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COMMENT

05/27/2015
The series of arrests in Switzerland this morning have thrown FIFA into a crisis that is likely to escalate as the FBI investigation widens. Inevitably the spotlight will soon be turned to sponsors as the media and the public start to ask how they will respond. That is, of course, if the sponsors don’t pre-empt the discussion and take action or issue official statements.

Sponsors appear to have been unhappy with the adverse publicity surrounding FIFA for a number of years now. Following the 2014 World Cup several, including tier one partners Sony and Emirates and tier two partners; Castrol, Johnson & Johnson and Continental, did not renew their contracts.

FIFA sponsor withdrawals following 2014 World Cup

Contrary to several reports, Emirates is unlikely to have withdrawn because of corruption allegations despite the airline having criticised FIFA very strongly back in 2011. The airline was always going to find it difficult backing the Qatar 2022 World Cup as it is being hosted in a rival emirate and it looks highly likely that Qatar Airways will take over the tier one spot. Other sponsors were coy about their failure to renew and it is not unreasonable to assume that some had decided that their relationships had come to a natural end, but the allegations of scandal and corruption surrounding FIFA are likely to have at least guided the thinking of any waverers.

Legal clauses that sponsors can invoke

There are, however, several major problems for FIFA now. First, will more sponsors follow suit and pull out? It is almost certain that sponsors will have clauses that allow them to do so if they can demonstrate that FIFA is either behaving unethically or bringing adverse publicity on them as sponsors. In such a case the termination clauses could be invoked pretty much instantly and it might be very difficult for FIFA to challenge them.

FIFA needs number one sponsor in category

Second, if sponsors do pull out, who would replace them? FIFA seeks to align itself with number one brands in its various categories. If, for example, Adidas withdrew, would Nike step in? It's highly unlikely given that Nike tends prefer national federations and individuals rather than partnering 'mega-events'. If Visa pulled out, would MasterCard step in? Again unlikely given the acrimonious end to FIFA's previous deal with MasterCard. If Coca-Cola pulled out, I suspect that Pepsi would find it too risky to jump in. In the car sector, IMR has recently produced an in-depth report which shows that most of the major brands have committed their budgets recently - Toyota as an Olympic TOP sponsor, Chevrolet on Man Utd, Nissan on the Champions League etc. It's highly unlikely that another brand would come forward and offer a similar amount to Hyundai should it withdraw.

Thus FIFA would perhaps end up finding it difficult to attract replacements and certainly not replacements of similar stature. This in itself diminishes the FIFA brand, but would also inevitably lead to a reduction in rights fees. Smaller brands have smaller budgets, but they'd also be in a buyer's market.

It is possible that, financially, the problem could be solved by 'political' deals with major Russian and Qatari companies that would cover the next two World Cups, but this is far from ideal. FIFA has needed major global brands to help spread its message and build excitement - global brands are a fantastic communication vehicle for the World Cup.

It is, therefore, crunch time for FIFA. Sponsors will be watching what happens over the next few hours, days and weeks very carefully and if they are not reassured, then a mass exodus is certainly possible. There could quite easily be a domino effect if one or two sponsors pull out - it would give others the confidence from both a legal and PR standpoint, but it would also see public pressure put on those remaining.

Timing - bad for FIFA, good for Blatter

The timing is also bad for FIFA in this respect as we are only at the beginning of the four-year World Cup cycle and sponsors won’t have committed large amounts of cash and effort on the 2018 activation programmes. If they pull out now, there is very little lost resource.

Timing is also a major factor for Sepp Blatter himself. His position as President, which is up for re-election on Friday, depends on a large number of federations from developing nations backing him.

Blatter’s popularity here has been built on FIFA making large grants to such organisations to develop soccer in their countries. If sponsors pull out before the Friday vote, those nations will inevitably start to worry about where the money is going to come from.  The chances are that this timing is good for Blatter. Events are unlikely to move fast enough for his position to be threatened as the delegates will have arrived in Switzerland with their minds made up on who to vote for. Many will remain loyal to Blatter because no other candidate looks strong enough to secure a majority and few federation heads want to be on the wrong side of the President even if his position is looking increasingly at risk.

The next two days will certainly be interesting!

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