GLOBE & MAIL NAYLOR & BRUNT TWIST ON $ ASPECT OF THE

The latest version from both writers, who are generally pro CFL. Naylor forgets(?) to mention how the Grey Cup was a windfall and a profit or $3M+ and also how the losses sustained by the disfunctional owners were written of financially and is/can be a winfall.
As for Brunt, he has been anti CFL of late and this from a guy who was previously a huge supporter. In fact, he rarely writes on the positives and is starting to remind me of Marty York.

From goal line to red line
The dying Renegades are just the latest in a long line of Canadian Football League clubs that lurch from crisis to crisis. The product isn't the problem. The bottom line, DAVID NAYLOR writes, is that the business model doesn't work
DAVID NAYLOR

OTTAWA -- In many ways, the past decade has been a period of great prosperity for the Canadian Football League.

Overall attendance is the largest in league history and the league's television numbers are strong, anchored by a string of wildly successful Grey Cup games. The product, as always, has never been an issue.

But, yet again this past week, the league was asked to come to the rescue of one of its teams when the owners of the Ottawa Renegades concluded they simply can't make a go of it.

Dating back to the insolvency of the B.C. Lions and Ottawa Rough Riders in 1996, through the near-collapse of the Saskatchewan Roughriders a year later and the Hamilton Tiger-Cats' and Toronto Argonauts' receiverships of 2003, Ottawa became the sixth CFL franchise in less than a decade to come begging to the league for life support.

Add in the serious financial scares of the Winnipeg Blue Bombers and Montreal Alouettes during the past decade and the league is averaging nearly one financial calamity a season since the dream of U.S. expansion died at the end of the 1995 season.

The question many CFL fans are asking is why?

Why does a league that at times appears to have so much momentum lurch from crisis to crisis, each time delivering self-inflicted blows to its credibility?

The answer lies in the bottom line.

"The basic business model is broken," one former club official said. "You can't sell enough tickets and sponsorships to cover your expenses in most instances. It's systemic."

Understanding the difficulty of a business that spends more than it takes in may seem like a simple matter. But it's one the CFL has yet to adequately confront.

The original owners of the Ottawa Renegades learned that after paying $4-million for an expansion franchise in the fall of 2001. The Renegades lost $4-million that first season before taking on $6-million more in losses over 2003 and 2004. With no end in sight, the group decided it wasn't prepared to lose more, opting instead to welcome former Rough Riders and Shreveport Pirates owner Bernie Glieberman as the majority owner last spring.

"At some point it just becomes a basic business proposition," said Randy Gillies, one of the Renegades' original owners, who exited the picture after the 2004 season. "You have to be able to generate enough revenue to offset your costs."

Gillies's CFL experience stood in contrast with that of his other sports venture, the National Lacrosse League's Toronto Rock.

Though the Rock are a smaller operation than a CFL team, the club's expenses are significantly less and it generates a profit. As a result, the owners have not only made money, but also have seen their equity skyrocket in terms of franchise value. A similar phenomenon exists in major-junior hockey, where many franchise values are approaching $5-million.

"It's a basic equation," Gillies said. "Our revenues meet or exceed our cost base and our cost base is controllable because of a number of things.

"Obviously for some markets, the CFL business model works, and in others, it's a challenge. I think that may be one of the things the league has to look at: how to balance between some of the stronger markets and the weaker ones."

Not all CFL clubs lose money. But the ones that turn a profit year after year, such as the Calgary Stampeders and Edmonton Eskimos, are in the minority.

In most markets, factors such as poor on-field performance, injuries or bad weather can mean the difference between a chance to break even and multimillion-dollar losses. In markets where CFL teams are owned by wealthy businessmen whose love for football exceeds their degree of financial pain, the damage is minimal. But where that's not the case, such as with publicly owned teams in Saskatchewan and Winnipeg, it means a crisis.

Winnipeg president Lyle Bauer recently suggested his club would forecast a loss this season for the first time in five years, raising the question of how much the league's new $3.8-million cap on each club's player payroll is really going to help.

But Bauer, like Hamilton owner Bob Young, has long since abandoned the notion of relying on the football team alone to generate enough money to cover expenses. Which is why both clubs have ventured outside the box to other related businesses, such as managing sports events and sports websites in order to create a more workable business model.

"There's no question it's a tough business to manage," Bauer said. "The margins are always slim and the margins for error are even slimmer. I believe the best model is the Eskimos, but people like us could only hope for 41,000 in average attendance. So we have to find new ways to generate revenue, which we are.

"In our case, we've negotiated a situation with the city where we operate the facility where we play and there are other opportunities that we will examine. With a limited market and limited stadium, you have to create other opportunities, and most of those are not football-related."

Sources said Ottawa Senators owner Eugene Melnyk might have had some interest in the Renegades if he could have gained control of managing Lansdowne Park, where Frank Clair Stadium and the Ottawa Civic Centre are located. That structure would be similar to the model being developed in Winnipeg.

