The CFL’s business model isn’t broken, its leadership has failed

The CFL remains in crisis mode due to the COVID-19 pandemic, but I remain unconvinced that its business model is broken.

According to their financial reports, the Saskatchewan Roughriders produce approximately $40 million in annual gross revenue. The Winnipeg Blue Bombers generate $35 million, while the Edmonton Football Team checks in at $25 million.

It’s believed that the CFL’s gross revenue in a non-pandemic year is between $200 million and $240 million. As such, we can project that the league’s six privately-owned teams average between $17 million and $23 million in annual revenue.

Commissioner Randy Ambrosie caused a sense of panic in May 2020 when he told the House of Commons finance committee that the CFL’s nine teams lose $10 to $20 million collectively each year. That number sounds scary on the surface, but it’s hardly overwhelming in context.

Annual losses of $10 to $20 million mean the league only needs to increase revenue by five to ten per cent in order to start breaking even. If teams had an equalization fund for gate receipts and Grey Cup revenue — more on that in a moment — the losses would be easy to manage across nine franchises.

The CFL had an average attendance figure of 22,917 in 2019, which was third-best among North American professional sports leagues. That number is better than MLS (21,310), the NBA (17,844), and NHL (17,377).

Fans were buying tickets to games before COVID-19 and they will again when it’s safe to do so. The league should try to become less dependent on gate revenue — ticket sales account for approximately 35 percent of revenue in Saskatchewan, Winnipeg, and Edmonton — but selling tickets to live events is still a perfectly viable stream of revenue in the entertainment industry.

The CFL also does relatively well on television with its TSN contract worth approximately $50 million annually. Partnering with multiple networks would be smart from a marketing and exposure perspective, but the deal is respectable.

The Grey Cup also remains one of the most-viewed television broadcasts in Canada every year. It often finishes in the top five to ten, particularly in non-Olympic years.

The game was a blowout in 2019 but still finished as the year’s No. 9 television broadcast with 3.9 million viewers. Four games of the Toronto Raptors in the NBA Finals were ahead of it (4.3 million to 7.7 million) along with the Academy Awards (5.2 million), Super Bowl LIII (4.3 million), The Big Bang Theory series finale (4.3 million), and Game 7 of the Stanley Cup Finals (4.2 million).

Virtually everything that tops the annual list for television broadcast ratings in Canada is American. The Grey Cup is the exception. The Grey Cup is ours. It’s uniquely Canadian.

The CFL’s business model is not broken. It’s far from perfect, but it would be perfectly viable with better leadership that can explore new sources of revenue.

According to Frank Cosentino’s book A Passing Game: A History of the CFL, the league’s gross revenue in 1976 was $12.9 million. This would equate to $59 million today with inflation.

The league’s television contract with the CBC was worth $1.5 million and player spending was approximately $750,000 per team, which is $3.4 million in today’s dollars.

This means CFL players got 52 per cent of league revenue in 1976. Today, they receive approximately 25 per cent. For comparison, NFL players will receive 48 per cent of league revenue in 2021, while NHL and NBA players get 50 per cent.

Taking inflation into account, the CFL’s annual revenue has quadrupled since 1976 and the value of its television contract has increased by 700 per cent. Meanwhile, player costs have only increased by a little over 50 per cent.

The CFL doesn’t have a broken business model. If its business model was ever broken, it was broken in 1976.

There have always been ebbs and flows for the popularity of the CFL across its various markets. Struggles in Vancouver, Toronto, and Montreal are hardly a new phenomenon.

Average attendance in Montreal fell from 23,192 to 12,022 over course of the 1960s. It was the league’s largest market at the time and declining ticket sales were of grave concern to its stakeholders.

The Grey Cup was hosted in Montreal in 1969 to try to boost interest in the league. Prime Minister Pierre Trudeau was a strong supporter of the festivities, even performing the game’s ceremonial kickoff.

The Montreal initiative worked with ticket sales doubling in 1970. The average ticket price was $3.70, which is the equivalent of $25.44 today.

In his Grey Cup report, legendary CFL commissioner Jake Gaudaur stressed that it was important “that as many federal government representatives as possible be familiar with what Canadian football really is.”

Has the CFL and its leaders made a conscious effort to consistently remind our political leaders how important, special, and unique the league is? I’m not convinced they have.

One of the ways in which the league remained healthy through its leaner years was an equalization fund. Wealthier teams would subsidize those who had struggled financially the previous year, helping ensure that all nine teams remained viable.

It’s hard to believe today, but two teams that received a lot of financial assistance over the years were Saskatchewan and Winnipeg. It’s tough to imagine Toronto, Montreal, and B.C. becoming CFL powerhouses in the future, but the same could have been said of the Roughriders and Blue Bombers in the not-too-distant past.

We also live in a world where new iterations of nostalgic properties are exploited for profit across the entertainment industry. Hawaii Five-0Magnum P.I., and MacGyver are all among the highest-rated scripted shows on television, while films like DolittleSonic the Hedgehog, and Bad Boys for Life dominate at the box office.

Nostalgic brands print money for Hollywood, but the CFL isn’t viable? That’s a joke.

I’m not an accountant or a corporate CEO. I don’t have access to the league’s exact financial figures, nor does anyone who’d be willing to disclose them on the record.

With that said, even I can see that the CFL generates plenty of annual revenue with lots of room for growth. It has solid attendance numbers, a strong television partner, and one of the country’s most popular television broadcasts of the year.

It’s disingenuous to say that the CFL doesn’t have a viable business model when revenue has increased so dramatically relative to its expenses over the decades. There’s money to be made. The league’s history proves that.

The CFL will never be a financial powerhouse like the NFL, but it doesn’t have to be. The CFL is an accessible product that provides high-quality entertainment and celebrates our country’s rich heritage.

I believe the CFL could become profitable again by 2022 or 2023 with proper leadership in place and that’s with or without the XFL.

John Hodge is a Canadian football reporter based in Winnipeg.