Just hours removed from the news that the U.S. Justice Department office had arrested a number of top FIFA executives, with plans to bring them to trial in the U.S. on charges of wire fraud, many soccer observers began asking:
Will this cost FIFA more sponsors?
While it could be months or even years before the arrested executives learn their fate, the federation's accountants could be dealing mammoth changes to their bottom line much sooner than that. FIFA has spent years shrugging off scandals and allegations of improper conduct, but in the last 18 months, many of the sport’s wealthiest benefactors, including Sony and Johnson & Johnson, decided to walk away.
As the afternoon of May 27, none of FIFA's existing sponsors have announced plans to part ways with the federation. Sponsors including AB InBev and Adidas say they are monitoring the events "closely." But whether they stick around as this scandal unfolds over months and perhaps years will depend on how toxic FIFA becomes.
Any loss of sponsorship dollars could be very difficult to make up while this scandal continues to unfold. “Short of a brand coming out of nowhere and looking for some really inexpensive PR on the global stage, I can’t imagine a new sponsor entering the picture anytime soon," said Ann Green, a senior partner at Millward Brown, a leading global brand strategist.
A Long-Standing Problem
Charges of corruption and wrongdoing have dogged FIFA for years. The Justice Department indictment alleges illegal activity going back decades, and comedian John Oliver barely broke a sweat when he spent a full 13 minutes raking FIFA over the coals in 2014 on an episode of "Last Week Tonight,” calling the organization “comically grotesque.”
But up until very recently, these charges had little effect on sponsors’ interest in partnering with FIFA. The organization pulls in upwards of $350 million every year in sponsorship money, with top-tier partners ponying up $24-$44 million annually. At those prices, and because of the unprecedented level of exposure that global soccer offers, sponsors have been reluctant to rock the boat.
“They have simply paid lip service,” Michael Hershman, a former member of Fifa’s independent governance committee and co-founder of Transparency International, told the Guardian. “Saying in press releases: ‘Oh yes, the sport needs a greater degree of integrity and transparency.’ But they haven’t put their money where their mouth is.”
What’s changed over the past 18 months is where the pressure has come from. Mark Pieth, a Swiss law professor who chaired an independent governance committee that advised FIFA from 2011 to 2013, repeatedly told sponsors: “‘We need your clout.’”
Last week, the International Trade Union Federation launched a campaign calling on all World Cup sponsors to pressure soccer's governing body to change the working conditions in Qatar, where hundreds of people have died building the stadiums meant to host the games there in 2022.
Individual activists have contributed as well. A quick search on photo-sharing hubs like Imgur turns up numerous examples of FIFA sponsors’ logos redesigned to implicate them in the inhumane working conditions people are enduring in Qatar.
A Tipping Point?
With problems swirling not only around the Brazilian World Cup but around the ones scheduled for Russia and Qatar, five sponsors, including Castrol, Continental Tyres, Johnson & Johnson, Sony and Emirates have either walked away from the football federation or announced that they will not renew their deals. Sponsor reaction in the coming days is likely to be varied.
Some may make a show of pulling out; others will just quietly not renew their deals. “I think these sponsors are going to run the gamut from letting this lapse to making a big corporate statement,” said David Carter, the executive director of the Sports Business Institute at USC’s Marshall School of Business.
And while none of FIFA’s top sponsors has indicated a definitive move in one direction or another, they may all feel compelled to act soon. FIFA is scheduled to hold an election Friday that will determine its president, and brands will want to get themselves into position before that happens. “By Friday's election, we'll be 48 hours into this scandal,” Carter said. “I think it would be unusual for any corporation or anybody doing business with FIFA to defer a decision until after the election.”
Little Standing In The Way
If one of the federation’s sponsors felt compelled to sever its ties with FIFA, it’s likely that very little would stand in any sponsor's way. Though the details of FIFA’s deals with its current sponsors are private, most sponsorship deals include an "out" clause of some kind that allows either party to walk away if it feels the partnership has the potential to bring it into disfavor.
“I think pretty clearly this falls into that category,” Carter said.
But Nigel Currie, sponsorship consultant at NC Partnership, told Bloomberg TV that it will take collective action by brands for FIFA to really sit up and pay attention. “If just individual brands start breaking ranks, that’s one thing,” Currie said. “But if they all pull together, they could have a real impact and really damage FIFA very badly, and I think then you’ll start to see some changes and see [FIFA] taking some notice.”