London, May 2007

Brazilian football is experiencing a rare moment of change in its commercial development process, thanks to the creation of an environment of genuine competition for TV rights, for the first time, in the words of a local club director.

In an exclusive interview with Sportcal, Ricardo Hinrichsen, Flamengo's Vice President of Marketing, said: "If we are able to take advantage of the situation, there is an opportunity for us to reach another level."

TV Globo, which holds the rights to the Brazilian Championship, is being challenged by TV Record, which claims to have offered around R$500 million per year for the rights, compared to the R$300 million that Globo pays per year, in a contract that ends this year.

Flamengo, the club with the largest fan base in the country, is considering partnering with Corinthians to negotiate the rights separately, unless the other clubs agree to a distribution formula that reflects the two clubs' greater audience power, he said. "If we negotiate jointly, it will be very difficult for any TV network to sign an agreement without both clubs."

Currently, revenues are distributed among three categories of clubs, with Flamengo and Corinthians receiving the same amount as clubs like Vasco, São Paulo, and Palmeiras. Flamengo believes this formula should be revised, as it groups together clubs with 3 million fans (Flamengo) and 35 million fans (Corinthians), with others in the range of 25 to 5 million.

A recent study commissioned by the clubs to use a new distribution methodology was ultimately discarded due to a lack of agreement between them. The clubs are expected to meet soon to devise a negotiation strategy, and Ricardo has already announced that it has been decided that if the club needs to stand alone—along with Corinthians—it will do so.

Other factors contributing to this positive momentum include the approval of Timemania and the expectation of hosting the 2014 World Cup. Most clubs are heavily in debt, including Flamengo, which plans to use lottery revenue to pay off debts over the next 10 years. Despite this, the promise to repay its debts improves the club's situation, which now qualifies it to receive sponsorship fees from Petrobras, which is currently not the case due to the club's fiscal situation.

Knowing that the fan base represents an attractive potential market, Hinrichsen plans to pursue smaller sponsorship categories, even if only half of the fans can be considered “potential consumers.”

The club plans to build a new arena for 30 people at its headquarters, which represents a new market segment that is still largely unexplored here, such as hospitality and corporate spaces, for example.

However, this new development is highly controversial and has significant political implications, as the higher price tag will prevent many fans from watching live matches. According to him, the trend for the 2014 World Cup is for more "democratic" stadium seating, but for most of the seats to be used to generate higher revenue.

The club is also in talks with the American company Bonham Group, a naming rights specialist, to bring in new sponsors for the arena. Another negotiation involves Warner Brothers, interested in developing a licensing program for the club's brand, as was recently done with São Paulo.

Other initiatives include a new website and a fan engagement program, which will allow the club to understand its fans' spending habits, for example. According to Ricardo, "with this in hand, I can close better sponsorship and licensing deals, as currently it's a shot in the dark."

Many of these initiatives, common among European clubs, are new to Brazil. Even Flamengo, the country's largest club, has only had its own marketing department for two years.