Economic analysis of the Asian Cup

Economic analysis of the Asian Cup

This article was originally published on 23 January 2015 but was erased by a technical glitch.

As we head into 2015, Australia is set for the biggest summer of sports it has in its history. With the Australian Open and Cricket World Cup all heading down under, it seems that we Australians are blessed for having so many international tournaments on our shores. In addition, we also play host to the biggest international sports event for the year, the Asian Cup. The Asian Cup is expected to generate a huge TV audience in the Asian region, with a potential 800m viewers watching worldwide. Having been born and raised in Indonesia, soccer is my number one sport to watch this January and I hope that all Australians will enjoy the Asian Cup. However, will it become an economic success for Australia, given that it’s competing with so many other sports? Let’s find out.

Forecasts by PWC estimate that the Asian Cup will see 500,000 attendees, adding $23m to Australia’s GDP. There are no publicly available reports on how PWC came to arrive at these numbers, so we don’t know for certain whether these numbers are correct. While the figures are pretty good, considering that soccer isn’t very popular in Australia, it is dwarfed by the economic returns generated from the Australian Open, which posted $181m in revenue in 2013. Of course, one cannot fault the Local Organising Committee (LOC) as this is the first time Australia has hosted the Asian Cup, but additional information suggests that they could have run the event more efficiently, profitably and to be more accessible to the Australian community. At least the Asian Cup is almost guaranteed to make money, which cannot be said for Melbourne’s Grand Prix.

It is unfortunate that there are economic inefficiencies arising from the Asian Cup. For example, ABC and SBS were at odds with each other in order to attain the rights to broadcast Australia’s games, as ABC spent $1.5m to win the bid. This was such an odd decision, given that SBS does an outstanding job covering soccer events such as the World Cup. As it unfolded, ABC decided not to broadcast Australia’s opening 3 games live, and local soccer fans are outraged with the move. I personally see this as $1.5m of taxpayer’s money down the drain, as I believe that SBS could’ve done a much more efficient job broadcasting the Asian Cup, with the added fact that SBS had already planned to cover its bidding costs via advertising and sponsorship.

In addition, the LOC could have done a better job with the match schedules to generate more profits. As an example, Canberra hosts six opening games involving high profile teams such as South Korea and China. So far, crowd attendances have been better than expected, but I wonder what would have happened if China or South Korea had played out their games in Sydney, inside a much bigger stadium. This is a classic case of allocative inefficiency. A change in venue would have seen more attendees, bringing extra revenue to the LOC. This is crucial given that the only income stream available to Football Federation Australia (FFA), and its subsidiary LOC, is from ticket sales.

While the microeconomic outlook of the Asian Cup isn’t great, it serves as a catalyst for major economic activity in our economy. By participating in activities such as Match Australia, the Asian Cup is the perfect opportunity for many local businesses to strengthen its ties with overseas counterparts, and forge new ones. With seven of Australia’s top ten trading partners participating in the Asian Cup, it is vital that Australia host a successful Cup to encourage trade as well as investment from other countries. So far, the Asian Cup has attracted major sponsorship deals with the likes of Toyota, Samsung and Emirates and the LOC has worked hard with groups such as Australian Hotels Association NSW to ensure that local businesses band together to boost trade by celebrating this momentous occasion. Australia’s tourism industry is also set to benefit from the Asian Cup, as Tourism Australia expects between 30,000 to 50,000 international visitors attending the event.

The Asian Cup also delivers a much needed infrastructure upgrade to soccer facilities in Australia. The program features lighting and turf improvements, as well as a pitch upgrade in Newcastle Stadium. With the advent of the Asian Cup education resource, children can also learn more about the countries participating in the event. Most importantly, the Asian Cup has the potential to unite the whole of Australia like never before. There are close to 2m soccer participants in the country already, and the world game will play an increasingly important role in our community. Soccer is the most inclusive and accessible sport in Australia, and it is able to bridge the divide in gender, age, language and even religion. A deep run into the Asian Cup by the Socceroos should see Australians put their differences aside, and join together to celebrate Australia’s cultural diversity.

Overall, the Asian Cup is likely to become a major success story for Australian sport and the Australian economy. While the revenue generated from the event is likely to be above average at best, the future economic implications of this event are massive. The Asian Cup signals that Australia is committed to become a significant player in the Asian region, and a successful event will solidify Australia’s relationship with its major trading partners as it seeks to boost economic growth for the years to come.