The Economics of Sports : More than Fan Fever

  21 min 25 sec to read
The Economics of Sports : More than Fan Fever

It is said that sports play a vital role in the life of a country. Its development can bring tremendous economic changes. The question is, when will this happen in Nepal.


The FIFA World Cup 2018, which will take place from June 14 to July 15 in Russia, is just around the corner, and the excitement to watch one of the most celebrated events in global sports has already gripped Nepali football fans like all other soccer enthusiasts across the planet. Like earlier iterations, this year’s edition of the mega tournament has brought a sense of excitement not only for great sporting action and football passion but also in terms of economic and business advantages.  

The Economics of Sporting Passion
Behind this worldwide football euphoria and the curiosity about who will lift the trophy, are the economic benefits the host country, the governing body Fédération Internationale de Football Association (FIFA), event sponsors, brands, broadcasters, advertisers, marketers and numerous other businesses, big and small, will reap from the quadrennial sporting event. 

Brands and companies have rushed to sign sponsorship deals with the organisers, participating teams and individual athletes worth billions of US dollars. Official estimates show that the 2018 World Cup, which is estimated to be watched by 3.2 billion people across the world, will generate over USD 5 billion in total revenue for FIFA in sponsorships, broadcast rights and ticket sales. 

Some of the big names in global business including Adidas, Coca-Cola, Gazprom, Wanda Group, Hyundai Motors, Kia Motors, Qatar Airways, Visa, Vivo, Budweiser, Hisense and McDonald’s are the official partners and sponsors of this edition of the World Cup. 

The event offers a lot to not only for the businesses of the host nation and other major countries that are sending their players to the Russia World Cup. Businesses in other countries too are expecting a bumper season during this World Cup. In Nepal too, many brands have already started promotional activities to cash in on the business opportunities provided by the biggest event in football. ‘Coke Kham Russia Jaam’, ‘Hyundai Road to Russia’, ‘Worldlink 20-30-50 World Cup Jhakaas’, ‘Clear TV World Cup Kick Off’ ‘Himstar Football Mela’ are some of the consumer market campaigns that have already created vibes. TV brands in particular are aggressively engaged in marketing and branding by announcing attractive offers. 

According to Sanjay Rajbhandari, deputy general manager at CG Electronics, sales of electronics items increases during major international sporting events. “As the FIFA World Cup 2018 draws nearer, we will offer different consumer schemes and attractive discounts. We will also organise promotional activities and branding activities in different cities across the country to boost the sales of our products,” he says, adding that LG will focus on selling its premium television sets in the categories of Smart TV, Ultra HD TV and OLED TV.

The football extravaganza has also provided lucrative space to soft drinks and beer brands to jump onto the World Cup bandwagon. Similarly, restaurateurs are also hoping to have a busy time during the matches. Many restaurants in the capital have started to display large sized high picture quality TVs and projection screens. 

Likewise, retailers are also expecting to make money from the sales of merchandise like jerseys of the participating teams and different sportswear items. Kritika Sapkota, Owner of Bhadrakali Sports Wear says that the demand for items like jerseys, wrist bands and football boots always surge during major sporting events like the FIFA World Cup, ICC World Cup and UEFA Champions League. “But, as the customs charges on sporting items have increased in recent years, the sales of such items is yet to gather pace,” she says.

Nepal & Sports Economics
Despite continuous exemplary activities in India and other South Asian nations for the development of sports, especially in cricket, Nepal is taking too long to invest in it and to make the sporting atmosphere better.

Many agree that most types of sports are in a state of neglect at present. Except for some sports like cricket, martial arts and to some extent football where Nepali athletes have relatively fared well, many others are still in the nascent stage of their development despite being introduced here decades earlier. 

The poor performance of athletes in various international tournaments clearly reflects the level of sports development here. For example, Nepal hasn’t bagged any medal in the Olympics which it has been participating in since 1964. Similarly, despite about a century long history in the country, football hasn’t developed much in Nepal to enjoy any notable international wins.

The primary reason for the underdevelopment of sports in the Himalayan nation is the government’s apathy, stakeholders say. According to them, the size of the money allocated in the national budget is largely insufficient for the sports sector development. In the last six fiscal years, the allocated money accounts for less than one percent of the total budget. 

“Annually, the sports sector receives only about 0.56 percent of the total budget. This is why we have to rely on foreign assistance,” says Jeevan Ram Shrestha, president of Nepal Olympic Committee (NOC). According to Shrestha, who is also a Member of Parliament from CPN (UML) (now Nepal Communist Party), the budget is largely insufficient given the increasing popularity of different types of games among Nepalis. “The budget allocated by the government is primarily for purposes like training and catering to games at the grassroots levels, whereas we also function to further enhance the talent which has already reached a higher level,” he mentions. 

