12 Audibles: Does the CFL have a Toronto problem? A big-city problem?

12 Audibles: Does the CFL have a Toronto problem? A big-city problem?

Welcome to another week of 12 Audibles, our weekly look at storylines from around the CFL. This time around, we start with an off-the-field analysis...

1. Does the CFL have a Toronto problem? Through nine weeks of the season, one of the biggest off-season storylines hasn't worked out the way many hoped. The Argonauts' move to BMO Field was one of the most important stories to watch this year, and with a newly-renovated stadium, a tailgating experience and ambitious marketing plans, there was some optimism they might be able to break the recent cycle of playing well on the field and struggling off it. The question was still if fans would come, though. Things started off well off the field, with the team pulling in 24,812 for their season opener (short of the stadium's 27,000 capacity, but 95 per cent full, which is impressive considering where things had been) and more questions being raised about the team's on-field play thanks to a 42-20 loss to Hamilton. Since then, though, the official attendance hasn't been impressive; 12,373 showed up at BMO Field for a game against Ottawa (pictured above, from the Toronto's News blog), 16,048 were there for a game against Montreal, 15,063 were there against Winnipeg, and 15,157 were there against Edmonton.

Those numbers have provoked a lot of media discussion and even some apocalyptic talk, and it's easy to see why. That's an average of 16,690 fans per home game if you include that opener, 14,660 if you don't. Both of those numbers are way under the league-wide season average so far of 24,193 (as per CFLDB). Granted, there are some additional circumstances to consider; the Ottawa and Montreal games were on Wednesday and Monday respectively (but the Winnipeg and Edmonton ones didn't do better than the Montreal game, and they were on Friday and Saturday respectively), there have been issues with heat and with other events going on (such as preparations for that Honda Indy Toronto race, which made it harder to get to BMO Field for that Ottawa game), the team has played horribly at home (they're 1-4 there so far), and summer often sees a lot of Argonauts fans out of town at their cottages. Still, those Friday and Saturday games should have helped, as should have their cross-promotion with the ongoing Canadian National Exhibition. It is quite possible that this attendance could improve as the year goes on, especially if the team starts playing well at home and building some buzz, but let's first evaluate it for what it actually is right now. Is an average attendance of 16,690 or 14,660 disastrous for the Argos?

The answer is "not necessarily." Let's take a look at what the Argonauts' finances might be. The team is privately owned (split between Bell and Larry Tanenbaum's Kilmer Group), so their financial reports aren't public, but as we've done in previous years, we can get an estimate of what they're making and spending based on CFL finances that are publicly reported. There are two important numbers that we do know; the salary cap ($5.1 million this year) and the league dispersements to clubs (mostly revenue from the TV/radio/internet rights deal with TSN, but some other things are included in this; this was $4,204,850 per club in 2015, as shown by the Eskimos' financials.) Thus, each team will likely get around $4.2 million (maybe more; it was $4,344,817 in 2014) from the league, and they can pay a maximum of $5.1 million in salaries to players (with some caveats: for example, players on the six-game injured list don't count against the cap). So, even if the Argos spend right up to the cap, the biggest loss they could have from player salaries versus TV revenue would be only $900,000.

What are the Argos' other costs and revenues? Again, the Edmonton example may prove instructive, especially considering that Edmonton has generally been the lowest of the three teams that do report their finances. The Eskimos reported operating expenses of $22.8 million in 2015 (and operating revenues of $24.8 million, giving them a $1.6 million profit). For comparison, the Bombers reported operating revenue of $28.3 million and operating expenses of $23.9 million (a $4.4 million profit), and the Roughriders reported operating revenue of $39.3 million and operating expenses of $42.7 million (a loss of $3.4 million, which expanded to a loss of $4.3 million after adding in donations, rent and investment value changes)  It seems likely the Argonauts' expenses aren't much beyond Edmonton's, especially considering that the Eskimos have heavily invested in football operations in recent years.

What about their revenues? Well, we don't have enough information to really understand where they stack up in a few areas, but they may not be that different from teams we do know. Toronto's probably below Edmonton in merchandise sales (the Eskimos had $1,683,445 last year, a substantial rise over 2014), but they're not necessarily as far behind in sponsorships ($4,502,647) or concessions and game-day revenues ($3,993,919; yes, the Argos have had less people at their games than Edmonton, but they also may make some money from pre-game tailgating sales). That's all hypothetical, though. One area where the Eskimos certainly were ahead is in postseason revenue; they hosted the West Final and made $1.7 million off that, while Toronto didn't host a postseason game. Another area we can examine in more detail, and the only one that's directly related to attendance, is gate revenue.

