Depth of Moncton Market Unclear

Published on August 3, 2011 10:15 PM by dbo.

Touchdown Atlantic II is less than a couple months away (Hamilton hosts Calgary Sept. 25) and there has still been no announcement that the game is sold out. After last year’s quick sellout expectations were high and demand was expected to be so too. After a fast and furious launch, the sellout failed to materialize. Now more than two months from the May 10th pre-sale launch without a sellout, can we say the CFL lustre has worn off in Atlantic Canada?

Initial reports were that Touchdown Atlantic tickets were in high demand and the football fever from 2010 was back. After two days of sales, the game was almost sold-out, not quite on the pace of 2010, but still impressive. By May 17th, promotion pieces started appearing in the Times & Transcript on the game spinoffs, the passion and caring shown by CFL players and the match up between two of the CFL‘s top QB’s.

By May 27th it was revealed only 2,000 tickets were left. On June 1st, an article reported that Terry Baker supports a Moncton franchise bid and approximately 1,000 end zone seats remained for sale. A July 2nd season kickoff interview with CFL Commissioner Mark Cohon indicated less than 2,000 seats remained. It appears the final 1,000-2,000 tickets have been slow to move, with no change in the numbers since they were revealed. Since then, there has been no more information on ticket sales nor an announcement the game is sold out.

Update Sept 2011: Tickets are still available.

This did not go unnoticed. Fans were asking where the sellout announcement was. On July 10th, CFL.ca’s Matt Cauz asked can Atlantic Canada support a team?

Cauz expresses a exuberance for Atlantic expansion right now. He explains the Atlantic Schooner’s failure in the 1980’s is not a strike against Atlantic Canada. I don’t know who is holding the failure of the defunct franchise’s owners to provide a stadium against Atlantic Canada. It proved only that a stadium is difficult to finance, not that Atlantic Canada couldn’t support a team. Getting back on track, Cauz doesn’t pick a favourite between Moncton or Halifax, and admits he has no knowledge of the corporate support available, but looks at options to build a regional fan base for which ever city is granted a franchise.

Cauz suggests reserving 1,500-2,000 tickets for fans from the remote city. To sweeten the deal for those fans, Cauz gives away free parking or reduced ticket rates. A little regional marketing, some local pride and some rivalry games against BC and Toronto and the new franchise is set to succeed. Following Ottawa’s entry into the league, Cauz expects a press conference outlining stadium plans, season tickets details and a hard date for the Atlantic Schooners to enter the league.

If only it were that easy. Unbridled enthusiasm supporting football in the Maritimes is necessary and positive, but off-the-cuff brainstorming needs to be refined and balanced with reality or false expectations are created. To reduce the complexity of acquiring and operating a CFL franchise to some ideas about a few thousand tickets and some marketing does a disservice to the league and the issues standing in the way of a Maritime franchise.

The truth is none of the building blocks for a franchise are in place and without them no franchise can be awarded, let alone a press conference be held. Let’s take a look at the requirements for a franchise.

A Stadium

The first requirement is a suitable stadium, one that seats a minimum of 25,000 and has the modern amenities required for professional football. The situation in this regard hasn’t changed.

Moncton Stadium has been a sufficient venue for one game events, though its limited capacity has forced higher ticket prices. It is insufficient for a full franchise in a number of ways. Half the stadium is temporary bleachers, erected at the ends of the end zones. The current temporary seats, purchased by the provincial and federal governments, may bring capacity to about 22,500 in 2011. With a full franchise, fans will question the seating and features and the higher cost of tickets versus going at all. Even with capacity increased, the comfort of fans will be a factor at buying time once the initial euphoria has worn off. Finally, the facilities must have an investment to meet the needs of a professional franchise and team.

Many ideas are being bandied about to bring a qualified stadium to Moncton. One thought is to copy Vancouver’s Empire Field setup. It seems like an affordable solution, though Vancouver’s situation was to construct the stadium using 25-30% seating and equipment from the 2010 Winter Olympics. After it is no longer needed, the stadium will be disassembled and reused elsewhere so the $14.4 million cost was largely for labour and equipment lease. A more realistic estimate for a 25,000 seat modular stadium is $50 million. Ignoring the complexities of building such a stadium around existing permanent stands in Moncton, it is the cheapest solution, but provides no long term value. The stands are still temporary, the facilities lacking and the cost sunk into a facility that can never be built upon long term. The suggestion that such a facility could be used for 10-20 years while a permanent home is waited for assumes the franchise will be there in 10-20 years and somehow the money for a permanent stadium will be easier to raise in the future. That isn’t an insult to Atlantic fans, but a reflection on what people expect out of their entertainment dollar.