Gyanendra Malla, Vice Captain of the national cricket team agrees with Shrestha. “The money allocated annually in the national budget for sports is very low. It is less than one percent of the budget,” he says, adding that the amount gets even smaller when it is divided among different games.

The budget for the upcoming fiscal year, however, has seemingly taken a generous approach for sports development. Finance minister Dr Yubaraj Khatiwoda in his budget speech for FY2018/19 held on May 29 has nearly doubled the amount of money for the Ministry of Youth and Sports to Rs 4.18 billion compared to previous years. The money will be used to construct new stadia and sports infrastructure in all provinces and organising the 13th South Asian Games in 2019.  

Inadequate Infrastructure 
The lack of infrastructure is one of the major constraints for the Nepali sports sector. At present, the Dashrath Stadium is the only sporting venue in the country to host international level games. The stadium was constructed in 1956 and was opened to the public in 1958. As it is currently under reconstruction following the 2015 Earthquake, the lengthy closure of the major multi-purpose stadium in the country has halted major league competitions in football such as the National League and has also stopped Nepal from hosting important SAARC-level games, namely the South Asian Federation Games and South Asian Football Federation Championship. 

While the Halchowk Stadium located at Halchowk, Kathmandu, is another multi-purpose sporting venue, it’s far too small with a stadium capacity of 3,500 compared to the Dashrath Stadium’s 30,000 plus, making it nearly impossible to host big events.

“Organising the league competition, which includes promotion and relegation of participating sports clubs, on a regular basis is instrumental to scaling up the capacity of both teams and individual players. The existing infrastructure is not in a good enough condition for major league games,” says Sanjib Mishra, former general secretary and spokesperson of the All Nepal Football Association (ANFA), the Nepali football authority which is responsible for organising league competitions. 

“The last few years haven’t been satisfactory for Nepali football for a couple of reasons, such as the halting of national-level league competitions and issues in ANFA itself,” he adds. 

Nepali cricket also has been coping with similar problems. “Currently, the Tribhuvan University International Cricket Ground at Kirtipur is the only venue for organising cricketing events. This has long been a problem for the development of Nepali cricket,” expresses Aamir Akhtar, founder and managing director of Everest Premiere League (EPL). 

According to him, the only modern cricket ground in the country lacks basic facilities and services such as floodlights, dressing rooms and internet connectivity. “The government should focus on building more infrastructures for cricket and work on modernising the stadium at Kirtipur,” he says.  

Cricketer Mall suggests that the government should take up the major responsibility in terms of increasing investment and providing services to realise the potential of Nepali sportsmen and women. “There is no proper infrastructure such as stadiums for cricket. The government can also urge other sectors to invest in cricket,” he opines. 

Though the government has repeatedly committed to constructing a new international cricket stadium at Mulpani, Kathmandu, the announcement is yet to be realised.  

Poor Show of Sports Bodies
Problems within the governing bodies have also added to the woes in sports development in Nepal. ANFA and CAN could be taken as instances here. The Internal disputes that have surfaced in ANFA in the form of long standing power struggles, alleged corruption and subsequent government interferences have collectively played a role to erode the institutional capacity of the association, thereby diminishing the prospects of Nepali football. 

However, with the recently held elections at ANFA in which Karma Tsering Sherpa won the presidential post and his panel claimed the posts of all central members, the association hopes to take Nepali football towards a new direction of growth and glory. “The newly elected team will work passionately for the overall development of football in the country,” opines Mishra, adding, “We hope that ANFA will continue the National League football competition which hasn’t been organised for the last three years.” 

CAN is facing a situation similar to ANFA. CAN hasn’t been in a functioning state since April 2016 when the International Cricket Council (ICC) suspended its membership indefinitely citing government interference in CAN. The power struggle in the association intensified in March 2016 when the Nepal Sports Council tried to replace the elected committee led by Chatur Bahadur Chand with an ad-hoc committee which failed to get ICC’s recognition.   

Rising Prospects in Sports Commercialisation 
In spite of the various problems, the commercialisation of sports in Nepal can be seen on the horizon. This is particularly due to the progress made by Nepali cricket. Despite minimum support from the government, the sport, whose popularity started growing in the country from the mid-1990s, has noticeably developed in the last 20 years. 

In recent years, the national team has registered some major international wins taking Nepali cricket to new heights. The latest is the historic six-wicket win over Papua New Guinea in the semi-final match of the ICC Cricket World Cup Qualifiers held on March 16 in Harare, Zimbabwe which secured the ODI status for the country for four years. 

In the meantime, the successful completion of the Everest Premiere League (EPL) and Dhangadhi Premiere League (DPL) over the course of the 2017 season has opened the doors for investors in the sports sector. “The league has been successful in terms of developing players and cricket and also for the owners of the teams as an introduction to a new sports venture. Spectators also got a chance to watch international players play,” says EPL founder and MD Akhtar. Played in the Twenty20 format, EPL, which debuted in 2016, has presented entirely new ways in organising league games in Nepal by adopting international sporting standards ranging from auction of players to deals in sponsorships, advertising and TV broadcast rights. “We have adopted international systems in EPL but with limitations and by understanding what Nepali cricket is,” mentions Akhtar.  

