Brazilian Soccer’s Outmoded Ownership Model Limits Growth – Consultancy
RIO DE JANEIRO, BRAZIL – Brazilian soccer clubs continue to work under an old model, which limits their growth. Such is the finding of a study prepared by EY consultancy that analyzed the organization of clubs in Brazil and in other regions such as Europe, where the corporate club is more common.
Under the corporate model, clubs have investors and follow rules different from the membership model, which is more prevalent in Brazil.
“The first conclusion is that abroad most clubs are private, and here the majority are membership clubs. They are clubs that, like a city, have regular elections and follow rules whereby clubs are not allowed to make a profit. This model could have worked in the past, when clubs had revenues of 50 million. But nowadays soccer is an industry”, says Pedro Daniel, EY Sport Market CEO.
According to the study, among first division teams of the five major soccer leagues in Europe, 92% are organized as corporate entities. In Brazil, 92% of clubs in the first and second divisions of the national championship are non-profit associations. The exceptions are Red Bull Bragantino, Cuiabá and Botafogo of Ribeirão Preto.
A bill under debate in Congress contemplates the creation of corporate teams in Brazil. According to the text, clubs may choose to cease being an association and become a company, with tax benefits and debt renegotiation. The text has already been passed in the Chamber of Deputies and needs to be passed in the Senate.
According to EY experts, a key advantage of the business model is to provide greater sustainability and long-term vision to the operation.
“With a management of about three years, the club manager will end up focusing only on the short-term. In Europe, clubs have become internationalized, content producers, these are long-term projects that you can’t build thinking only about the next two or three years,” says Daniel.
Another major point is the clubs’ financial health. “In many cases, clubs are heavily indebted in the short-term. If they were a company, they would be under judicial reorganization”, says Gustavo Hazan, EY’s Sports Market senior manager.
Under the corporate model, club leaders have greater responsibility for their decisions as individuals, which encourages increased responsibility in decision making.
Converted into a company, these clubs would have a greater capacity to attract resources, improving their financial health and their management to prevent financial squeeze situations in the future. And, with a clear regulation, there are more chances of attracting serious investors, who contribute more consistently to the club’s growth.
In the study, EY analysts found that, with the exception of England, other leagues have predominantly national investors. And in countries like Italy, Spain and France national investors, in their majority, have some personal link with the club or are entrepreneurs in the region. Foreign investment in European teams comes mainly from the United States and China.
Another study by EY in 2018 showed that the soccer production chain generated R$52.9 billion that year, and estimates that this chain had an impact of 0.72% on the Brazilian GDP. The analysts estimate that, with changes in sector regulation, this market size could be doubled.
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