The purpose of this essay is to defend and reinforce a manifestation published in Estadão, on 12-4-2019, regarding the urgent need to professionalize Brazilian football with management rules and administrative efficiency, as the only way to its financial independence.
The best and most creative football in the world is in Brazil and definitely needs to be treated as an industry considering the importance for the national economy, job creation and payment of taxes. In recent years, we have seen a significant evolution considering the growth of almost 100% in club revenue in the last 8 years.
Just to illustrate the economic strength of football in the world, the first division of the English Championship annually generates almost €5 Billion while the Bundesliga around €4.5bn. Although it is important to note economic factors such as GDP and per capita income in these markets, these values demonstrate the capacity of the football industry to generate wealth for a country.
The evolution of this football industry in Brazil is mainly due to a movement of the local clubs. It is already possible to see winning models such as Flamengo and Palmeiras, which in 2018 represented a quarter of the total revenue of the 27 main clubs in the country. In these cases, the clubs still operate as non-profit associations, but have implemented a model change and long-term management projects.
Another interesting model is the case of Bragantino, which was recently acquired by the multinational beverage company Red Bull, which already owned another four clubs around the world and implemented a totally professional for-profit model (paying taxes regularly as any company) and already shows positive results within the field leading the national B series.
It is of extreme importance that the clubs reflect on the model that will be adopted taking into account that hardly a possible investor will have security to contribute financial resources in a team with an associative character that changes management every three years (or less) and that decisions are taken considering political aspects of the associates and not objectives as exist in the companies.
It is also imperative that a group of clubs that present difficulties in cash flow, high level of indebtedness and low recurring revenues assess the possibility of moving to a professional model completely removed from social activities to enable fundraising and positive financial and sporting results.
It is also worth mentioning other changes that currently occur in the Brazilian market. We highlight the opportunities that will be generated with the commercialization of the international rights of broadcasting, as well as the opportunities derived from sports betting.
In conclusion, the opportunities are at the doors of Brazilian clubs. There are bills under consideration in Congress that will encourage clubs to these changes considering legal certainty and differentiated taxation. However, we believe that clubs that anticipate the approval of the Law (without waiting for the time of the National Congress) will have an immense competitive advantage over the other competitors (opponents) and just as in any area, will survive only those who can adapt to the new reality of this increasingly professional industry.
Daniel Kalume, partner of Mota Kalume Advogados
Gustavo Hazan, leader of the Sports sector at EY
