Third and long for building a better CFL

COVID-cancelled season could improve business fundamentals for foundering league

An empty concourse at the BC Lions’ BC Place home field will remain largely empty throughout 2020 | Chung Chow

The COVID-19 pandemic forced the Canadian Football League (CFL) to cancel its 2020 season, but the extended time off may give the league a chance to rethink its fundamentals to return on stronger footing in 2021.

For that to happen, however, officials and analysts say the league and its teams need to re-examine every aspect of their operations and consider a host of issues, including unconventional new income streams, improving financial transparency, controlling costs and revenue sharing.

“If this is not a wake-up call, then the league’s going to be dead,” said Justin Dunk, managing editor at leading CFL-specific news site 3DownNation.com and sports anchor at CHCH-TV in Hamilton, Ontario. “If the league is willing to be open to new ideas, the pandemic can be a positive. But if it passes, and we go back to the old CFL where every team looks out only for itself in nine different directions, then the league is not going to survive long-term.”

Revenue sharing and finding new markets

The CFL has always been seen as the North American professional sports league most likely to be the hardest hit by the pandemic because of its heavy reliance on ticket sales/gate revenue.

According to financial statements from the three community-owned teams, gate receipts accounted for 32% ($11 million, Winnipeg Blue Bombers), 35% ($8 million, Edmonton Football Team) and 43% ($17 million, Saskatchewan Roughriders) of a team’s total operational revenue. That figure is much higher than that found in the National Football League (NFL) (about 15%) and other professional leagues, said TSN football insider Dave Naylor.

When taking other game-day revenue such as concessions and merchandise sales into account, that percentage of total CFL team revenue would approach – or even surpass in some cases – 50%. More importantly, the CFL lacks a comparable central revenue stream. The TSN’s television deal nets approximately $50 million annually, which is divided among the nine franchises and the central league office. That figure pales in comparison with the NFL’s TV deals from three U.S. networks, which totals US$3 billion annually.

“What has been said for years without it being necessary is that the NFL can run just on TV money,” Naylor said. “They don’t even have to sell a ticket to function.... The CFL’s business model is to sell tickets and sponsorships. How do you replace 30% to 45% of your revenue if you don’t have fans in seats?”

So if the CFL is to emerge from the pandemic shutdown on better footing, it will need to expand revenue streams beyond traditional ticket sales, Naylor said.

One eventual answer can be the league’s CFL 2.0 plan launched by the league’s commissioner, Randy Ambrosie, in 2018, where the league holds combines for football players in Europe, Latin America and Asia to secure the best talent in those markets to come play in Canada.

“The direction of having an international quality for its players is driven by the idea you could secure digital broadcast rights out of countries like Germany, Mexico and Japan,” Naylor said. “You may not get a single large broadcast deal, but if you can get one in 12 countries, even at $3 million each, that would be a substantial boost to the league’s broadcast revenue.”

BC Lions President Rick LeLacheur said such an initiative is especially important for major markets like Vancouver, where the CFL has struggled in the face of stronger competition from other leagues like Major League Soccer (MLB).

“[CFL 2.0] is very important, particularly in Vancouver, Toronto and Montreal,” LeLacheur said. “These are very international cities. It’s very important to broaden our horizons and our appeal ... and while it’s not going to get accomplished overnight, I think we have to keep working on it, because once you get the best players from these other countries, that’s what creates interest from these countries and these communities.”

For Dunk, however, the CFL 2.0 plan is too vague and long-term to be considered an answer to the league’s current economic woes. He noted that the CFL needs to look closer at ways to make the product stronger in Canada – and that means embracing sub-sectors like sports betting, video games or other regional streaming product outside of the TSN national TV agreement.

“Sports betting is going to blow up, and the CFL needs to jump onboard with that,” he said. “And with a video game, even if you don’t have a season, you can have a video-game tournament where [Calgary Stampeders’ QB] Bo Levi Mitchell is playing [Saskatchewan QB] Cody Fajardo, and you can derive revenue from that.

“And while the CFL has a U.S. broadcast deal with ESPN, how much money are you getting from that? I think there may be an opportunity to go to border cities and states that may be interested in the CFL, to do regional digital broadcast deals where you can stream it to more people ... because that’s how younger demographics access sports right now. You need to get the game in front of eyeballs that don’t have access to TV.”

Dunk added that other football rule changes – such as mandating one Canadian quarterback onto each roster – could also increase local fan interest.

Reducing costs, sharing resources

There is, however, another side to the equation beyond revenue for CFL to achieve financial stability – cost control. The shutdown of the league for one season has put a bigger spotlight on operational and cost inefficiencies, and the CFL head office laid off or furloughed 29 staff members in late August – leaving 41 employees performing critical tasks, the league said.

