Fri Dec 24 04:17pm EST
Amidst the stadium debacle in Hamilton, it would be easy to forget that the Winnipeg Blue Bombers finally found some resolution to their own stadium saga last week. It's probably not a perfect deal for the club, but unlike in Hamilton, a deal has been struck. The key question with that deal was how exactly the Bombers were going to be able to pay off their $85 million contribution, though. This week, we got some partial answers with the club's release of their funding plan, and that plan tells us some interesting things about the state of the CFL's economics.
The Bombers say their contributions to paying off the debt will be in the neighbourhood of $4 million annually over 44 years. They're expecting to do that through four revenue streams, each projected to raise over $1 million. Those streams break down as follows:
—Attendance/corporate/amenities: This category is what most people think of in terms of football revenue. It includes both average ticketholders and corporate suites, as well as concessions, club and lounge seating, parking and other such things. The projected average attendance (28,000 out of a 33,000 capacity) seems reasonable; despite a 4-14 season this year, the Bombers pulled in around 28,000 fans for several games in the old Canad Inns Stadium (pictured above), so it would seem plausible that they could draw at least 28,000 on average in a new facility with a hopefully-better team. Also crucial will be the corporate suites, which are often the real money-generators in professional sports these days. The new stadium will have around 40 corporate suites, and the Bombers will need to do a good job of selling those.
—Naming rights and sponsorships: This includes the primary stadium naming rights, secondary rights inside the stadium and other corporate sponsorships that go beyond buying suites. For example, some CFL teams have first downs, touchdowns, quarters or other in-game events presented by a certain company; many also show ads on the big video screens at times. It seems quite plausible to pull in at least a million in this category, and the primary naming rights in particular could be a very valuable property. The CFL's national television ratings continue to rise, with an average of 876,000 turning in to each game this year on TSN and RDS. That interest in the game across the country makes stadium naming rights more valuable, particularly if they're sold to a company with a national presence. Think of how many times a stadium's name is referenced on-air in an average TV or radio broadcast (or a written live blog or game report, for that matter). With growing interest in the CFL, that's incredibly valuable exposure, and its value could continue to grow over the term of this deal. We don't know where the CFL will be in 44 years, but the trends at the moment (more viewers, younger viewers, et cetera) are certainly positive.
—An increase in the facility fee. This is something that's built into the price of Bombers' tickets. It currently sits at $2, but will rise to $3.50 next year and $6 the year after in the new stadium. Obviously, the main thing this depends on is attendance. With an average attendance of 28,000, a $6 facility fee would work out to $168,000 per game. Over nine regular-season home games, that translates to $1,512,000. A home playoff game or two obviously boosts that further. This is a pretty decent way to get revenue; yes, it makes tickets more expensive, but $4 per person isn't likely enough to make many reconsider buying tickets, and that money adds up.
—Recouping the entertainment tax. This is something else that's also built into the price of tickets. Unlike the facility fee, it's not going to increase in the new stadium, but it is going to start going to the club. It's currently going to the city to pay off debts from Canad Inns Stadium, which will be completely repaid in 2013. There's no information in that article on how much this tax is, but again, the revenue raised from it depends on the attendance. If the club can hit their attendance projections, they should be able to get the needed million out of this.
Of course, a football team's expenses go well beyond just paying off their debts. They have to pay players, coaches, executives and front-office staff. They also have to pay for equipment and stadium upkeep, and there are advertising and promotional expenses necessary to bring in crowds. Fortunately, there are enough revenue streams that the Bombers at least seem likely to be able to do all that as well.
For one thing, the gross income from regular attendance and corporate seats is clearly in excess of the $1 million needed to pay off that portion of the debt. The team's projecting $1,512,000 per year just from a $6 facility fee per ticket; they'll clearly be pulling in much more than that from the rest of the price on average tickets. There should be more in concession revenues and corporate suite revenue as well. Some of that money's likely going to pay off costs involved in running the team, so the net income from that stream (before debt payments) may be closer to $1 million, but they should be generating far more than $1 million from all the items enclosed in that first revenue stream.
It's also notable that there's no mention of television revenues anywhere in the debt repayment. TV money's becoming more and more important in all professional sports, and it seems likely that's only going to increase as the years go by. TSN's stellar ratings (the CFL on TSN has the highest average rating of any TSN program, including their weeknight NHL games) are reinforcing the importance of the league to television, and that should lead to an even more lucrative TV contract when this one comes up for negotiation. That's another significant source of money that's likely earmarked to pay off team costs rather than the debt.
A final element to keep in mind is the importance of the Grey Cup. Hosting a Grey Cup is generally a huge economic boost for not only the city that reels it in, but also the club. Commissioner Mark Cohon said at his state of the league address this year that the Grey Cup's hopefully going to head to every market in the near future, and a new stadium in Winnipeg certainly gives the league impetus to return there. With smart financial management, the Bombers could haul in enough extra revenue from the Grey Cups they host over the 44-year span of this agreement to pay off team expenses and their loans in down years.
What's interesting about this debt plan is that it's so heavily reliant on average attendance, though. That's very much against the flow of many professional sports, where the key dollar streams are becoming corporate and TV. Three of the four areas (everything except naming rights, and even that depends on attendance to a degree) marked for debt repayment are directly dependent on how many people the Bombers are able to get in the seats. That's becoming a tougher sell to many with the advances in television that sometimes make it more compelling to watch from home, and that's going to necessitate the Bombers creating a strong game-day experience. That might include different promotions, unique food and drink ideas, or other elements (pre-game tailgates, perhaps?), but the most important element for attendance is a good team. If the Bombers can deliver a strong on-field product, the rest will probably follow, as this plan seems workable if they're able to keep the fans coming. If not, they could run into some challenges.