More than football: How World Cup failure will cost billions of kroner

While the players from the Danish national team sun themselves on Bornholm, it is the country’s economy that will foot the bill for their failure to qualify for Brazil 2014

Today, delegations from the 32 countries that have successfully qualified for the 2014 World Cup in Brazil will gather for what promises to be the most nerve-wracking 35 minutes of football action of the year so far: the World Cup draw. The draw starts at 17:00 CET and will be shown live on TV2 from 17:35.

For the other 176 FIFA members, however, the clock will tick slowly as they dwell on what could have been. Because the cost of qualifying goes far deeper than a mere loss of national pride – World Cup participation is a serious financial endeavour, and the Danish economy has lost billions of kroner failing to make it to Brazil.   

A study released by the British Retail Consortium (BRC) earlier this year estimated that if the English national team had failed to qualify for this year’s competition, it would have cost the British economy between 18 and 31.5 billion kroner.

The BRC’s figure is based on a whole host of country-specific economic factors, but it does allow for a rough approximation of the cost of Denmark’s failure. The Superliga might not be the Premier League, but when it comes to their national team, football fans in this country are at least as passionate as the English – and with more disposable income.

So, if the BRC’s figure is adjusted to take into account the difference in population size (given that Britain’s population is 63 million and England’s is 53 million, compared to Denmark’s 5.6 million, there is a wide margin of error!), the Danish economy will lose between 2 and 3 billion kroner.

The cost to the sport
Included in this is the loss sustained by the sport’s governing body, the Danish FA (DBU). FIFA paid each team that qualified for the 2010 World Cup 45 million kroner – a figure that is expected to rise this time around. An additional 52 million kroner was paid out to teams that made it out of the group stage, and so on.  

“It has been a sound financial principle of the DBU to never anticipate revenue from participation in international competitions when budgeting,” a DBU spokesman explained. However, he did concede that the revenue from previous competitions had been used to fund various grass roots schemes, the development of indoor facilities and most notably the Women’s 2020 project – which received  around 20 million kroner after the 2010 World Cup in South Africa.

Brand prestige and sponsorship suffer
Whilst this revenue stream is significant in its own right, the side’s failure to qualify for the tournament will also affect the DBU’s brand prestige. This has significant consequences. Denmark’s most marketable players, such as Daniel Agger and Nicklas Bendtner, will struggle to obtain lucrative brand endorsements in the seasons that follow due to a lack of exposure on the world stage. The domestic sides that make up the Superliga can also expect to find it more difficult to recruit top players and this will affect gate revenues.  

Similarly, future sponsorship deals for the national side will also suffer. At present Danske Bank is the main sponsor of the national side. Its current deal with the DBU expires in July 2014 (which was agreed upon prior to the national team’s failure to qualify for the tournament), but the next time around,  it is less likely that the DBU will be able to ask for the 16m kroner per year that it currently receives.

Merchandising and TV also hit
Another important revenue stream is in the retail sector: specifically kit and memorabilia sales. While Denmark is no Mexico (which sold over 1 million jerseys worldwide for the last World Cup), and Adidas can probably afford to forgo the revenue generated by kit sales in Denmark, sports stores like Stadium, Sportmaster and the DBU itself are not so lucky. If we consider that in a year when England play at a World Cup, shirt sales increase by around two million and that a full Danish kit costs around 800 kroner, this will have a significant impact.

Television broadcasters can also expect significant losses. In September, the Daily Mail reported that if England had failed to qualify, ITV could expect to lose around £30m in terms of lost advertising revenue, TV2 can expect a similarly proportionate loss. Despite this, Frederik Lauesen the Head of Sports at TV2 remained positive: "The 2014 Football World Cup is a major event both for TV 2 Denmark – even though the Danish team hasn’t qualified for participation. At TV 2 Denmark we expect a large number of viewers to the World Cup, similar to previous World Cups," he said.

The bigger picture
However, the football-related factors only account for a fraction of the overall figure, as the majority of the loss can be attributed to macro-economic factors. For example, the figure that the BRC produced for next year’s tournament is much higher than the one for the 2010 World Cup, which was just 9 billion kroner. This is because in 2010, any potential economic boost was offset by a decline in productivity during games that aired during working hours. In Brazil, this will not be the case.

A second major, but almost immeasurable influence is the so-called ‘feel good effect’ that is generated in the lead-up to and during the tournament. Although the Danes will still watch the World Cup in their droves, whether or not they will do it with the same zeal (and whether or not their wives and girlfriends will bother) is a different matter. After all, for the first time since 1982, there won’t be a Scandinavian team present!

If the national side had qualified, there would have been a huge jump in retail sector spending. Pubs and breweries would benefit most from this, but there would be increases across the board – including everything from restaurant sales and supermarket purchases to online gambling and even airline ticket sales. This would have also had a knock-on effect on the manufacturing sector as it would have ramped up production to meet the demand. Correspondingly, advertising companies would have also spent more in an attempt to take advantage of increased consumer spending.

So, all in all, it’s going to be a very expensive summer.

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