U.S. Team's World Cup Elimination Deals Setback to Fox -- Update

The failure of the U.S. men's soccer team to qualify for the 2018 World Cup creates a major headache for broadcaster 21st Century Fox Inc., which faces the prospect of smaller TV audiences and diminished advertiser interest without Team USA on the field.

After a stunning loss to Trinidad and Tobago on Tuesday, the U.S. team will miss next summer's tournament for the first time since 1986.

Fox Sports, a unit of 21st Century Fox, paid $200 million for the U.S. English-language rights to broadcast the 2018 World Cup, with plans for it to be the biggest production in Fox Sports history. More than 350 hours of programming is planned across multiple networks and digital platforms, and tens of millions has been spent building production facilities in Moscow's Red Square to cover the tournament.

Without the U.S. team, Fox will likely be dealing with lower viewership, which means a tougher time selling advertising and potential shortfalls on the ratings guarantees for ad packages that have already been sold, according to ad buyers. Team USA's elimination is also a blow to official U.S. soccer sponsors like Nike Inc. and other brands that have been trying to stoke interest in the sport domestically.

While hard-core soccer fans will still tune in, the absence of the U.S. men is expected to result in a "significant drop" in ratings, said Kevin Adler, chief engagement officer at sports-marketing firm Engage Marketing.

More casual "soccer fans in the U.S. care about their team and the Cinderella story that they could one day make it all the way, and that is now gone," Mr. Adler said. "It will be tough for Fox to find a compelling story line that will draw in those casual U.S. fans."

In 2014, Walt Disney Co.'s ESPN aired the World Cup in the U.S. and several of the most-watched games, unsurprisingly, involved the American squad. For example, the U.S.-Portugal match drew an audience of 18.2 million, more than any NBA Finals contests that year and more than the 17.3 million who tuned in for Germany vs. Argentina -- a record for a World Cup men's final.

The U.S. team's four matches in the 2014 World Cup were among the tournament's top five most-watched games in the U.S. and averaged 14.3 million viewers, compared with 3.85 million viewers for the other 60 games, according to Nielsen data.

In a statement, Fox Sports said the team's failure to qualify for the World Cup in Russia doesn't change its "passion for the world's biggest sporting event."

"While the U.S. was eliminated, the biggest stars in the world from Lionel Messi to Cristiano Ronaldo stamped their tickets to Russia on the same day, and will battle teams ranging from Mexico to England that have massive fan bases in America," Fox Sports said.

21st Century Fox and News Corp, parent company of The Wall Street Journal, share common ownership.

For Fox Sports, significant revenue may be at stake. ESPN brought in $529 million in advertising revenue for the 2014 FIFA World Cup in Brazil. Top advertisers spent more than $30 million each on U.S. ads for the event, according to ad-tracker Kantar Media.

Earlier this year, Fox Sports President Eric Shanks joked in a conversation with media buyers, according to Ad Age, that if the U.S. team didn't make it to Moscow "that would [be] like, $200 million flushed down the toilet."

Nigel Currie, an independent sponsorship and marketing consultant based in London, predicted Fox could take a substantial financial hit if ad rates drop in anticipation of smaller TV audiences.

"It is a disaster for U.S. soccer, MLS and for FIFA," he said. "The U.S. has been very important for the development of football globally since [the U.S. national team] started qualifying regularly for the World Cup."

If Fox doesn't deliver the audiences guaranteed in ad packages that have already been sold, the company may be forced to give marketers so-called make-goods -- additional ad time to make up for the shortfall.

Many advertisers' overall interest in the World Cup will likely remain strong since it offers an unmatched opportunity for brands to get their messages out around the world, particularly in fast-growing emerging markets. FIFA World Cup sponsors include Coca-Cola Co., Adidas AG, Hyundai Motors Co., Anheuser-Busch InBev NV's Budweiser and McDonald's Corp.

A spokeswoman for Coca-Cola said that while "we always love to see U.S. Soccer succeed," the World Cup reaches more than 150 markets and "is one of our most celebrated assets."

Nike, the official supplier of training gear and uniforms for the American squad, is among the "most heavily invested brand" in Team USA and "will obviously take a hit," said Mr. Adler of Engage Marketing. Nike, which also sponsors other national teams and has a deal with global soccer icon Cristiano Ronaldo, didn't immediately respond to a request for comment.