The Eskimos brought in $8,620,735 in pre-season and regular-season gate revenue last year (for comparison, Winnipeg brought in $9.8 million and Saskatchewan brought in $15.7 million), and had a regular season home average attendance of 31,517, which would multiply to a total attendance of around 283,653 across nine home games, plus 11,825 from their preseason "home game" in Fort McMurray for a total attendance of 295,378. That means Edmonton brought in average revenue of $29.19 per ticket sold, which seems reasonable: some seats are cheaper than that, some are more expensive, and season ticket savings affect this. The Argos' season-ticket pricing looks a bit more expensive than the Eskimos', and their single-game tickets also seem a little more expensive, so we can probably assume that they're making at least as much per seat sold as Edmonton and perhaps more. That gives us an opportunity to estimate gate revenues for the Argos under a few conditions, as seen in the following sheet:

What the Toronto Argonauts' gate revenues might look like based on their reported attendances, the value per seat sold in Edmonton ($29.19), and an estimated value per seat sold in Toronto ($35). (Andrew Bucholtz.)
What the Toronto Argonauts' gate revenues might look like based on their reported attendances, the value per seat sold in Edmonton ($29.19), and an estimated value per seat sold in Toronto ($35). (Andrew Bucholtz.)

There are a few key takeaways from that. Even under the most favourable assumptions here (an average attendance that rises to 18,000 and revenue of $35 per seat), the Argonauts' $6.2 million in gate revenue would still be $2.4 million behind Edmonton, and they'd be $3.6 million behind Winnipeg and $9.5 million behind Saskatchewan. So, poor attendance certainly does hurt them. However, even under the least favourable assumptions here (an average attendance that plummets to 14,660, the current average discounting the home opener, and revenue of $29.19 per seat), Toronto still pulls in $4.3 million from the gate, and while that would put them $4.3 million behind the Eskimos, that isn't necessarily disastrous.

Remember, Edmonton made a profit of $1.6 million in 2015 and had $8.6 million in gate revenues; they also made $1.7 million from hosting the West Final, but spent $2.6 million on hosting and playing in the West Final and playing in the Grey Cup. Thus, if all other factors are held even, a CFL team that doesn't compete in the postseason would only need would need about $6.1 million at the regular-season gate to break even. Under the least favourable conditions here (presuming other areas of revenue and expenses are similar), the Argonauts would lose $1.8 million on the season. Under the most favourable conditions here, they'd make $100,000. Of course, this comes with caveats; we're presuming that the attendance figures are accurate, that the numbers of free tickets given out aren't significant enough to really tank the per-seat revenue, and that Toronto's other revenues and costs are in line with Edmonton's. Still, there's a way this team could even be profitable if they manage to boost their average attendance to just 18,000 and their revenue per seat to $35.

That's also before you consider that the Argos are hosting the 2016 Grey Cup, which is a big money-maker. Hosting the Grey Cup gave the Riders $9.3 million in profit in 2013 and the Bombers $7.1 million in profit last year. Thus, the Argos' losses this year should be more than covered by Grey Cup profits. Those profits should also provide enough money to hopefully cover losses for several years. Now, those profits certainly won't cover the team's losses indefinitely, and the league can't just keep handing Grey Cups to Toronto (which will have had two in five years now) to prop up the franchise, so the team does need to improve its attendance in order to become stable.

The Argos have deep-pocketed owners who appear to be in this for the long haul, though, and the attendance really isn't calamitous. It's well below other cities, sure, but it's a big gain over last year's 12,430 (affected by moving home games thanks to the Blue Jays playoff run), it's not far below their 17,791 in 2014, and it's not necessarily far from what the team would need to become at least revenue-neutral. There's reason to believe they may be able to get there some day, especially if they start winning at home. Someone who might help there is...