Other thoughts are to go with the current facility, perhaps add a few seats, and build on that to win support for a new/expanded stadium. It is very easy for pundits to take risks where they are not party to the consequences. It is unlikely the CFL will go with any plan for an expansion franchise and just hope things work out. Others want shovels in the ground for a suitable sized stadium, but someone else is to figure out how to pay for it. Private or public leaders should just find the funds. Many of the discussions on this topic come from across the country, but the desire to see a 10th franchise in the Maritimes exceeds any realistic thoughts on how it can all be paid for.

A final option I have not heard suggested yet, but is sure to be on the minds of a few is to leverage the region by utilizing stadiums in Moncton and Halifax. If Halfiax goes forward with a stadium, Moncton perhaps will commit to upgrades of their facilities to keep up. This may place Moncton Stadium closer to CFL calibre, enough that an owner can consider holding games in both centres as part of a regional team. A sound suggestion to involve a regional fan base rather than one city, but hoping for two stadiums seems a little unlikely and very far off. The CFL needs to focus on getting one qualified facility in the region before two are considered.

Aside: Touchdown Atlantic 2011 Ticket Revenue Projections

CFLdb guestimated the ticket revenue generated from the first Touchdown Atlantic and I thought we should recreate for 2011 to see how the price increases and reduction of ticket tiers has affected things. Note we are using a capacity of 20,725 this year which was the announced attendance last year.

Price Tier Ticket Price Percentage of
Seating
Estimated Seats Gross Revenue
Red Zone $39 13.50% 2,798 $109,122
End Zone $49 36.50% 7,565 370,685
Gold $79 27.74% 5,749 454,171
Platinum $89 22.26% 4,613 410,557
Total $64 (Avg.) 100% 20,725 $1,344,535

A Qualified Ownership Group

A stadium in place, the next piece required is an ownership group. Currently there are no known interested parties, and no one stepping up to drive a stadium project. Before qualified parties are bound to come forward, more certainty on the stadium situation, not necessarily one built, but plans and money allocated, need to be in place before anyone may come forward.

There are people in the Maritimes who have the financial resources to operate a CFL franchise. Do any of them have the desire to do so? I do not know. Let’s look at what kind of commitment it would require. I’ve estimated numbers as they stand today, using educated guesses based on the three community owned/public teams’ annual reports.

(I went higher than Dave Naylor’s $15 million budget as I believe $20 million better reflects what a competitive team will spend in the upcoming years, by the time a 10th CFL franchise is awarded. I haven’t considered higher travel costs and other details, like assuming the team controls the ancillary revenue streams for the stadium, which may be a big assumption if they are a tenant only and make no contribution to its construction. These estimates are not meant to be accurate or a range of what it takes to operate a team, only show what potential owners are dealing with in terms of budgets and risk and why it is not as simple as wanting a team in the Atlantic region to get one there.)

Start up costs

  • $7.5 million expansion fee
  • $10 million league security bond
  • $2.5 million miscellaneous start up costs

Revenue

  • $11 million in gate receipts (equals $53 average ticket price with sold out current configuration 20,725 seat stadium)
  • $1.9 million in league revenue
  • $2.2 million in concessions
  • $4.7 million in merchandise
  • $2 million in sponsorship
  • Total: $21.8 million

Expenses

  • $4.5 million players’ salaries
  • $4.5 million football operations
  • $1.4 million in concessions
  • $3.5 million in merchandise
  • $1.5 million administration
  • $6 million other expenses
  • Total: $21.4 million

Hey! The team is breaking even! Let’s grant a franchise today. Slow down there, speedy. There are too many assumptions with this model. Saskatchewan generated $11 million in gate receipts in 2010 off approximately 300,000 in total attendance which equates to about a $38 ticket average. Compare with 2010 gate receipts for Edmonton at $8 million and Winnipeg at $5.3 million. Will Moncton be able to equal the maximum receipts in the league on two-thirds of the stadium size? Will fans come back game-after-game, season-after-season, paying higher ticket prices for lesser facilities? Will a 25,000 seat stadium allow them to generate $11 million in gate receipts? I don’t question the initial support Maritimers will provide a professional football team, but the newness does wear off. When it does, the facilities and cost become barriers to the enjoyment of taking in a game. I only want to illustrate how the current situation is not viable for a permanent franchise.

The average ticket price is also deceptive. It doesn’t reflect the average cost of a ticket actually sold, only the average price needed for seats available to raise the required revenue. Complimentary tickets will raise the price paid by actual fans. As we have seen this year, there is a limit to the price the market will bear. Certainly, having a local team involved changes this, but a local team means season tickets and 10x the cost of a single game as well. Multi-thousand dollar commitments from fans over multiple years will be the true proof of the depth of the Moncton market.

Finally, this revenue must be kept up every year. The team needs to sell $5 million in merchandise every year (which would put them in the top 10 sports teams in Canada), take in $11 million in gate receipts without fail or a deficit occurs. In addition to the owner’s $20 million tied up in the franchise, they are on the hook for any losses if any of the revenue falls off. This is before any contribution to a stadium. A sobering decision for any group with the means and interest in the CFL.