In 2011, Fox Sports and Telemundo significantly upped the ante for World Cup rights. Fox agreed to pay $425 million for English-language rights to the 2018 and 2022 competitions, a jump from the $100 million that ESPN had paid for the 2010 and 2014 games.

Comcast Corp.'s Telemundo bid around $600 million for the Spanish-language rights to the two World Cups, almost twice what Univision Communications Inc. had previously paid. The elimination of Team USA from competition may not be as big a blow to Telemundo as its audience is composed of more avid soccer fans as opposed to those tuning in out of curiosity or to cheer the U.S.

After a stunning loss to Trinidad and Tobago on Tuesday, the U.S. team will miss the sport's premier tournament -- to be held in Russia next summer -- for the first time since 1986.

Fox Sports, a unit of 21st Century Fox, paid $200 million for the U.S. English-language rights to broadcast the 2018 World Cup, with plans for it to be the biggest production in Fox Sports history. More than 350 hours of programming is planned across multiple networks and digital platforms, and tens of millions of dollars have been budgeted for production facilities in Moscow's Red Square and to cover the tournament.

Team USA's elimination also is a blow to FIFA, soccer's governing body, which has long seen the U.S. as its primary market for growth. Fifteen years ago, English-language media rights for the World Cup were basically worthless. Now fees for media rights in the U.S. are among the highest in the world. Among young fans, only basketball is more popular. FIFA didn't immediately respond to a request for comment.

The U.S. team's four matches in the 2014 World Cup in Brazil were among the tournament's five most-watched games in the U.S. and averaged 14.3 million viewers, compared with 3.85 million viewers for the other 60 games, according to Nielsen data.

Fox Sports President Eric Shanks said without the U.S. in the tournament, the network would put a greater effort in storytelling and marketing to "drive interest in the World Cup."

Mr. Shanks said Fox would rethink its ambitious productions plans as well. "Recognizing that we probably want to do more in other areas, we're going to be looking at how to make the most efficient use of everything we're going to put on the screen and in marketing."

21st Century Fox and News Corp, parent company of The Wall Street Journal, share common ownership.

For Fox Sports, significant revenue may be at stake. ESPN brought in $529 million in advertising revenue for the 2014 World Cup. Top advertisers spent more than $30 million each on U.S. ads for the event, according to ad-tracker Kantar Media.

Earlier this year, Mr. Shanks joked in a conversation with media buyers, according to Ad Age, that if the U.S. team didn't make it to Moscow "that would [be] like, $200 million flushed down the toilet."

Nigel Currie, an independent sponsorship and marketing consultant based in London, predicted Fox could take a substantial financial hit if ad rates drop in anticipation of smaller TV audiences.

"It is a disaster for U.S. soccer, [Major League Soccer] and for FIFA," he said. "The U.S. has been very important for the development of football globally since [the U.S. national team] started qualifying regularly for the World Cup."

A spokeswoman for Coca-Cola said that while "we always love to see U.S. Soccer succeed," the World Cup reaches more than 150 markets and "is one of our most celebrated assets."

"While we are disappointed for the team and their fans, our relationship with [the United States Soccer Federation] extends beyond a singular result, tournament, or squad," Nike said in a statement. "We also partner with many federations that have already qualified for the World Cup."

In 2011, Fox Sports and Telemundo significantly upped the ante for World Cup rights. Fox agreed to pay a combined $425 million for English-language rights to the 2018 and 2022 competitions, a jump from the $100 million that ESPN had paid for the 2010 and 2014 games.

Comcast Corp.'s Telemundo bid around $600 million for the Spanish-language rights to the two World Cups, almost twice what Univision Communications Inc. had previously paid. The elimination of Team USA from competition may not be as big a blow to Telemundo as its audience consists of more avid soccer fans, compared with those tuning in out of curiosity or to cheer on the U.S.

--Matthew Futterman contributed to this article.

Write to Joe Flint at joe.flint@wsj.com, Suzanne Vranica at suzanne.vranica@wsj.com and Lara O'Reilly at lara.o'reilly@wsj.com

(END) Dow Jones Newswires

October 11, 2017 19:24 ET (23:24 GMT)