The cost issue, especially in teams’ front offices, has already been noticed prior to COVID. The CFL decided previously that the non-player football operations salary cap will drop from $2,558,000 before the pandemic to $2,070,400 for next season, although the league decided not to enforce a tighter limit on the number of personnel (managers, scouts, coaches, etc.) a team can have beyond the current maximum – 11 for coaches, 14 for all other front-office positions.

LeLacheur agreed that cost is an issue that CFL teams like the Lions must now address more than ever.

“I think we recognize that, as a league that’s fan-driven, we need to get our costs in order,” he said. “It’s like any business; you have to look at revenue and expenses.... We are looking at everything, wherever we can. We have to learn to be able to do more with less.”

Part of the solution, Dunk said, may be to share resources with others where possible. He noted that in places like Toronto and Hamilton, where the same ownership group owns both the local CFL and soccer teams, front office staff can be shared between the operations.

Some CFL team duties may even see a centralized, league-run approach, he added.

“I think you will see a smaller number of people working in the league office, and teams will potentially reduce their staff and share resources,” Dunk said. “The example for me is the Hamilton Tiger-Cats and Forge FC, and a lot of their employees are doing things for both teams. So at the league level, maybe a person will work in the league office for the teams, but they will also have a role on the league level.

The conversation of sharing league resources naturally leads into the discussion on revenue sharing, where stronger teams would subsidize weaker clubs to ensure the league’s overall survival. That, said Naylor, had been considered several times before but hit similar roadblocks each time.

“For example, Maple Leaf Sports & Entertainment Ltd. owns the Toronto Argonauts,” he said. “And the wealthiest team in the CFL in terms of revenue is the Saskatchewan Roughriders, which is a publicly owned team funded by ordinary people who reach into their own pockets to buy tickets. If you are really prepared to share revenue, you have to be prepared for the Saskatchewan Roughriders to send money to MLSE – the same company that pays Kyle Lowry $650,000 a game.

“The optics of that, as you can see, is challenging.”

Then there’s the issue of player compensation, where about 30% of revenue generated goes to CFL players’ salaries – much lower than in other sports leagues. Any attempt to bring cost efficiency to CFL players’ salaries will require the league to be more transparent than ever with its books to get the CFL Players’ Association onboard with whatever moves are needed.

“There has been a sense that the league doesn’t value the voice of its players … and a suspicion among the players that the league is more profitable than the owners say it is,” Naylor said. “Now, I don’t necessarily believe that’s true. But there has to be some transparency and clarity so that the players can understand what the business is and is not. What you have to do is to get both sides in and open the books; we are in challenging times, so let’s see what those challenges are.”

Viability, with and without football fans

There is hope, however. LeLacheur noted that the Lions have been happy with the number of season-ticket holders who chose to forward their credit to next season. There has also been significant participation in the “Grey Cup fan base” project, where fans can buy spots to put their names on a new base where the Grey Cup is housed.

Corporate sponsors have been loyal as well, LeLacheur said. The team has been able to fulfil its sponsorship obligations by using its social media channels, website and contests, and plans for family-friendly setups at games in 2021 remain in place to attempt to attract a younger demographic of fans.

However, the elephant in the room remains: will the pandemic subside enough in 2021 to allow fans back into stadiums? LeLacheur said the Lions are operating under the assumption that it will.

He added that the team is considering a wide range of social-distancing measures for BC Place Stadium.

Meanwhile, both Naylor and Dunk are skeptical that a 2021 season will happen if fans are still barred from the stadiums – given the CFL’s reliance on gate receipts to operate. That’s a model that will have to change for the long-term good of the league, Dunk said.

“The Canadian Elite Basketball League just had a summer tournament. The Canadian Premier League for soccer is playing games. Those leagues have been around for one year. Now, it’s different because they are in the startup stage, but people who are in the CFL – especially the owners of private teams who have been around for a long time – they have to make a decision to be forward-thinking of where the league can be.”

Naylor, however, said reports of the CFL’s demise have been greatly exaggerated.

“None of us knows how long COVID is going to last. None of us knows whether there will be fans in seats in 2021 or even 2022. But there will always be a Canadian Football League, and here’s why: there is a surplus of talented football players in North America. You’ve got half a dozen stadiums in this country that are either newly built or significantly renovated, just in the last 10 years. You have a television network in TSN – my employer – that makes the CFL its most important product between June and November. If you can have a survivable ownership structure with those components, you’ll have the CFL.” •