Questions abound this CFL off-season

by Gregory Beatty

When CFL commissioner Mark Cohon delivered his “state of the league” address during Grey Cup week in Regina, he had plenty of good news to share. Topping the list was a new five-year broadcast agreement with TSN that will seriously boost annual revenue, to $43 million from $15 million.

Ratings, attendance, merchandise sales and corporate sponsorships were also up.

But Cohon continued to preach the need for fiscal prudence. “Clearly our future is bright,” he said, “[and] we can continue to grow and build [a] modern and innovative CFL, but only if we resist the temptation of going back to the old, reckless financial ways.”

As veteran CFL fans know, the league came dangerously close to collapse in the late ’90s, so Cohon’s caution is probably justified. But with the league about to negotiate a new collective bargaining agreement with the CFL Players’ Association, he was also likely looking to dampen player expectations for a substantial hike in the current $4.4 million team salary cap.

“Overall, the league is as healthy as it’s ever been,” says Shaun Augustin, a University of Regina sports economist. “That said, it’s a pretty small-revenue league — it’s not on the same footing as other major leagues like the NFL and NHL. That means member clubs are perilously close to being in financial trouble almost at any time.”

“The CFL is a patchwork quilt with areas of strength and weakness,” agrees Glenn Hodgson, senior Conference Board of Canada economist and co-author (with Mario Lefebvre) of the upcoming book Power Play: The Business Economics of Pro Sports.

“You look at the Riders; they’re busting with cash — they could almost buy the league,” says Hodgson. “But you can’t base the league off the financial strength of the best franchise.

“Still, [the CFL] is much stronger than it was even a decade ago.”

Five of the current eight CFL franchises are privately owned, so their owners don’t have to reveal their finances, but the Riders, Edmonton and Winnipeg are community-owned. All three are top-tier CFL franchises, but there are definitely disparities between them. Revenue for the Riders this year is expected to reach $35 million, thanks to hosting the Grey Cup — whereas in 2012 (the most recent numbers we’ve got), the Eskimos recorded operating revenues of $18.8 million while the Bombers earned $16.7 million.

During the last CBA (which was signed in 2010), the salary cap increased from $4.2 to $4.4 million. This time, says Augustin, “I suspect the CFLPA is going to fight for something north of $5 million a year, and that’s probably a conservative figure. It might even be $5.5 million.”

Unlike the hard cap that the NFL employs, the CFL has a soft cap. Teams can exceed it, but if they do they pay a stiff financial penalty and may also forfeit draft picks. The idea behind a cap is to force teams to be disciplined in contract negotiations, and prevent big-market teams from dominating by outspending their small-market rivals.

That’s typically what happens in baseball, where teams like the New York Yankees and Boston Red Sox deploy high-priced line-ups that make it difficult for small-market teams to compete — and right now, the Riders are the Yankees of the CFL. For them, a $1 million jump in the salary cap would be chump change, but for many other teams it might be a difficult expense to swallow.

The way the league runs its cap system is unusual, says Augustin.

“The CFL is an anachronism in sports with its CBA. The salary threshold is arbitrarily set: they negotiate it [and] it’s not tied to revenues.”

With the huge disparity between CFL teams, the only way a salary cap tied to revenues would work is if there were significant revenue-sharing between teams — and Hodgson wonders if that isn’t something the CFLPA will be pushing for this time around.

“My advice to the players would be to look at the NHL negotiations. The players rolled back their share of revenues from 57 to 50 per cent, and the teams finally agreed to get more revenue-sharing in place. But fans in Saskatchewan and Rider management won’t want to hear that, because you’d be the cash cow.”

Outside of player salaries, there’s all sorts of spending a team like the Riders can do to enhance their competitive prospects. One example was the mini-camp the Green & White held in Florida last April to start preparations for the 2013 season. They can also sign top-notch coaches and provide players with state-of-the-art training facilities.

And if you’re a perennial Grey Cup contender, as the Riders arguably have been with four Grey Cup appearances in seven years, players will want to play for you because they know they’ll be in line for healthy post-season bonuses. In the Riders’ case this year, players received an extra $23,000 ($3,400 and $3,600 for the West semi-final and final wins, and $16,000 for the Grey Cup). When you consider that the average CFL salary is $80,000, that’s a pretty sweet bonus.

So if revenue-sharing did end up on the table, how much money would Rider management and fans be willing to part with to strengthen their CFL rivals?

During the last round of negotiations in 2010, the CBA wasn’t ratified until days before the season began in late June.

Things could be even dicier this time, says Augustin.

“I’m not saying there’ll be a work stoppage, but if I was a betting person I’d say there’s probably a 50-50 shot that they won’t come to an agreement by June,” says Augustin. “Not that there’s terrible animus between the parties, but I do believe the players are going to want to be paid significantly more.”