Magazine

World Cup Follies


The arrangement was billed as an elegant mix of sports and statecraft. Back in 1996, the Zurich-based Federation Internationale de Football Assn., the stewards of the 72-year-old World Cup, shocked the football world by choosing South Korea and Japan to co-host the 2002 championship, an historic first. Both countries would share the prestige--and the commercial spoils--of organizing Asia's first World Cup.

FIFA's top brass, then led by the autocratic 80-year-old Brazilian Joao Havelange, spun the decision as a hands-across-the-water gesture that would bring these fierce economic rivals closer together. There was chatter that Japanese Emperor Akihito would pay an historic visit to Seoul. Optimists saw a possible break from years of mutual recrimination over Japan's brutal occupation of South Korea from 1910 to 1945, the enlistment of South Korean "comfort women" for Japanese troops, and Japan's refusal to acknowledge its war guilt in textbooks.

Now, with the 17th World Cup ready to kick off on May 31 in Seoul, it is clear that things haven't gone according to the FIFA script. South Korea and Japan have spent the runup to the games sniping at each other over perceived slights and insults large and small. Making matters worse, as thousands of football fans converge on Japan, they will find the nation in its third recession in a decade. By contrast, Korea is economically and culturally ascendant. Indeed, South Korea's government and big corporations see the World Cup as a golden opportunity to brand Korea as Asia's Most Wired Nation--at the expense of sad-sack Japan.

Meanwhile, South Korea and Japan are busy demonstrating how one-upmanship can blow financial propriety to shreds. Eager to dazzle the world, both have spent furiously, pumping in a combined $8 billion on new stadiums, related infrastructure, and the cost of running and promoting the games. Critics say the extravagant preparations are over the top--and that Japan, in particular, can't afford them. Japan is expected to recoup perhaps $475 million from its share of ticket sales from 32 games, $100 million from FIFA, as well as sponsorship fees from its official World Cup suppliers. But it won't get any share of the television rights or global sponsorship money. Indeed, while Japan is expected to gain $24 billion in related economic activity, much of that was spent long ago. The net effect "certainly won't hurt," says Gary Evans, who has studied the likely economic impact of the Cup for HSBC Securities. "But it is not going to bail out Japan." For its part, Korea, which spent $2.4 billion on stadiums, roads, and organizing costs, expects $600 million from tourists, beyond the revenues it will share with Japan and receive from FIFA.

Even as South Korea and Japan trade fire, charges of financial impropriety and vote-buying are dogging FIFA's current Swiss president, Joseph S. Blatter. Organizers are worried that the games could be overshadowed by a fiasco more unseemly than the Salt Lake City Olympic bribery scandal in 2000.

Indeed, if there is one thing that both Japanese and South Korean football officialdom can agree on, it's that FIFA's leadership is largely to blame for these World Cup follies. Former FIFA honcho Havelange had promised the World Cup to Japan after the 1994 Cup. But he quickly caved in when faced with a leadership challenge by European FIFA members who supported the co-hosting gimmick. Scoffs Hiromi Sanguu, the World Cup promotional director for the Niigata Prefectural government: "They probably thought Japan and South Korea share the same language."

The Japanese, who had spent billions of yen launching their nine-year-old professional football organization, called the J. League, and enlisting soccer legends such as Brazil's Pele to lobby FIFA for the right to host the event, considered the decision on co-hosting a betrayal--and are still carping about it. But Korean World Cup organizing committee boss Chung Mong Joon, scion of the the Hyundai conglomerate, says the Japanese shouldn't speak ill of the co-hosting scheme. "Such remarks at this stage are like spitting on their own face," he thunders. "People outside won't respect Korea and Japan if you talk like that."

In fact, co-hosting is not necessarily a bad idea. More of the same is likely inevitable, if only because few nations can by themselves afford to put on an event of such size and complexity. One of the main issues in the case of Japan and Korea is that they each set up their own organizing committee. Indeed, Blatter's spokesman Markus Siegler says if two nations co-host the Cup in the future, "we would only have one organizing committee."

The fact that Japan and Korea have separate committees set the stage for a battle that has taken petty behavior to historic lows. The two sides even fought over what to name a trio of official mascots. The Koreans considered their names--Ato, Nik, and Kaz--too Japanese. Kaz, for instance, is close to the name of a Japanese football player. The Japanese found the entire discussion annoying, since in fact FIFA devised the characters and their names.

A diplomatic thaw was probably never in the cards anyhow. Japan and Korea still can't agree whether that big body of water between them is the Sea of Japan or the East Sea. Japan's Emperor and Crown Prince Naruhito will likely decline a long-standing invite from Seoul to attend the World Cup's gala opening on May 31, though a lower-ranking royal may show up. To Hwang Tae Soo, 31, a member of Korea's Red Devils soccer fan club, it is this kind of "impudent Japanese attitude" that makes it "impossible for us to expect better ties."

