Category: CFL

The Canadian Football League canceled its 2020 season yesterday, announcing it was abandoning plans to play games in a “bubble” in Winnipeg and instead will plan on resuming play in 2021. Commissioner Randy Ambrosie explained:

“Even with additional support,” Ambrosie said in a statement, “our owners and community-held teams would have had to endure significant financial losses to play in 2020. Without it, the losses would be so large that they would really hamper our ability to bounce back strongly next year and beyond. The most important thing is the future of our league.”

That “additional support” Ambrosie mentioned was government money, something that goes back to April when the commissioner asked for $150 million in federal funds (all CFL numbers in Canadian dollars from here on out) and then said teams could repay it by showing government PSAs on game broadcasts. That went over really poorly with members of parliament, and Ambrosie eventually switched to asking for a $44 million interest-free loan, then a $30 million interest-free loan, but came up empty.

Government loans and grants to bail out businesses that suffered unexpected losses due to the Covid pandemic are commonplace, of course — American, United, Delta, and Southwest Airlines combined have gotten $19.5 billion, and the U.S. Paycheck Protection Program alone has handed out $380 billion in forgiveable loans, of which only some has been used to buy yachts. But the CFL cash request was weird, in that it was intended less to keep people employed than to compensate league owners (or “philanthropists,” as Ambrosie called them) for losses from this season, which will supposedly amount to between $60 million and $80 million).

The real reason that the CFL is shutting down when other leagues are pushing ahead with season plans, as we’ve covered here before, is more about the league’s contract with its players’ union saying it doesn’t have to pay salaries if there are no games, so the league’s nine teams will save about $50 million collectively on payroll by not playing. U.S. sports leagues haven’t wanted to give up the vats of TV money they can earn even for playing games in empty stadiums and arenas; the CFL gets about that much from its new national TV deal, but I guess you also have to pay for turning the lights on and buying equipment and all that other stuff, so the league’s owners figured, meh, let’s just skip a year and come back when the grass is greener.

What just happened, then, is that the CFL decided it was only worth it to play games in 2020 if the Canadian government paid it to do so, and when that didn’t happen, it took its ball and went home. Which is its right to do, but it’s also Ottawa’s right to say, Hey, it’s not our job to underwrite your profits. I mean, who do the CFL owners think they are, American Airlines?

Anyone who had the Canadian Football League in your betting pool for “Which pro sports league will be the first to request a coronavirus bailout?”, you are an unexpected winner!

CFL Commissioner Randy Ambrosie told The Canadian Press on Tuesday the league’s proposal involves three phases: $30 million now to manage the impact the novel coronavirus outbreak has had on league business; additional assistance for an abbreviated regular season; and up to another $120 million in the event of a lost 2020 campaign.
“We’re like so many other businesses across Canada,” Ambrosie said. “We’re facing financial pressures unlike anything we’ve seen before.

“Our best-case scenario is we’re almost certain to have to cancel games. But at worst if this crisis persists and large gatherings are prevented, we could lose the whole season and the types of losses we could incur would be devastating.”

You and everybody else, pal. But let’s take a closer look at those “devastating” projected losses.

Forbes doesn’t bother with an annual survey of CFL team finances, but thanks to several teams being publicly owned, we can get a glimpse at what a typical balance sheet looks like. The Saskatchewan Roughriders‘ 2018-19 annual report, for example, shows $40.4 million in gross revenues (almost half of that from ticket sales, with merchandise sales and sponsorship money tied for a distant second) and an equal $40.4 million in operating expenses. (Capital fundraising by fan groups resulted in a net $1.5 million profit.) The biggest expense ($14 million) is listed as merely “football operations,” which could include a lot of things, though notably not “home game expenses,” which is a separate line item.

Slightly less than half of the football operations expenses are player salaries, based on the league’s $5.75 million salary cap. (I was about to write something about having to pay for costs like health benefits as well, then I remembered, Canada.) The Canadian government is offering to cover about $10,000 worth of payroll costs per employee through June 6, something that seems likely to be extended if the pandemic keeps businesses shuttered past that point, something that is almost certain at this point. But given that the CFL’s player contract indicates that players don’t get paid if there are no games, player salaries likely aren’t an expense that teams need to worry about.

What other expenses can be dispensed with if there’s no season? Advertising ($2.5 million) and ticket office costs ($1.3 million), for starters, and likely a whole lot more. But clearly some costs can’t be entirely eliminated, so each team is going to face at minimum millions of dollars in red ink.

That’s going to be a far bigger problem for teams like the community-shareholder-owned Roughriders than for, say, the Toronto Argonauts, owned by Canadian telecommunications giant Bell Media, which turned a $3 billion profit last year. But still, even if the CFL could be fine in the long run, a one-time revenue hit would create a fiscal crisis that could destabilize the league, so it’s not entirely unreasonable for the Canadian government to look for ways to help.

Ways to help, though, could mean a lot of things. For starters, as a Change.org petition opposing the subsidies proposes, the government could simply loan the league money, with promises that it would be repaid at a later date once games have resumed. But that, uh, is not exactly what the CFL has in mind:

Ambrosie has insisted that the CFL would find ways to pay back the $150 million if the government grants the request to help keep the league afloat. The league and its teams would not write a cheque to re-pay the funds — rather, the CFL has proposed an in-kind “payback” by involving players in the community and in charitable and government-sponsored programs, such as social programs, tourism videos and public health initiatives.

That would be an awful lot of tourism videos to get to $150 million! Not to mention that I’m very curious to hear how eager CFL players would be to appear in tourism videos their team owners promised they’d do to “repay” loans that weren’t used to pay them any salaries.

Situations such as this one get us back to a philosophical difference about what government involvement with sports leagues should look like. Some subsidy critics, especially those of a more fundamentalist libertarian bent, take the line that the business of sports isn’t the government’s business, and any money changing hands is a bad thing. Others — such as the majority voting populace of Seattle, or me — think that you cant and shouldn’t try to untangle government policy from private business operations, so the best goal should be to ensure that any money provided by the public at least results in some equal public good.

If CFL teams want to take out a loan from Canadian taxpayers, in other words, they should make it worth their while. There’s an almost infinitely long list of ways they could do so — an increased public stake in teams, free or discounted tickets to future games, a share of future revenues, one free serving of poutine to every household in the nation — but “our players will appear in some tourism videos, no change” is not one of the better ones.

At least one member of parliament is demanding to see the CFL’s books before agreeing to any leaguewide bailout, which would be a start. But — as with other industry bailouts — it’s important to get this right, because you only have one chance to demand some kind of public return on a public expense. If the U.S. airline industry can agree to provide both cash and an equity stake to the public in exchange for loans, then you wouldn’t think it’d be too much of an ask for perky Canada to demand the same of its pro football league.