Football isn’t the end but the means to sustainable economic value

Islam Zween, Argaam CEO

Football without fans in a stadium loses most of its glamour. Remember the Covid era with no fans allowed in games? Building football stadiums is then a big business model whose economic success depends on the logic of how it creates, transmits, and maintains its brand value. In marketing, they always say that brands are made, not born. And football’s brand value in the kingdom is created through the interaction between multiple stakeholders including stadium building with its multiplier effect.

That said, the return on investment is important to be assessed carefully with any mega sports events though. The kingdom still has ten years to host FIFA World Cup, as it’s expected be confirmed later this year. And there are many lessons to be learnt from previous big events such as world cups and Olympics from a cost-and-benefit perspective, so that the kingdom through its sports strategy makes sure that it would generate a profit and even surplus, as there are several examples of host countries that racked up chunky losses in the past. With almost all the main expenses fall on the host country, FIFA takes home most of the profit and revenue in World Cups generated by media rights, ticket sales in advance and sponsorships. As far as stadiums are concerned many costly stadiums in other countries sit unused after the event. That’s why we highlight some successful business models below when it comes to building stadiums and how they lead to big economic development not just in surrounding areas but in the wider economy as well.

Why it matters:

Permanent Seat Licensing: This’s a successful business model in stadium-based sports. It’s a pre-production marketing of stadium seating to buyers who are willing to pay a premium for preferential treatment and a guarantee of service. It’s designed for the fans who have financial ability to pay the one-time fee and commit to future season ticket purchases. In the US, investors raised in two separate occasions in Chicago and Philadelphia $39million and $159 million to build two NFL stadiums through the PSL programme and even before the building of the two stadiums.

Emotions are vital for economic success: Many of us passionately and emotionally support a certain team. And fans always follow their favourite teams to watch their games live in the stadiums, which in this sense have a competitive edge over watching games at home. This emotional loyalty, in turn, leads to successful business results represented in ticket sales and in-stadium purchases.

Market players:  Stadiums are now seen to offer a springboard for clubs to create partnerships with other market player across various industries, such as finance, leisure, entertainment, and tourism. Regarding tourism, big stadiums around the world do have museums displaying the achievements of a famous club and accordingly attracting visitors and tourists. Take Germany’s Bayern Munich as an example. The club’s Allianz Arena hosts Germany’s biggest club museum covering over 3000 m2, hence attracting tens of thousands of visitors every year.

Football is the king of investments: Investment activity was diversified across several sports in 2023, but football remained the most liquid market partly due to the sheer number of investable assets, according to the latest study by Deloitte. Football comprised 52% of all sports right’s holder deals globally in 2023.

The majority of football deal flow stemmed from North American investors (57%) and English clubs were the primary target, making up 29% of all football deals. The most expensive stadium in the UK in terms of construction cost is Wembley Stadium at £1.8 billion, which makes it the world’s fourth most expensive. The world’s number 1 is SoFi in Los Angeles, California, which cost $5.5 billion. 

More than sports investment: Building a new stadium in any city around the world cannot only be considered an investment in a club or country’s brand, but also a commitment to the part of the city where the new arena is being built in the form of developed infrastructure and utilities. Football economy is a highly competitive environment, in which projects like stadiums and football clubs are also business companies and service providers.

Islam Zween, Argaam CEO