"You can only extract so much from football entertainment, so if you expand it to other things, it opens the door wider," Bauer said. "You have to be creative and inventive to feed the beast because the cost of football will not go down."

There is one way the league could make the cost of football go down. That would be to slash player salaries drastically, making them closer to those of NFL Europe, where the average salary is roughly $20,000 (U.S.), compared with the projected $80,000 average for the CFL this season. While evidence would suggest players would play for a lot less, Bauer said that's not a direction the league is prepared to go.

"If you start cutting into those salaries, you'll lose guys because it's not worth the price they pay with their bodies," Bauer said. "I think the player compensation issue is the least of our concerns. What you're suggesting is a non-starter because it would reduce the product and the players are the product."

Adding it up

Ottawa Renegades' sample budget from 2002-04 (estimated):

Income

Ticket revenue: $5-million.

Sponsorships: $1-million.

League distribution: $1.2-million.

Concession/merchandise:

$0.7-million.

Total: $7.9-million

Expenses

Players/coaches salaries:

$6.5-million.

Travel: $0.5-million.

Marketing: $2-million.

Rent: $0.5-million.

Administration: $1-million.

Total: $10.5-million

Loss: $2.6-million

$4-million

What the original owners of the Ottawa Renegades paid for a CFL franchise in 2001.

$4-million

What the Renegades lost in 2002, their first season.

$6-million

What the Renegades lost

in 2003 and 2004 combined.

$5-million

The Renegades' projected

loss through the 2006 season.

$0

What the CFL is willing to accept for the Renegades now, provided the new owners agree to pay all the bills.

"The basic business model is broken. You can't sell enough tickets and sponsorships to cover your expenses in most instances. It's systemic."

Former CFL team official

From goal line to red line
The CFL should set modest and realistic goals off the field, STEPHEN BRUNT says, because the unique on-field sport is still great

STEPHEN BRUNT

E-mail Stephen Brunt | Read Bio | Latest Columns
For the better part of a quarter of a century, the Canadian Football League has been fretting about what it wants to be when it grows up.

On the face of it, that might seem ridiculous, given the game's long history in this country, which stretches back to the very origins of North American football in the mid-1800s.

But it's the business side of the game that's the issue, not the sport and not the culture. And ever since the league's ambition began to outstrip its means -- about the time a wonderfully lucrative television deal negotiated by outgoing commissioner Jake Gaudaur turned out to be a one-time windfall and not the beginning of a trend -- the league has struggled with ways to get bigger, or simply to get different, in order to pay the bills.

We may be losing bags of money as currently configured -- so the mantra has gone under a series of commissioners -- but when some day we become this other, slicker, richer thing, everyone involved will be swimming in profit, will see their franchise values vastly increased and will be mighty glad they got in on the ground floor. (Yes, there are shared elements with a pyramid scheme.)

The most obvious example was the disastrously executed expansion into the United States, a move borne out of pure desperation at a time when league extinction was a real possibility. But even the more recent theory that the CFL needed to become a 10-team league with the addition of Halifax or Moncton, finally stretching from coast to coast, originated in the belief that the sport had to be headed somewhere in order to survive, long-term.

This week's implosion of the Ottawa Renegades ought to bury that notion for the time being, and perhaps forever, given that the Maritimes still lack both a stadium and potential owner and given that the last expansion team crumbled because it couldn't find a way to stay out of the red.

A perfect time, then, to take stock of what the CFL is and what it isn't, to wonder whether existing as a modest, eight-team loop in which at least a few people find a way to make money might be goal enough.

The foundations of its business -- gate receipts and television and sponsorship revenues -- won't be altered dramatically whether or not there are franchises in Ottawa or Halifax or Quebec City, other than to be divided into one or more extra shares. There's a strong national audience, especially for the playoffs and the Grey Cup, and for ticket-buying fans in the member cities. The potential number of visiting teams has never been the issue.

People will pay to watch the games in person in numbers that are historically consistent (with a few peaks and valleys in individual markets), and people will tune in on television, even when the CFL occasionally falls out of fashion. There is also added value in the league's history, in its continuity and in its cultural currency. It's not just some rootless, fly-by-night sport that's been imposed on the country.

That's pretty much the entire story, and it's not about to change dramatically. There are no new markets, new media or new opportunities outside Canada's borders that will dramatically alter the picture.

So the challenge is finally learning to live within those bounds, made more difficult by the league's own class divide.

Right now, there are two models for CFL ownership. One is the community team, which has only ever been successful in the West, which relies on grassroots commitment to the cause and which is the first to be affected when operating costs far outstrip revenue because, by definition, it can't operate at a deficit for long.

The other is wealthy hobbyists who aren't quite big enough players to get involved in the National Football League or National Hockey League, but want the fun and the ego boost that come with being at the helm of a professional sports franchise. They can make life tough for their community brethren because for them, losing money to win more games is often treated as a viable option.

If there were an endless supply of rich guys, happy to blow the kids' inheritance on CFL teams, perhaps reining in the league's cost structure wouldn't be an issue.

But assuming that's not the case, assuming that stumbling from cash crisis to cash crisis is no one's goal, perhaps it's time to finally cut the CFL to fit.