The Japanese tend to be more understated, rolling their eyes about their headstrong Korean counterparts. Still, Tokyo soccer officialdom is fed up with the in-your-face aggression of the Korean organizing committee. "It has been difficult," says J. League Chairman and Chief Executive Saburo Kawabuchi. "We've been more adult" than the Koreans, he adds. And it is true that the Koreans seem to take every opportunity to get in a dig at their co-hosts. Korea Telecom, an official sponsor that will be Webcasting matches live on the Internet, thumbed its nose at Japan in a recent press release by crowing that "this will be a golden opportunity to compare the information-technology levels of the co-hosts." CEO Lee Sang Chul says his company will develop a true "e-World Cup" and an information-technology environment "you have never seen anywhere else in the world."

Chang Il Hyung, senior vice-president of Samsung Electronics, thinks Korea's high-tech gloss will lift the brand image of all its exporters. "There is still a big gap between `Made in Korea' and `Made in Japan,"' he says. "Co-hosting could help narrow the gap." To that end, Hyundai Motor, another sponsor, will spend nearly $100 million to promote its models. Says Cho Rae Su, the company's deputy general manager: "We'd like to make the event emblematic of the tremendous changes in Korea and Hyundai Motor, particularly in terms of offering quality goods and services." To maximize Hyundai's brand awareness, the company is holding Hyundai Football World Championships in such key markets as the U.S., China, and Europe.

Japan Inc. is going all out, too. Toshiba (TOSBF), which manufactures everything from medical gear to appliances, is trying to recast itself as an information technology player. It will supply its PCs and other equipment to the championship and is offering those who buy a notebook or handheld PC the chance to win free tickets. Another sponsor, copier and printer maker Fuji Xerox Co., is providing gadgets to World Cup organizers. This is a can't-miss opportunity to promote the brand to younger types, according to Ryuji Hattori, a Fuji Xerox corporate vice-president.

Sponsors are not the only ones exploiting the World Cup. Korean and Japanese construction companies cleaned up, too, reaping the rewards of the biggest stadium-building splurge in Cup history. South Korea could easily have expanded or upgraded its Olympic Stadium in Seoul, built for the 1988 Summer Games. Instead, the Kim Dae Jung government and soccer organizers spent $185 million to build the Seoul World Cup Stadium. On the resort island of Jeju, home to yet another new stadium, officials aren't sure how they will use the site after the World Cup.

It's equally difficult to justify the stadium-building in Japan. The northern city of Niigata, a stronghold of the ruling Liberal Democratic Party, is now home to a $230 million stadium, half-financed by municipal bonds. Local officials plan to host rugby matches and concerts, but filling 40,000 seats will be tough. Japanese politicians argue that such pork is permissible--it generates jobs, right? Trouble is, a lot of the money has already been spent--and Japan will remain in a recession long after the next World Cup champion is crowned on June 30.

The state-run Korea Development Institute estimates that the competition will add $4.7 billion to the economy, or about 1% of current gross domestic product. But even government officials in Seoul doubt the forecast. Deputy Prime Minister Jin Nyum says that instead the games are about "the brand-making of Korea." But will there be a net economic payoff? Not in the view of Hong Kong-based ABN Amro analyst Franklin Poon, who calls the Cup "largely an expensive party without any long-term benefits."

FIFA officials may have also misjudged the gap between living standards in rich Japan and less-rich South Korea. Official ticket prices range from $130 each for early matches to a cool $650 per head for the finals. In Japan, where residents are still well-heeled despite years of recession, all 32 matches are sold out. But with the kickoff two months away, only 77% of the tickets have been sold in South Korea.

What's more, both sides think FIFA is being less than generous with the proceeds. While the organizing committees in Japan and South Korea will each get their $100 million cut, FIFA will keep $1 billion-plus. Of course, Blatter and FIFA are easy targets in one sense. Their power over global broadcasters, multinationals, and governments is awesome. Some 250 million people play soccer in more than 200 countries and territories. The game's youthful following and global reach make the World Cup a can't-miss party for companies such as Adidas, Budweiser, Hyundai Motor, and Coca-Cola.

If one factors in repeat viewers, "you have 30 billion to 40 billion" eyeballs tuning into Cup matches during the month-long series, says Toshiba Corporate Executive Vice-President Tomohiko Sasaki. Then there is the sheer prestige of hosting the games. That's why FIFA delegates are wined and dined and flown first-class all over the planet, often on the dime of World Cup host wannabes.

Not surprisingly, FIFA has been able to command bigger and bigger concessions along the way. The cost of TV rights has jumped sixteenfold, to about $900 million. And while FIFA insists that global sponsors don't disclose the fees they pay, one industry source says the association gets $40 million apiece from big sponsors for a four-year package of promotional rights to flog their name and products at the World Cup and other soccer series.

The World Cup is a big-time event for FIFA and for multinational sponsors. But it's no forum for thawing diplomatic disputes. Earlier this month, a group of Japanese and Korean recording artists released an officially sanctioned World Cup song called "Let's Get Together Now." If early sales are any measure, it seems sure to be a commercial flop. Maybe FIFA is finally getting the message: Peace, love, and the World Cup are not necessarily compatible. By Brian Bremner in Tokyo and Moon Ihlwan in Seoul


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