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The Business of Sports in Italy

The World Cup in Qatar and the new frontiers between eSports, crypto, NFT and metaverse.
10/11/2022 Divulgatory Research Download PDF

Football is the most profitable sport, with global revenue of $47 billion

The ingredients for the renaissance of the soccer world: cypto, NFT and metaverse

The value of sports sponsorships by cryptocurrency-related companies exceeded $1.5 billion worldwide in the period from January 2021 to June 2022 alone (Bankless Times, 2022). From Juventus with Bitget to Lazio with Binance, exchange companies are playing an increasing role in Italian soccer sponsorship: in the 2021-2022 season, the crypto sponsorship market on Serie A match jerseys touched €335 million. A market dominated by commercial sponsors (brands such as airlines), which account for 69 percent or 230 million euros, and technical sponsors (clothing brands) with the remaining 31 percent, worth 105 million. The growth from the 2020-2021 season-which had recorded 170 million-was +35.3 percent.

Among the tools of the crypto sector, the digital assets that are enjoying the most success, are fan tokens, special purpose cryptocurrencies through which clubs of various sports disciplines can interact with their supporters. There are 156 sports organizations in the world that have launched a fan token or entered into agreements with companies in the sector, and, the most highly valued tokens are those of Manchester City (€13.4), Paris St. Germain (€12.9), and Inter Milan (€7.6). The industry leader in sports sponsors remains Crypto.com, the official sponsor of the 2022 FIFA World Cup.

According to Tommaso Marazzi, among the authors of the research, “if in marketing the key to success is to build customer loyalty, in the current sports landscape the secret is to ‘tokenize’ fans, to induce them to purchase fan tokens in such a way that they are entitled to actively participate in the life of the club.” The reason for the collaboration between clubs and crypto companies is thus a direct result of a trend that has its roots – in part – in the economic crisis produced by the pandemic. “On the one hand, clubs have a strong need for liquidity and economic/financial resources, and on the other hand, crypto companies need to find a way to make themselves known, and the world of sports, particularly soccer, is a showcase that guarantees space and visibility on a planetary scale,” Marazzi says.

In fact, there are multiple ways to increase revenues while engaging more fans.

  • Manchester United is about to open its own store in the metaverse where it can market official apparel, strictly virtual and accessible with cryptocurrency.
  • The Port will build its own virtual stadium while also adding collectible teams and players in NFT format. Within these spaces in the metaverse, it will be possible to live real experiences; we will no longer be mere spectators but will be able to interact with the stars of the sports world. According to Valerio Mancini, “So the metaverse will be the place where companies will have to build their competitive advantage by trying to attract their customers and especially to offer unique experiences and sell their products, experiences that go beyond soccer.”
  • Looking at best practices, the NBA for example has created a “netaverse” where users can benefit from an immersive virtual experience that allows them to follow the game from every corner of the parquet as the Barclays Center is the first arena equipped with 360-degree VR technology.
  • At the brand level, Nike launched Nikeland, a virtual playground used to attract new customers and test innovative products before launching them on the market.
  • In Italy, FC Clivense decided to manage merchandising sales through a dedicated e-commerce and launched a crowdfunding campaign selling small shares in the club, thus increasing the club’s income (+741 thousand euros).
  • In addition, Como has won the trust of its fans by purchasing a sports center, renovating the stadium’s turf, entering video games and creating a TV channel, as well as raising the bar by taking Spanish world champion Cesc Fabregas, a move that will undoubtedly increase the club’s visibility and thus also its revenue.

Thus, sports turnover in the metaverse could reach $40.5 billion globally by 2028, from the current $13.6 billion. Geographically, Europe is the leader in technology-supported sports turnover, with 42 percent, closely followed by North America and the Far East, but this would be the area with the highest growth between now and 2028.