According to Akhtar, EPL is a sponsor-oriented and sponsor-friendly sports event which is probably the first of its kind in Nepal. “Both EPL and the franchises have their own sponsors. More than 40 direct sponsors including that of leagues and franchises and many indirect sponsors via TV were engaged in the tournament,” he informs. 

 DPL is another league which has been striving to commercialise cricket in Nepal. Started in 2017, it has held two league tournaments with encouraging levels of team participation, spectator numbers, sponsors and advertisers, according to the organisers. “The second season of DPL was organised with a total investment of Rs 30 million,” says Prakash Khadka, director at Dhangadhi Cricket Academy, the organiser of DPL. Khadka who is also the coordinator of DPL says that the next season of the league will see more investment and team participation. 

The domestic cricket scene has also started to produce future international star athletes which signal the increasing prospects for the commercialisation of Nepali sports. The rise of Sandeep Lamichanne to prominence in the recently concluded 2018 IPL strongly indicates that Nepali cricketers have the potential to get the global spotlight. The 17 year old right-handed leg spin bowler of the National Cricket Team who played for the Delhi Daredevils in this year’s edition of the IPL received widespread acclaim for his performance. Lamichhane who is poised to have a high auction rate in the next IPL season has already bagged big sponsors and prizes immediately after returning to Nepal.  

Sponsorships: Revenue Generator  
A few games such as cricket, football and golf are attracting huge amounts of money in sponsorships. Surya Nepal Pvt Ltd (SNPL), Gorkha Brewery and Chaudhary Group (CG) are some of the prominent sponsors. SNPL, which is considered a pioneer in the development of golf in the country, is the title sponsor of major golf tournaments like Surya Nepal Masters and Surya Nepal Golf Tour. It has also inked sponsorship deals with the Nepal Professional Golfers’ Association. The company has been involved in sports sponsorship under its CSR initiation SNPL Khelparyatan with a stated objective of promoting golf tourism in the country. 

Nepal Telecom’s Rs 46.5 million agreement with CAN in 2015, SNPL’s Rs 40 million deal with the Surya Nepal Golf Tour in 2014, CG’s Rs 21 million deal with CAN in 2012 and Gorkha Brewery’s Rs 30 million deal with ANFA in 2011 are considered to be the biggest sponsorship deals in the history of Nepali sports. 

For companies the world over, striking sponsorship deals with sports bodies, teams and players gives them an opportunity to get stronger in branding and promotion. But the case is not the same for many Nepali companies. “As the level of commercialisation in sports is low in Nepal, the sponsorship deals do not generally have a major impact in the popularity of the brands,” opines Vidushi Rana, director of Marketing and branding at Kiran Shoes Manufacturers, the producer of Goldstar shoes. 

She says that sponsorship deals in events like IPL and the English Premier League (EPL) take the brand to a wider mass. “Nepal has a small population and audience numbers watching tournaments in their TVs is even less,” she argues.  Kiran Shoes Manufacturers is one of the sponsors of DPL. Under its signature brand Goldstar, the company also has plans to sponsor other games like volleyball and basketball, according to Rana. She suggests the government to come upfront in commercialising sports by constructing infrastructures and increasing investment so as to engage prospective sponsors in the games.   

The Business of Broadcast Rights 
Broadcast rights also play a major role in sports economics. In neighbouring India and western countries, selling broadcast TV rights generate huge chunks of money for organisers and sports authorities. For example, FIFA has logged a windfall amount of USD 1.85 billion in broadcast rights for the 2018 World Cup. Likewise, the IPL 2018 registered even higher amount of USD 2.5 billion in broadcast rights (TV and digital) auction which was bagged by the largest Indian media company Star India, a wholly owned subsidiary of 21st Century Fox. 

The practice of auctioning broadcast rights like in India and elsewhere is yet to start in Nepal. Nonetheless, some major TV channels are given the rights to telecast the tournaments by the event organisers. The AP1 TV broadcasted the latest editions of EPL and DPL matches. A high level official at AP1 say that the viewership of the TV channel sharply increased during the matches and the broadcasts helped the channel to look into developing new contents. The TV channel recorded Rs 10 million in advertisement transactions. The TV rights were given to AP1 TV for Rs 5 million in cash and Rs 5 million in sponsorships.  

Potentials in Sports Tourism 
Nepal, which has very suitable climatic conditions for organising sporting events, has the potential to become a destination of sports tourism in the South Asia region. However, the country hasn’t been able to explore the lucrative opportunities. “If we can have players who are internationally higher ranked and are regarded as icons playing in the matches, the possibility of attracting tourists from neighbouring countries is high,” thinks Akhtar of EPL. “If tourists from India can afford to come to visit as religious pilgrims, they can certainly afford to come to watch cricket tournaments in Nepal too. Our southern neighbour is a home to a huge number of cricket fans,” he adds. 

NOC president Shrestha holds more particular views. “Winter sports such as skiing can be introduced in suitable parts of the country. We can explore opportunities in establishing winter sports as a foundation for off-seasonal tourism,” he opines. 

Organising tournaments can also be a spur to promote tourism in the country.  In the 2018 season of DPL, audiences from various parts of Nepal travelled to Dhangadhi to watch the matches. Khadka of DPL says, “DPL has helped in both finding hidden cricket talents in the country and promoting domestic tourism. The number of audiences averaged 4,000 in every match. It went up to 7,000 in the final game.” 

Though temporary, Nepal has become one of the 16 ODI countries in the world. Accomplishments like this are certainly a big leap for the Himalayan nation, but many things needed to be done to make the sports a viable sector. “Our players and the whole team will be competitive internationally only when they play regular domestic games,” stresses National Cricket Team’s Vice Captain Malla. He says it is equally important for the sporting bodies to make the athletes financially sustainable which will enable them to focus on sports. “Having a regular domestic cricket league structure can be instrumental not only in the personal development of the cricketers but also can be helpful in terms of their income generation,” he mentions.  

The government needs to come up with comprehensive plans for the development of all types of sports if it is to capitalise the available oppurtunities. Tournaments like EPL, DPL and Surya Nepal Masters have shown that Nepali private sector is keen to support the sports sector. Now the ball is in the government’s court to capitalise on the sporting potentials which will not only be instrumental in transforming the sports sector as a lucrative avenue for investment, but will also bring pride and glory for the country with international victories.

Mega Sports Events, Huge Opportunities for Economy

Undoubtedly, the FIFA World Cup 2018 will be a big opportunity for the host country to gain maximum economic advantage.  A Russian government report published in late April predicted the event will add an amount somewhere between USD 26 billion to USD 31 billion to the country’s GDP over the course of 10 years from 2013 to 2023. Several independent researches published in recent months have also forecasted the Russian economy to grow by up to 1 percent in 2018.

In fact, the world cup has provided a significant boost to the sluggish Russian economy. Since 2014, Russia has faced a steep economic downturn and has  also observed a recession for a couple of times over the years, primarily due to the economic sanctions imposed by western nations after the country’s annexation of Crimea and its alleged role in the armed uprising in eastern Ukraine. Russia, which is said to have spent over Rs 14 billion in constructing stadiums and other necessary infrastructure and preparations to host the world’s grandest football contest, is expecting a record tourist footfall of about 1.5 million in and around the tournament period.

Besides the football World Cup, other events such as the UEFA European Championship, ICC Cricket World Cup, ICC World Twenty20, Wimbledon, PGA Championship, World Rally Championship and Tour de France along with league games such as English Premier League (EPL), La Liga, Seria A, Bundesliga, National Basketball Association (NBA), Major League Baseball (MBL) and Indian Premier League (IPL) are the largest international sporting events that have become a major supplementing factor to the economy and business.

IPL, which concluded on May 27 with the eight-wicket title win of the Chennai Super Kings over the Sunrisers Hyderabad, further highlights the economic importance of sporting events. The league cricket having a brand value of USD 5.3 billion contributed USD 11.5 billion to the GDP of India in 2015, according to a KPMG study commissioned by the Board for Control of Cricket in India (BCCI), the governing body of Indian cricket. The London 2012 Summer Olympics is another example. The Olympics games played an important role in helping the United Kingdom to come out of the economic recession which the country had faced due to the Global Financial Crisis of 2008 and Sovereign Debt Crisis of the Eurozone. The official figures showed that the GDP of UK grew by one percent in the third quarter of 2012 with the event adding GBP 9.9 billion in the form of investment, trade and employment generation. Furthermore, it has been estimated that the country will have long-term benefits from the Olympics amounting to GBP 41 billion by 2020. 

The 1984 Los Angeles Summer Olympics has remained as classic case study about the financial success of sporting tournaments. The event is the first profit-oriented Olympics which generated eye-popping revenue of USD 1.4 billion, while its expenditures amounted to USD 483 million. Likewise, the ICC World Cup 2015 organised jointly by Australia and New Zealand generated more than AUD 1.1 billion in direct spending, according to the International Cricket Council (ICC). The tournament contributed AUD 460 million to the GDP of both neighbours.

While there are also a few instances of economic failures such as the negative impacts of the 2004 Athens Olympics to the economy of Greece, generally such events have given boost to the host country’s economy

Experts Views on The Economics of Sports