CFL Seeking Government Bailout, League In Jeopardy Of Folding

JohnWallStreet

Commissioner Randy Ambrosie testified in front of a House of Commons Standing Committee on Thursday May 7th that the Canadian Football League (CFL) is “very much in jeopardy” of folding and in need of financial aid from the federal government if it's going to survive the sports hiatus. Back in late April, it was reported the league applied for $30 million in public funding to offset lost ticketing and sponsorship revenues (the ask increases to $150 million in the event the entire season gets canceled); the CFL previously determined that the start of its season would be delayed until at least July 1st (a date that looks increasingly unlikely with bans on large gatherings still in effect and the U.S.-Canadian border closed). While the possibility remains that the league could play a truncated season beginning in early Q3, Ambrosie informed the Committee “the most likely scenario is no [2020] season at all.”

Howie Long-Short: The CFL is seeking $30 million in emergency funding, but it's not as if the league’s teams are facing bankruptcy today or tomorrow. Ambrosie acknowledged that for now the nine CFL clubs can fund operations using the “money our fans, and to a lesser extent our broadcasters and sponsors, pay us in advance for games.” The real problems will begin once the league formally announces the cancelation of regular season contests - or at least acknowledges they’ll be played without fans in attendance - and needs to start refunding ticket holders. Remember, CFL clubs are generating the majority of revenues at the gate (not from media rights). Without fans in the building league revenues "effectively [go] to zero."

The CFL’s ask has been presented as a necessary measure to ensure the 100+ year old league (founded in 1909, there have been 107 Grey Cups) still exists once the pandemic subsides, but the lack of transparency offered in terms of “where the money sought would be applied” has left many in Parliament unconvinced. The Sports Network correspondent Rick Westhead explained that “while some of the league’s teams are community owned teams [and thus should be entitled to receive taxpayer funded aid] (see: Saskatchewan, Winnipeg, Edmonton), others are controlled by large holding companies [that can sustain the temporary losses]" (see: Toronto).

While Ambrosie said that the government funding would be used to "keep as many people employed as we possibly can" questions remain about how much of the money requested is earmarked for the players. Westhead explained that concerns stem from the fact that “the majority of CFL players are American and live in the United States (hence why the border issue is a problem). It's fair to ask if the Canadian government should be using taxpayer funded money to bailout American residents."

There is also some general skepticism amongst MPs that CFL teams do in fact regularly lose money (the Commissioner said the teams lose a collective $10 million to $20 million annually). Westhead noted that public records indicate Saskatchewan, Winnipeg and Edmonton “have done a good business in recent years. Edmonton generated $2.8 million in profit on $25 million in revenue in 2018. Winnipeg and Saskatchewan made $2.6 million and $1.4 million respectively [that same year].” Parliament will wait for the league to submit a transparent business plan (see: open their books) - one the players are on board with - before issuing their decision.

Technically speaking, the CFL isn’t looking for a handout. Ambrosie has promised the league would pay back any funds borrowed over time through a series of “initiatives, community programs across the country, tourism, promotion [and] Grey Cup advertising.” While certainly more appealing than presenting the ask as a 'gift', the gifts-in-kind exchange proposed is unlikely to sway MPs in the way a plan including monetary repayments might.

Historically speaking, the NFL has avoided expanding into Canada to avoid crushing the CFL (stadium size and availability have also been among the hurdles). If the Canadian Football League goes out of business, it reasons to believe an NFL club will one day call Toronto (even though it's never been a great CFL market) - and perhaps Vancouver - home. Remember, the Bills franchise has worked to cultivate fans in the city in the past and still does not have a long-term stadium solution in Buffalo.

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