The future of the football industry and the importance for Italy

In order to lift the World Football System, according to Alessio Postiglione, one of the authors of the research, “a series of measures aimed at securing the operation of the industry are needed, exploiting and enhancing the full potential of the sector: from developing new partnerships with companies in emerging sectors, such as cryptocurrencies, to trying to attract more and more new capital to making the metaverse and new technologies, as well as the gaming and eSports sector, one of the pillars on which to build the foundations of a new structure on which to rest the soccer industry.”

For Valerio Mancini, “Today the picture of Italian soccer cannot but be alarming: the system, accomplice to the pandemic, is more weakened and suffering than ever, in search of new revenues and interventions capable of regaining an economic-financial balance that has been missing for too long.” In this context, “the project of the European Super League – ESL, promoted by some clubs, including Juventus, Real Madrid and Barcelona, despite the very strong criticism received especially from FIFA and UEFA, could reverse the negative trend that sees more and more revenues and attentions focused on the economic monopoly of the Premier League and cope with the financial difficulties that are plaguing European soccer.”

Despite this, soccer continues to be one of the key elements that can bring Italians closer to the sport.To bring it to safety, “we need large investments in youth sectors and infrastructure, promote membership, increase the number of athletes selectable for the National Azzurri, and implement a reform of the leagues to ensure the economic-financial sustainability of professional soccer,” Marazzi concludes. The NRP plays a crucial role in this regard: the government has earmarked 700 million euros for facilities in municipalities with more than 50,000 inhabitants, and 300 million euros for school gyms. Currently, there are 12 stadiums being planned and built on Italian soil for a total investment of 1.9 billion euros, but with a positive impact of both 176.8 million euros as ticketing revenues, increased spectator attendance at stadiums (+2.7 million) and employment (+10 thousand jobs).

The study makes an analysis of the soccer market at the global level with a specific focus on the Italian reality, the critical issues of the soccer industry, the impact of the pandemic, the reduction in the number of spectators, registered members and players especially among young people, and the absence of the Azzurri at the World Cup in Qatar 2022. The role of cryptocurrencies, NFT, eSports platforms and metaverse, now used by small and large sports clubs, is highlighted, highlighting best practices and technologies that can get the sports industry off the ground in Italy.

Globally, soccer is the most profitable sport. With global revenues of $47 billion, it accounts for 28 percent of the turnover generated by sports worldwide. Europe is the richest stage internationally, but in the 2019-2020 and 2020-2021 seasons, clubs in Europe’s Top Divisions recorded an overall loss -7 billion euros in revenue. However, according to the authors of the research, the numbers will rise again: until 2025 the average annual increase in the number of European spectators will be +8% (+37.7% if we consider calculations by 2030).

Soccer is undoubtedly the most watched and played sport in Italy: it is the favorite of 31% of Italians, the European average is 27% (FICG, 2021). In our country, soccer generated 78.8 billion euros in revenues, a figure equivalent to 3 percent of Italian GDP (Sport System Observatory, 2022). Despite this, it is a suffering industry: in the 2020-2021 season, about -92.4% fewer matches were played than in 2018-2019, this caused lower revenues of 7 billion euros of which ticketing (4.4), sponsorship and commercial activities (1.7), TV rights and UEFA revenues (0.9).

Pandemic aside, Italian soccer still has critical issues that have never really been addressed such as excessive debt by most clubs (amounting to 5.4 billion euros, +3.5 percent compared to 2019-2020 according to the FIGC, 2021), infrastructure obsolescence, marketing strategies on match day the low propensity for innovation and experimentation with virtuous foreign practices such as naming rights, and the inability to create and nurture direct contact with new generations, who are increasingly fascinated and involved in the use of new immersive technologies.

Soccer in Italy: decreasing membership and growing eSports

As of today in Italy, sport has an impact on the national economy of about 24.5 billion euros (3 percent of GDP), a significant value-guaranteeing about 420,000 jobs-but one that pales in comparison to countries such as France and the United Kingdom where it is close to 6 percent of GDP. Data in hand, investing in soccer pays off: the total value of soccer for the FIGC is €4.53 billion (2020-2021 season); for that season, Italy got a return of €18.3 – in tax and social security terms – for every euro “invested” by the Italian government in soccer.

