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Economics 101 from U.S. Soccer Prez
by Mike Woitalla, October 24th, 2008 7AM

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U.S. Soccer Federation President Sunil Gulati also teaches economics at Columbia University. Soccer America spoke with Gulati about how the global economic crisis may affect the soccer world.

SOCCER AMERICA: Do you expect the soccer world to suffer because of the current economic crisis?

SUNIL GULATI: Look, economic downturns have negative effects, full stop. For people to say sports is somehow recession proof, that's basically nonsense.

Will people always be interested in sports? -- sure. They'll be interested at some level, but does a downturn mean you go to the stadium less and watch more games on TV? Maybe.

Does it mean some commercial institutions decide to take out fewer sponsorships? Maybe.

For sports properties -- leagues and teams, to the extent that one has long-term [sponsorship] contracts in place, that does offer some protection during any economic downturn.

SA: But it might be more difficult to lure new sponsors?

SG:
Of course. For example, some of the biggest spenders in the sports sponsorship area in the United States are automobile companies [which are struggling], so they might well reassess their current spending levels.

SA: And fans may spend less on sports?

SG:
Clearly, downturns affect disposable income, disposable income affects consumption. That's how I say it to my Econ 101 students. And that's just the reality. If you have less money, you're going to buy less and sports is a discretionary expenditure, it's not like food or housing.

SA: What about an institution such as the U.S. Soccer Foundation, which uses the investment earnings from the USA-hosted 1994 World Cup profits to support the game in the USA?

SG:
Anyone or any institution with equity holdings has been adversely affected by the direction of the stock market over the last few months. The Foundation, which has had very a very impressive investing record over the last 14 years, has been hit pretty hard. No different than you or me -- but obviously in much larger absolute amounts!

SA: How about professional sports leagues?

SG:
There's different ways it affects various groups. Obviously, consumers get affected. People running businesses get affected. The business of the sport is affected, and those who own the teams are affected, because they're obviously businessmen and businesswomen who are heavily affected by what's going on in their other business.

SA: It must be comforting for MLS that so many of its stadium projects were completed before the economic downturn

SG:
Clearly stadiums that have already been built is a plus, because trying to get financing in the current environment is much more difficult than it would have been three, four, five years ago. There are of course still projects in the pipeline, whether it's D.C. or elsewhere. New York is virtually there.

In the current environment, just like anything else, financing is more difficult, but I have no doubt we'll come out of this and the credit markets will ease up.

SA: Any predictions on how the game will be affected internationally?

SG:
What people are talking about right now is the global downturn, which is going to hit everybody. But it's not going to hit everybody the same, just like increases in oil prices don't hit everybody the same.

I always ask my students on the first day of class, if the price of oil is going up -- is that good or bad? Most of them, living here in the United States, say it's bad. But guess what? It might not be bad if you happen to be living in an oil-producing country running trade surpluses.

So it will hit people differently, but everyone is affected. The issue, of course, is how long this period will last and how deep it will be.

SA: Did you think future World Cup preparations will be affected?

SG:
I have no doubt South Africa will host the 2010 World Cup and Brazil will host a great World Cup in 2014. That doesn't mean there aren't concerns.

Large public expenditures, whether it's for venues or infrastructure or anything else -- those come under increased scrutiny when you're in an economic downturn. That's true for stadium-building in the United States, or infrastructure investment elsewhere. The decision by the Nigerian Government -- citing current economic conditions -- to decline hosting the 2009 U-17 World Cup is an obvious example.

SA: And what is the status of the USA bidding to host a World Cup?

SG:
We haven't announced anything yet. We're waiting for some news on FIFA's timetable on decisions for the next two World Cups [2018 and 2022] - when they would likely make those decisions. Once we know that we'll make our plans public. It's safe to say we're very interested in bringing the World Cup back to the U.S.

[Editor's note: FIFA is expected to announce on Friday its procedures for the bid process for the 2018 and 2022 World Cups.]

 



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