Article published in Estadão

http://txt.estado.com.br/editorias/2008/03/19/esp-1.93.6.20080319.15.1.xml

Marketing increases club revenue

Earnings from sponsorship, advertising, and licensed product sales grew 40% annually from 2003 to 2006

Almir Leite

Marketing is rapidly becoming the main source of revenue for Brazilian football. A four-year survey, conducted from 2003 to 2006, based on the financial statements of 21 of the country's top clubs, shows that revenue from sponsorship and advertising grew by an average of 40% per year. In contrast, revenue from TV subscriptions increased by only 10%.

The increase in marketing revenues is due to several reasons. In recent years, this field has been better explored—although in practice, clubs are still in their infancy. One important factor was Brazilian football's adoption of the points system in the First and Second Divisions of the National League. This contributed to increased interest from potential sponsors.

"With this system, credibility has increased. Those who invest have visibility," says Amir Somoggi of Casual Auditores Independentes, the firm that conducted the study. "There's greater organization, the calendar is set in advance and adhered to. Football is more transparent."

2003 was the first year in which the Brazilian top flight was played in a home-and-away format. The analysis covers the period up to 2006, as the financial statements for last year have not yet been fully published—clubs have until April to submit their results. The 21 clubs selected for this study account for over 80% of the country's club revenues, which reached R$3,5 billion in the four years covered by the study.

In absolute terms, revenue from sponsorship and advertising still lags behind revenue from TV fees and athlete transfers (see chart). But the strengthening of this segment is more consistent. Revenue from television jumped from R$221 million to R$286 million between 2003 and 2006. And revenue from athlete sales jumped from R$169 million to R$227 million, an average annual growth of 16% (in 2005, it reached R$330 million and then declined). Box office revenue rose from R$46 million to R$79 million (an average increase of 20%). Marketing revenue, meanwhile, rose from R$58 million to R$168 million.

"Transfers are a seasonal thing," explains Amir. "In 2005, for example, the weight increased because of negotiations involving high values. The sale of Robinho from Santos to Real Madrid, for example (for around R$70 million). In 2006, the transactions were more modest." Based on this situation, the overall value of transfers should increase again in 2007, as Alexandre Pato alone went from Inter to Milan for around R$56 million.

FLAMENGO IN THE FRONT

Flamengo continues to be the club that earns the most from sponsorship and advertising. In 2006, R$24,436 million entered Gávea's coffers from sponsorships and activities such as licensing and sales of a wide variety of club-related products, starting with jerseys.

But São Paulo, which comes in second place (R$21,297 million), is more creative.

The Tricolor has invested in features such as the store located in Morumbi, mobile stores, and ongoing product licensing. "São Paulo receives 3% of its revenue from royalties. The average for other clubs is 0,5% to 1%," says the analyst. The Brazilian champion is, therefore, an example to follow. "São Paulo does a high-level job, but the main thing is for clubs to recognize the need to fully professionalize their marketing departments," comments Somoggi.