The improvement in the Azzurri’s reputation as a result of wins at the 2020 European Football Championships, the 2022 European Swimming Championships and the 2020 Tokyo Olympics, thanks mainly to successes in athletics, was +21.3% in 2021 (FICG data), generating an economic impact of about 36 million euros. Not only that, net sales in Italy of official FIGC-PUMA merchandising increased +295% (abroad +30%). So there was no shortage of benefits for the Country System, with an indirect economic impact estimated at least 0.7% of GDP (12 billion).

However, the Football System is in the midst of a crisis: in Italy, we have witnessed a sharp decrease in FIGC registered members – referees (-6.3%), coaches (-2.2%), clubs (-20.8%) and players (-21%) – with truly alarming numbers especially as far as youth activity is concerned: comparing the 2018-2019 and 2020-2021 seasons, there are 245,739 registered members, or -29.3%; with a percentage that rises to -48.9% if only the South and Islands area is considered. If we look at those practicing soccer in our country: between 2019 and 2021, the percentage of over-18s playing soccer decreased to 17% (-3%), while that of under-18s decreased from 35% to 31% (-4%). The regions where the greatest impact occurred were Basilicata (-49%), Molise and Sicily (-43%), Calabria (-42%) and Campania (-41%). Significantly higher numbers than in northern Italy with Veneto and Piedmont coming in at only -13%, according to FIGC data.

Both to find new sources of funding and to bring young people back to soccer, clubs are focusing on eSports. A phenomenon that also affects Italy, as reported by Gaming Report: in 2021 every day there were 475 thousand fans who followed digital sports events, while on a weekly level the threshold of 1 million 620 thousand was reached, for a growth of +15% compared to 2020. A sector in great growth with a value of more than 1 billion globally in 2021 (data from IIDEA – Italian Interactive Digital Entertainment Association). An example is the League of Legends tournament, which surpassed the Super Bowl in terms of audience (100 million vs 98 million).

Looking at Italy, the eSports market will reach €40 million in value in 2023, up from €16 million in 2020. For Alessio Postiglione, “these numbers show that eSports is currently the most promising market segment in terms of sponsorship opportunities and corporate promotion.”

The national team’s absence in Qatar and the World Cup numbers.

The Azzurri’s absence is a significant setback for the economy and Italian soccer, considering that winning in Germany 2006 caused a +1.9 percent growth in GDP and that the World Cup in Qatar could have brought the Italian federation, if victorious, a total revenue of at least $45 million. Counting that the national team today has an estimated value of about 93 million a year and will rise to 102 from 2023, its value could have been even higher if it qualifies for the Qatar review. Not only that, Italy will see a reduction in revenues from merchandising, TV rights, consumer sectors and sports betting: at the World Cup in Qatar, the estimated induced revenue generated would have been nearly 300 million euros in bets, of which only 45 million would have been on the matches played by the Italian national team, which historically count with an audience of more than 10 million spectators.

This will also be the richest edition of all with costs of about 467 million euros spent by the Qatari government per week in preparation for the World Cup, touching the record figure of 220 billion spent, higher than the sum of all World Cups made until 2018. The comparison with Brazil’s 2014 World Cup, the second highest ($15 billion), is merciless: spending in Qatar is almost 15 times higher. To cover this expense, not only sovereign wealth funds come into play, but also sponsors, such as Emirates, Etihad Airways and Qatar Airways, all of which have major deals with European soccer teams worth millions of dollars.

“The Qatar World Cup is a paradigmatic case of the role of soccer as a tool of soft power and of global soccer competitions as a means of gaining visibility,” concludes Alessio Postiglione. Prices to attend matches are also increasing, particularly those to see the final: they go from €995 in Russia to €1,400 for Qatar, about 40 percent higher.