2. Ricky Ray. The Argos have really struggled since veteran pivot Ray was lost in Week Five against Montreal, narrowly edging Ottawa 23-20 on the strength of their defence before losing 34-17 to Winnipeg and 46-23 to Edmonton (both at home). In those last two games, primary backup Logan Kilgore has thrown for just 344 yards (with just 41 last week) and seven interceptions (with five in one game against the Bombers). The team clearly needs better play at the quarterback position. Hope is on the horizon, though, as the team announced Wednesday that Ray will start their next game (which is at home next Wednesday, Aug. 31, against B.C.). His return should provide some on-field optimism, and that might help the off-field results. What about...

3. Attendance in Montreal and B.C.? The CFL's other biggest cities have also come under fire for poor attendance, placing second- and third-worst respectively with average attendances of 20,191 and 20,715 respectively so far this year. However, estimating their gate revenue according to the process above (taking the average attendance, multiplying by nine home games, adding the preseason attendance, and multiplying by the average of $29.19 Edmonton made per ticket) gives $5.7 million for Montreal and $6.0 million for B.C. That's below the estimated $6.1 million gate needed to be revenue-neutral (excluding playoff revenue and costs), but it's also not disastrous, and it's much better than the situation in Toronto. The actual situation might be better for them too, as their per-ticket profits could be above $29.19.  Those attendances could still be improved, of course, but it's worth pointing out that this is becoming less and less of a gate-driven league thanks to the new TV deal.

Yes, gate revenues are still the biggest source of revenue (and even bad ones are above the estimated $4.2 million the league's handing out to each club annually), but the amount of TV money coming in makes it possible to be close to revenue-neutral even with lower gates. For reference, an average attendance of 20,997 per regular-season game plus 20,000 at a preseason game, at an average of $29.19 per ticket, would produce the $6.1 million needed to hit revenue-neutral under these assumptions. An attendance of less than 21,000 seems like an achievable target. Something to consider here, though, is that this only works because the 2014 CBA gives players only an estimated 18.5 to 22.7 per cent of league revenues, a staggeringly low percentage by professional sports standards. If the reorganized CFLPA puts up more of a fight in the next bargaining war and gains a higher percentage of revenues, the attendance needed for profitability would rise. Speaking of the CFLPA, they made some waves this week with a submission to an Alberta government panel investigating...

4. Worker's compensation. The CFLPA "is calling for CFL players injured on the job in Alberta to be treated like other workers when they suffer a workplace injury," and that's a very interesting discussion to have. In particular, this is important relative to the expiration of medical benefits;in some cases, CFL players are only covered for injuries sustained on the job for one year after the date of the injury. That's part of why we're seeing concussion lawsuits from former players like Arland Bruce III and Korey Banks. The CFLPA's statement includes some notable comments from executive director Brian Ramsey:

"Professional football players are no different than every working Canadian; they work hard for their employer and deserve to be included in the standards and protections that apply to anyone injured on the job. Most Canadians don’t realize that CFL players have very minimal coverage for accidents and injuries they sustain as part of their work as professional football players. In some instances a CFL player injured during the season only has access to medical and rehabilitation coverage for a one-year period relating to the injury date.  There is no insurance scheme to cover those injuries past that one-year window, nor is there salary protection for a following season.  This means that a player injured in the last regular season game can be without a paycheque indefinitely.   That outcome means many injured players fall back on the public health care system, which leaves Canadian taxpayers with the bill for those injuries.  We don’t believe that’s fair to players or to taxpayers."

Essentially, the CFLPA appears to be arguing here that Alberta's worker's compensation review should require the CFL and its teams in Alberta to meet standards expected of other employers in the province (which would then likely require the CFL to do so nationally, as they can't have different standards for different teams.) They might not succeed, but this is a very interesting tactic from the PA; it's focusing on an area (long-term health benefits) that hasn't always seemed like a high priority for the association, and it's doing so with an appeal to government rather than in CBA negotiations with the league. That's suggesting that this new-era CFLPA may be more willing to fight (and to fight for health issues as well as just raw salaries) than we've sometimes seen in the past. Also seemingly in a new era and more capable of fight?

