How management explains the 17-point gap between Palmeiras and São Paulo

At the end of the 2008 Brasileiro, São Paulo won its sixth title with a difference of 10 points to rival Palmeiras (4th place). It was the third conquest in a row and the press discussed the possibility of a hegemony of the richest club in Brazil. Alviverde, on the other hand, was fasting for important cups.

Seven rounds from the end of the Brazilian-2022, the isolated leader Palmeiras has a 27-point advantage over São Paulo (12th place). The alviverde team is on its way to winning its third straight points title in six years. Meanwhile, Tricolor won the Série A for the last time in that edition 14 years ago.

The classic between the two rivals from São Paulo at Allianz Parque serves to reflect what has changed in this period for this change in realities. It is necessary to compare old numbers with current ones to understand how the managements of the two clubs evolved.

In 2008, São Paulo was the club that raised the most in the country: it had the most profitable stadium and youth division, in addition to good sponsorship agreements. In values ​​adjusted for inflation (IGPM), Tricolor São Paulo earned R$ 429 million that year. Its debt was well controlled: R$ 156 million (in adjusted values).

In the same year, Palmeiras was among the four with the highest revenue, but below the rival. There were R$ 368 million (in adjusted values) in revenue. Debt was also at low levels, although slightly above those of the rival (R$ 181 million). But his sports management was bad, he didn’t have a functional base division, he hired poorly and expensively.

What happens from there? The São Paulo board starts to accelerate investments in football, creates an expensive plan to reform Morumbi for the World Cup (it failed) and starts to lose institutional fights such as the Clube dos 13 dispute. Individual contracts by clubs take it from the top of TV collection, positions occupied by Flamengo and Corinthians.

Its base division continues to produce and sell players at scale: it was the most profitable in Brazil until recently. But the club makes mistakes with other sources of income: it makes a bad TV contract with Globo, lacking commercial and sponsorship income. His fan partner never scores like other teams. Morumbi becomes an older stadium compared to arenas made for the 2014 World Cup.

In 2021, São Paulo added BRL 476 million in revenues. That is, in the decade of the football boom, in which TV quotas, awards and transfers exploded, the club had an increase of only about R$ 40 million, considering the corrected values. Meanwhile, its debt jumped to R$642 million. This represents four times the 2008 figure considering the amount adjusted for inflation.

On the alviverde side, the board begins to put Palmeiras in a similar process from 2009 onwards. It started to assemble one expensive team after another, abandoning once and for all the good-beautiful and cheap policy that was in force until then. In four years, the club’s debt multiplies and reaches almost R$300 million at the end of 2012.

It is Paulo Nobre’s management that corrects the route: it reduces expenses, makes a large loan of its own capital to pay off debt, establishes staggered installments for payment. In terms of revenue, the club begins to restructure its base division. And it agrees with the sponsorship with Crefisa, which is a leap in commercial revenue.

In addition, Palmeiras is negotiating a better TV contract than São Paulo. Its Allianz Parque stadium becomes the most profitable in the country and this drives its partner-fan Avanti to a level well above the rival. Money for hires starts pouring in, but on a sustainable basis.

In 2021, Palmeiras totaled BRL 977 million in revenues. The value is inflated by two Libertadores and one Copa do Brasil awards, for two seasons in one. But the club’s income range is currently around R$ 700 million. In relation to 2008, Alviverde more than doubled its income in the period.

The net debt at the end of last year was R$ 434 million. It grew well above inflation, but was supported by an even greater increase in revenue. A revenue-to-debt ratio that is far less than the 1-to-1 ratio, therefore healthy.

Obviously, there were merits and pitfalls on both sides. This path taken by Palmeiras and São Paulo of reversing positions was not linear for 15 years. It is true that, in addition to their poor sports management, the big difference between the two was the greater ability of Palmeiras to adapt to the new way of generating revenue in a football club, while São Paulo stopped in time in this aspect.

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