The middle third: how the CFL’s in-between teams are doing on the financial front

One of the key disputed points in the ongoing CFL labour strife is just how profitable the league and its teams are. The players obviously believe they can ask for a substantial pay hike given the massive increase in TV revenues this year, but while the league has agreed they deserve a smaller boost, it maintains getting any closer to the players' proposal would be disastrous for a majority of its teams. Who's right? Let's look at the numbers. In its own statements, the CFL breaks its nine teams down into three distinct groups of three in terms of profitability. Here's a look at the middle one. See also our pieces on the bottom and top groups.

Analyzing the CFL's different financial situations gets particularly interesting when you consider the middle three teams, the ones that the league says would break even or make money under its own proposal, but lose money under the players' proposal. The players are apparently asking for a total increase of $2.4 million per team according to the league's statement, meaning there's a $1.55 million gap between the CFL and CFLPA proposals in total compensation. That means that those three teams are projected to make profits less than that gap in 2014, even with an extra $2.7 million in TV revenue each. (See the piece on the bottom teams for the league's argument that it's really only an extra $1.9 million, and why that doesn't seem likely.) The league has also said that only three teams lost money last year, so these middle three teams broke even or were profitable under the old CBA (or didn't exist in the case of the Ottawa Redblacks, an expansion team starting play this year that's likely in the middle).

Even if we presume the absolute worst case of the middle teams only breaking even in 2013, their balance sheets for 2014 would have to be over $1.15 million worse (thanks to lost revenues or increased costs) before player compensation is considered for them to still lose money under the CFLPA's proposal, thanks to the new TV deal. If any of those middle three teams made a profit in 2013, their 2014 balance sheets would have to decline by an equivalent amount for the league's statement to be true. So, if one of those teams made a $1 million profit in 2013, its 2014 balance sheet would have to look $2.15 million worse before player compensation was considered for the league's statement to be accurate.

If we assume the league's numbers are accurate, it seems unlikely that any of the three clubs that publicly report their financial statements are in the middle. Saskatchewan reported a pre-Grey Cup profit of $1.1 million in 2013 (keep in mind that their expenses included Grey Cup costs, so their non-Grey Cup profit would have been higher in an average year), Edmonton reported a $1.6 million profit and Winnipeg reported $2.9 million. The Roughriders would have to be $2.25 million worse than their pre-Grey Cup numbers in 2014 to be in the middle; that seems unlikely, as they won't have Grey Cup costs to account for. Similarly, it's hard to see Edmonton or Winnipeg's balance sheets dropping by $2.75 million or $3.05 respectively in 2014.

That suggests the middle three are B.C., Calgary and Ottawa. The Redblacks are a special case thanks to expansion, but the Lions and Stampeders have been around. How are they going to lose at least $1.15 million more in 2014? B.C. in particular should do well this year thanks to hosting the Grey Cup (even if Grey Cup revenues are accounted for separately, hosting the big game tends to boost gate and merchandise revenues during the season). They also have a recently-renovated stadium with plenty of corporate suite revenue, and although there are some challenges for them in the crowded Vancouver sports market, this should not be a club that regularly loses money. The Stampeders are similar; while their attendance was regularly below 30,000 for the first time in 20 years last season, they're not a team that should be in the red a lot (apart from their uniforms). It's possible to see Calgary taking more of a financial downturn in 2014 thanks to stadium upgrades this year, but that would be a one-year cost that wouldn't impact future profitability negatively (in fact, it should enhance their revenues this year and down the road), so saying they wouldn't be profitable under the players' proposal may be misdirection. While they might not make money in 2014, they could in future seasons.

Of the middle teams, Ottawa may have the best case to be called unprofitable under the players' proposal. It's difficult to get a handle on just what their costs and revenues are, as they haven't played a game yet, but it isn't necessarily unrealistic to envision them breaking even or making a small profit under the CFL's proposal and struggling under the CFLPA's system. However, keep in mind that they're an expansion team, and most expansion teams in any sport aren't instantly profitable in their first year. As with Calgary, calling the players' system unworkable for them may be more about this year than future years, where it could well work out.

It's impossible to say just how the middle three teams are doing without their full financial statements, but things certainly don't seem too dire for them even under the players' proposal. There are no clearly apparent ongoing costs that would make their balance sheet (not considering player compensation or TV revenue) worse by at least $1.15 million each year, which would be required for the league's statement to be true. It's possible there are one-time costs in all three cases (stadium upgrades in Calgary, startup costs in Ottawa and Grey Cup costs in B.C., which tend to be subtracted from pre-Grey Cup profit calculations, as we saw in Saskatchewan) that make the CFL's comments accurate for this coming year. However, unless these teams provide financial evidence to the contrary, there aren't any indications from the outside that they couldn't make money under the players' proposals in future seasons.

It's these teams that may face the most changes as a result of CBA discussions, though. If the union cracks and agrees to the league's proposal or something slightly higher, these teams remain unarguably profitable right away. If a settlement closer to the union's proposal is reached, these teams could face at least a short-term loss according to the CFL's numbers. (That may wind up being a longer-term loss if there are significant ongoing cost increases they can't avoid, or it may wind up not being much of a loss at all if the league's numbers don't reflect the true picture, but neither of those situations can be accurately predicted from the outside without those teams releasing their financials.) Thus, these teams' 2014 profitability may well depend on the labour talks, at least based on what the league is saying. Will that make them hard-liners unwilling to negotiate further, or will they be willing to take a short-term hit to get the season started and hopefully recoup losses down the road?

Also check our pieces on the finances of the bottom and top groups of CFL teams.

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