It's a great little league, and, especially, it's a great, unique game. That's enough, and that ought to be preserved.

staying status quo with 8 teams will get boring within 2 to 3 years, and u will see a decline in attendance and ratings and the league will go into crisis mode again....

gotta grow to 10 teams if the league is gonna get outta crisis mode forever....once the league gets good owners in ottawa, QC or halifax and get to 10 teams, u will see stability and amazing levels of popularity, and videogames....which will have the countrys media and fans talking about the CFL second only to the NHL....the CFL will see profits all across the board.

maybe they should try to hire the nfl commisoner after all hes retireing and he made the nfl to what it is today or at least give tom advice

Agree DG, that's why the league cannot go backwards whatsoever and folding or suspending the Gades is a step back. Perception what it is, the Southern Ontario and other ant CFL media will have a field day.
If Melnyk is waiting in the wing at year end or perhaps another owner in Ottawa, the league has to prop up. I would even go as far as to say even if there is no viable owner in Ottawa, run the team like there is one so the fans will come out and if not, sell to QC .
Plus, the Gleiberguy if you believe him said he will underwrite the entire cost if the league loans him their share. Eventually paying it back. Because he said about having a moral obligation?

6.5 million for Player/coaches salaries?

Can anybody say salarie cap?

imo, the league should move up their schedule for expansion into Halifax, QC, Windsor or anyother eastern city that wants a team and stick them into whatever stadium is available.........that way if ottawa cant make a go of it you already have a foot hold into another market......although I have to think that ottawa will pulll through this somehow.....

Perception is everything - the anti-CFL media, which is only just now starting to quiet down, will have a field day if the Renegades don't play this season. (But I don't think an 8-team loop would necessarily get boring ... this is the CFL, after all - boredom simply doesn't exist here.)

But Pigseye, I disagree about ramping up the expansion effort while there is still a team in dire straits ... Moving the Renegades (Quebec City is the only really viable option, considering their stadium, at this point) is still the second-best result (after keeping the Renegades in Ottawa). Solve the Renegades situation, make sure you can keep around that 9th team - whether in Ottawa or QC - before worrying about the 10th.

with the exception of the situation in ottawa, the cfl has never been hotter as it is right now, the league has to recognize this and strike while the iron is hot.........who is to say that in 4 to 6 years the mood will be the same, full spead ahead I say and if ottawa gets left behind well c est la vie.........

I don't like the idea of rushing expansion...isn't that what caused the problem in Ottawa? Rather than waiting until things were done properly, with stable, committed ownership, they pushed it through in a hurry...and now we're wondering whether the team will be here this season.

Do it right. Fix the Ottawa situation. Once they're on firm ground, hopefully in Ottawa, look to expand to the east coast...and do it right, do it slowly. I'd rather have 8 teams this year, 9 for 2007-2010, and 10 for 2011 and into the distant future than 9 teams this year, 10 in 2007, 9 in 2008, and 8 in 2009.

If you moved Gades to Halifax, they'd play out of an 11,000-seat stadium --- IF they kept temporary seats from exhibition games.

Someone can do the math more precisely.

But, assuming, $8-10 million is average for operating expenses and factor in $1 million as their share of TV money, that leaves $7-9 million to make up in revenue.

And you can't expect squat in sponsorship by transplanting a team into the area when you have no idea if it'll fly --- especially 2 mths before season or even next year.

But let's for arguement's sake say you get $1 million in sponsorship and other revenue, we're down to $7-8 million.

So 11,000 seats divided by even $7 million times 9 games would mean an AVERAGE ticket price of about $70. That's assuming 9 sellouts.

Somehow, the Ottawa situation looks more realistic.

No way is CFL is going to even consider further expansion until Ottawa situation is dealt with.

Regardless of what happens, this has pushed any timeframe for expansion anywhere back several years past the most optimistic estimate.

Stephen Brunt wrote:

It's a great little league, and, especially, it's a great, unique game. That's enough, and that ought to be preserved
. Interesting comment. The use of the term "little league", well, I might say it's a great non-major league that is Canadian. Yes, great, unique game for sure.

Now for the preservation part. I assume he means the CFL because our game as we know it, including the Grey Cup championship, will be here long after if the CFL should ever die. Our universities will keep it going and one part of me says the Grey Cup will then be even more of a national championship on a different scale as you will have so many cities that have teams vying for it, and where almost 100 percent of the players will be Canadian. Not bad, I will say.

Don't get me wrong, I don't want the CFL to die but it doesn't mean the end of Canadian football at all or the Grey Cup, and I think this is worth noting.

The salary cap was raised too much. Not enough money was set aside for the two regional offices to make sure teams comply with the cap. The CFL is a small league with little margin for error yet the bar to be competitive has been set pretty high. Player salaries in NFL Europe are much lower. As for the Arena league, it's season barely overlaps the CFL season making it possible for a player to play in both leagues in the same year (as a few have).

...the most sensible approach to this serious siutation I've read yet..... :arrow: