The Essence

Knowing When to Invest (and when not)

Congratulations Argentina for your recent win over France in the Fédération Internationale de Football Association (FIFA) World Cup 2022 soccer championship. The World Cup is the most prestigious association football tournament in the world, as well as the most widely viewed and followed.  Thirty-two national teams compete over the course of a month in two stages: the group stage followed by the knockout stage (including the final match).  As the World Cup is held only once every four years, it is one of the most highly anticipated and prepared for sporting events; on par with the Olympics, but that contains up to forty events.

“Real” (as over 90% of the world’s population would have it) football is not nearly as popular as “American” (though it is played elsewhere too) football in the United States.  So, while four years may seem like a long time, one of our Portfolio Managers waited twenty years to be a live spectator of a football game in his home of Los Angeles.  That’s how long the city was without a home team until current owner Stan Kroenke moved the Rams back from St. Louis, where they played between 1995 and 2015.  Simultaneously, the San Diego Chargers moved as well, now giving Los Angeles back its two-team status.

It could cost ~$6½ billion to host a World Cup – that’s the price tag for recent host Qatar, including infrastructure and the eight stadiums it built.  Similarly, it cost ~$5 billion to build SoFi Stadium in Inglewood, California – the new home of the Rams and critical to allowing for the team’s move.  Paris has budgeted close to €4 billion for the 2024 Summer Olympic Games (yet the actual figure is likely much higher) and that’s not even close to an Olympics spending record.

Many believe that these huge price tags to host spectacular sporting events have low (or in some cases negative) returns on investment (ROI).  With the number of entities involved and the imprecise way of calculating returns – how many people will visit Qatar, invest in its businesses or buy products from its companies over the coming decade uniquely due to the 2022 World Cup? – the ROI is nearly impossible to figure.  So why do it?

To read the full article, please use the link below.