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 top one. See also our pieces on the bottom and middle groups.
As discussed in the analysis of the middle group, it seems most likely that the CFL's top teams in terms of profitability are Saskatchewan, Winnipeg and Edmonton. That's useful for our purposes, as those are the only three teams that make their financial statements public (see an earlier analysis of them here). These teams made $1.1 million (pre-Grey Cup, and lower than it would be in a typical year thanks to Grey Cup costs, but we'll go with that number as we can't really separate out Saskatchewan's Grey Cup costs without their not-released-yet full financials; keep in mind that they're likely making more, though), $1.6 million and $2.9 million respectively in 2013. They're expected to get $2.7 million more each without a corresponding cost increase from the new TV deal (see the analysis of the bottom group for why the league-proposed number of $1.9 million isn't used here). If everything else remained static, they would make profits of $3.8 million, $4.3 million and $5.6 million respectively in 2014. Under the league-proposed increase in total player compensation for 2014 ($850,000 per team), those numbers would be $2.95 million, $3.45 million and $4.75 million respectively. Under the player-proposed increase for 2014 ($2.4 million, according to the CFL), these teams would make $1.4 million, $1.9 million and $3.2 million respectively. So, they're not only still making profits, they're still each making over a million dollars a year.
Of course, not everything will remain static, but it's interesting that the Edmonton and Winnipeg financial statements both seem optimistic about the future. From the Eskimos' report:
As we look to 2014, Football Operations will focus on improving the Club’s on-field performance. Increased financial resources are in place to assist Football Operations to meet their targets by finding, developing and retaining premier talent. Our new Head Coach Chris Jones has been appointed to lead an entirely new coaching staff, with the objective of delivering strong execution and creating cohesiveness. Added resources
have been allocated to the Scouting Department to hire more staff for increased territorial coverage throughout North America and improved effectiveness in recruiting the best player talent. Ed Hervey has put a detailed plan together.
As the largest single source of revenue, major emphasis will be placed on ticket sales, led by a newly-created senior position of Vice President of Ticketing. Additional headcount will be added to the ticket sales group to deliver on a plan of increasing our season seat ticket base over the course of the next five years. A targeted direct mail program has also been initiated in order to support all efforts in ticket selling and to reach out to new potential fans. One of our biggest challenges is to grow our season ticket base and we are grateful for any new support.
We are launching new hosting areas in 2014. Premium Seating sections are being added, which include a new Field Level Lounge, Sideline Club and Rooftop Patio. There are also new partnership opportunities with our popular Champions in the Community program. Champions in the Community is the umbrella program where our Club participates in a vast array of school, youth, hospital and charity work.
So, they're spending more on non-player football operations (revisiting CFLPA comments about why there's no management cap), but launching lots of premium seating sections and investing in sales to grow their gate, which seems at least a wash and potentially even better. How about Winnipeg?
The Club had excess revenue over expenses from operations of $2.9 million compared to just $727,000 in 2012 which was an increase of $2.2 million. Excess revenue over expenses from operations, before depreciation, came in at $3.7 million in 2013 compared to $1.2 million in the prior year. These results were in large part due to the move to Investors Group Field and the fantastic support shown to both the team and new facility by the fans and the corporate community. While the Club was pleased and encouraged by the financial results for 2013, it is fully confident this can be improved upon going into 2014 and beyond, given the increased revenues and removal of one-time costs as noted below.
Increases in total game revenue, Winnipeg Football Club revenue and stadium management revenue were the primary reasons for the increase in operating revenues of $7.5 million for the year, going from a balance of $16.7 million in 2012 to $24.2 million for 2013. CFL revenue distributions remained relatively consistent from 2012 to 2013, but will be increasing substantially in 2014 and subsequent years.
The move to the new facility not only resulted in increased revenues, but also increased costs, as evidenced by the increase in operating expenses of $21.3 million in 2013 compared to $16 million in 2012. This was exacerbated by certain costs that were one-time in nature and will not occur again in future years, led by significant executive and football operations severance costs that have all been expensed in 2013, as well as transportation plan costs that will be at a more acceptable level going forward.
Shown in Other Items in the Statement of Operations are other non-recurring costs such as grand opening costs, concession start-up costs, and stadium development costs that further contributed to decreasing the excess of revenues over expenses, but these also will not be incurred going forward. Even with the increased stadium operation costs, football operations remains the biggest area of expenditure and main focus of the Club, accounting for almost 50% of total operating expenses.
That doesn't sound too dismal either. Knock out some one-time start up costs, add in extra TV revenues, and the Bombers could do very well indeed in 2014 regardless of what player compensation system we wind up with. With good profits appearing ahead for them, the Eskimos and the Riders even under the players' favoured system, that might raise the question of if there should be more revenue shared from the league's richer teams to its poorer ones. Even without that, though, poor teams could learn from moves the rich teams have made, such as Edmonton's effective cost-cutting. At the moment, the wealthier teams look to be set for the future regardless of what happens in the CBA talks.