5. The Montreal Alouettes. Just weeks after the Alouettes seemed in total disarray with little hope, they somehow summoned their best performance of the season and thumped the Ottawa Redblacks 43-19 on the road Friday. Quarterback Kevin Glenn played particularly well, throwing for 382 yards with five touchdowns and a 83.3 per cent completion rate, which earned him a nod as the league's top player of the week. The key question is if this represents an actual turning point for Montreal, especially on offence. This performance was almost perfect, but the Alouettes are just 3-5 on the year and have scored just 173 points (only ahead of Saskatchewan). If Glenn and the offence can keep playing at this level, a turnaround and a run to the playoffs seems possible, but we shouldn't forget how bad this team's looked at times just because of one win. Similarly, we shouldn't yet write off...

6. The Ottawa Redblacks. A 43-19 home loss to Montreal is bad news, certainly, but this team is still 4-3-1 on the year and first in the East. They've also looked like one of the league's best teams at times. A single loss doesn't dispel that. However, what is interesting to ponder with Ottawa is how things will change with...

7. Trevor Harris' return: The team announced soon after Friday's loss that Henry Burris will be benched Thursday against B.C. in favour of Harris, who's returning from injury. Usually, it wouldn't be an easy call to bench the reigning league Most Outstanding Player, but Burris has been inconsistent over the last few weeks, and while he wasn't terrible against Montreal (322 yards, two touchdowns and an interception, a 67.7 per cent completion rate) and certainly wasn't the whole reason for the loss, he wasn't playing at his best either. Meanwhile, Harris only got the chance to start thanks to a first-game injury to Burris, but was dominant in his starts, throwing for 1499 yards in four and a half games with nine touchdowns, a single interception and a 82.2 per cent completion rate. It certainly would seem to make sense for Ottawa to go back to him now that he's healthy. We'll see how he does against...

8. A fired-up Lions' team. B.C. has been one of the best surprises of the season, posting a 5-3 record to date and getting great performances both from their defence and (recently) from quarterback Jonathan Jennings, but both of those areas were flat in a 37-9 home loss to Calgary Friday. Jennings in particular struggled, completing just 10 of 22 passes (45.5 per cent) for 153 yards. That was one of the worst showings from the Lions in a long while, and it's one they'll need to be better than if they hope to maintain their place as one of the league's elite teams. By contrast, there's no question about...

9. Calgary's place at the top. In a year with a lot of odd results, the 6-1-1 Stampeders have been the CFL's most consistent and most dominant team, and they've succeeded in a wide variety of areas. Passing offence? Bo Levi Mitchell threw for 340 yards and two touchdowns against B.C. (with a 73.7 per cent completion rate) and is second in the league with 2,534 passing yards. Rushing offence? Jerome Messam ran for 65 yards and a touchdown (albeit with only a 4.3 yards per carry average) Friday, and is second in the league with 496 rushing yards. Scoring offence? Calgary has a league-high 248 points. Defence? The Stamps have allowed a league-low 161 points to date. The only blemishes on their record so far are a tie with Ottawa and a season-opening narrow loss to B.C., which helps in...

10. The CFL's transitive property. There have been plenty of odd results this year, and any team can be better than any other on any given day. In fact, they all have been. Calgary beat Saskatchewan, who beat Ottawa, who beat Edmonton, who beat Montreal, who beat Winnipeg, who beat Hamilton, who beat Toronto, who beat B.C., who beat Calgary. You never know what will happen in the CFL. On that front, this week's biggest mismatch looks like...

11. Saskatchewan at Edmonton. The 1-7 Roughriders are coming off their worst game of the year, a 53-7 thumping by Hamilton. The 4-4 Eskimos are coming off maybe their best game of the year, a dominant 46-23 road win over Toronto. Given that, you'd think that the Eskimos hosting the Roughriders Friday would be almost a guaranteed win for Edmonton. You never know in the CFL, though, and you can bet Chris Jones would love to turn the narrative around with a win over his old team. Still, this sets up as a mismatch, unlike...

12. Calgary at Hamilton. Sunday sees the league's best team, the 6-1-1 Stamps, host an on-fire 4-4 Ticats' squad galvanized by the return of Zach Collaros. Collaros threw for 381 yards and five touchdowns against Saskatchewan last week, and it will be fascinating to watch him and Mitchell go head to head. This one has potential to be a high-scoring shootout, and one that can illustrate the best the CFL has to offer. It should be fun.

Thanks for reading 12 Audibles! Stay tuned to 55-Yard Line for CFL coverage all week long, and come back here next Tuesday for the next installment of this column. You can also contact me with feedback on Twitter or via e-mail. Enjoy the games this week!

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