to take the burden of hosting the World Cup. Now, the 2026 World Cup is also the most expensive to attend.
Face value ticket prices are several times higher than in Qatar, and the Attorney General of New York and New Jersey are investigating FIFA over its ticketing practices.
And yet, the host cities will likely lose money. Now, this is not a new problem. The economics of hosting the World Cup have almost never made sense for the host. For them, it's structurally a money-losing venture. The promise of being a host is that the World Cup will entail a massive infrastructure boom that brings in revenue over the long term. But the actuals often fall highly short of the estimates. So sport researcher Adam Beisel put it quite succinctly about the rosy projections made about potential tourism revenue from mega sporting events. The general rule of thumb by sport economists is to move the decimal point one place to the left for all economic impact studies. So why do countries keep lining up to host? The answer lies in a peculiar collision of monopoly economics, geopolitical ambition and a bidding process so broken that it caused the worst existential crisis in FIFA's history. Now to understand why hosts lose money, you have to dive into FIFA's business model. It's as ruthlessly asymmetric as it is simple. Essentially a not-for-profit organization, FIFA owns all the commercial rights to the World Cup. So that means broadcasting, sponsorship, licensing and ticketing. The four most lucrative, most scalable revenue streams the tournament generates. In the 2019 to 2022 cycle, FIFA reported total revenue of approximately 7.6 billion dollars, of which 6.3 billion dollars came from rights tied to the Qatar 2022 edition alone. Their expenses amounted to 6.3 billion dollars, leaving them with 1.3 billion dollars surplus. Now the host country, in this case Qatar, gets nothing from these rights directly.
What the host gets instead is the pill of building and operating new stadiums, transport upgrades, security, and events outside FIFA's commercial perimeter. And then the country is solely responsible for the debt raised to fund all this, and the risk of stadiums sitting empty after the event. There's no revenue sharing based on these commercial rights. FIFA also demands that the host surrender the ability to earn tax revenue on the World Cup. So, host cities must grant a full 10-year tax exemption to FIFA, its subsidiaries, and its corporate sponsors. And the areas in and around stadiums become tax-free bubbles, where only official FIFA partners like Coca-Cola, Visa, and Adidas are allowed to sell goods. Local vendors are shut out. Take Qatar, which spent over $220 billion preparing for the 2022 World Cup. Most of it was on national long-term infrastructure like airports, and metros that was undertaken by using this event as justification. And the IMF estimated the direct short-term economic returns from visitor spending at somewhere between $2 to $4 billion.
Less than 2% of the total investment. The 2018 World Cup in Russia, meanwhile, ran a smaller bill of $14 to $15 billion.
The World Bank found a temporary lift during the tournament itself, but that eventually wore off, leading to 0% growth in the third quarter of the year. Now, the only promise of these massive investments are indirect spillovers from tourism, food and beverage spending, local transport use, and some temporary employment. But that often doesn't materialise. For instance, for both Brazil and South Africa, which hosted the World Cup in 2010 and 2014 respectively, tourism spending made up only 10% or less of the total World Cup spend. In fact, this isn't just true for the FIFA World Cup. There's a long documented history of mega sporting events with the Olympics also being money-burners. And the actual budget for an event always overshoots the estimate. As per researchers from the University of Lausanne, 4 out of every 5 World Cup or Summer Olympics events ran budget deficits, and their average return on investment was minus 38%.