Confirmed Market Support

The CFL has gone to Moncton the last two years for the simple reason there is a suitable stadium to generate enough revenue for one game. The question is whether there is enough support for a team in ticket sales, merchandise, private boxes, corporate support and increased television viewers. With a temporary stadium and visiting teams, this can be hard to judge. The CFL will continue to try to measure this in Moncton for that is the only place of opportunity they have currently.

For the second annual event it is apparent tickets have been harder to sell. There has been increased prices and reduced pricing levels to make up for less public funding for the 2011 game. The CFL may have found the demand has shifted enough in the second year that increased prices cannot be born on the fixed supply. Certainly, the novelty factor for some people attending last year’s game has worn off and have chosen not to attend again, and the demand from people who didn’t attend last year has not been great enough to sell out the game again. It is also possible increased capacity (if in fact there will be more seats this year) pushed supply beyond the number of fans interested. That indicates there are only around 20,000 - 22,000 CFL fans in Moncton and area willing to attend a neutral-site game at the prices provided.

The CFL is still attempting to determine the depth of the Atlantic market, not only to put on display for potential owners, but to determine themselves the interest in the region and whether their focus should be to place the next franchise there or elsewhere. So far, the two Touchdown Atlantic’s have been the most successful in showing the true market depth, doubling the attendance previously seen in Atlantic Canada with a facility capable. There are many suggestions on how the CFL should proceed, from granting an expansion franchise to increasing the number of neutral-site games in Moncton.

Steve Thompson on the Bleacher Report writes that the CFL has two options, expand to Moncton or expand elsewhere and explains the steps to do both. Go and read the article, when you get back I will review some of the points he makes.

  • Overall, he makes no references to back any statements he claims as fact.
  • He considers Touchdown Atlantic 2011 “sold out, though some package deals still remain”. Seems to me that is not a sellout, which corresponds to no announcement of a sellout.
  • He refers to reports that Moncton Stadium can be expanded to 30,000 to 35,000 seats, which will ensure long term survival. Once again, someone conjures a stadium out of thin air at their desired capacity and suddenly the team is viable. No mention of who pays for this stadium though he does acknowledge stadium size does not equate filling it next.
  • He suggests increasing the temporary seating gradually to judge demand and entice potential owners.
  • To further show the capability of the Moncton market, he suggests the radical experiment of having all eight teams visit Moncton for two games a year, for eight games. He fails to examine the other side of the equation, such as the impact on the current clubs and whether a string of non-local teams will really interest Monctonians enough to put up the money for eight games.
  • Finally, he determines local ownership may not be found, and instead looks to wealthy Canadian families who have shown no interest in the CFL. A common pastime of CFL fans is to target high profile Canadians for franchise ownership.
  • Moving on to expanding elsewhere, he mentions Halifax as the best expansion opportunity for the CFL with their current stadium study occurring.
  • He then throws out Quebec City, London, ON, Kitchener, Saskatoon and Victoria as potential sites. Another common trait of CFL expansion pundits is to look at a map or population chart and target a half dozen.
  • He encourages these regions to add temporary seats to their stadiums so the market may be tested, and if successful further tests attempted. Armchair expansion-ists often are able to have many irons in the fire like this.

Realistically, a 10th franchise will take a long time to establish. The league may or may not hold a Touchdown Atlantic in 2012. On one hand, they may decide to give the market a break. On the other hand, they may want to keep the CFL in focus in Atlantic Canada. I expect that multiple games will be played in Moncton in 2013 with the displacement of the Tiger-Cats from Ivor Wynne Stadium. By that time Halifax’s plans for a stadium will be known. Once concrete stadium plans are public, with city, provincial and perhaps federal funding being committed, the CFL and potential owners who may have been waiting in the wings can come forward, ask for consideration of their requirements and the final cost sharing negotiation to take place. Construction can begin, perhaps in phases, with the requirements for the 2015 FIFA Women’s World Cup complete by 2015 and further construction occurring afterwards. Overall, expect a long process, much like the processes that took years in Ottawa and Hamilton.

It is not clear if the CFL lustre is off in Moncton or if other factors are at play. The CFL will continue to test the Moncton and Atlantic Canada market until it is determined it is suitable or not or another city brings suitable facilities into play.

Epilogue

To conclude, I will speculate on the three front runners in this race. If I had to predict, I would say none of these cities will become the 10th franchise before 2020.

It is true Halifax, Moncton and Quebec City are the leaders in this race. But the gun is still smoking, it is possible none will make it to the finish line for it is a marathon. Halifax may be the favourite because of its size, but there is no certainty on what their stadium study will say, nor a guarantee they will be selected as a Canadian site for the FIFA 2015 Women’s World Cup. They could determine that a suitable stadium is not fiscally possible or responsible.

Moncton, based on its size, has the most challenges facing it. While 10,000 permanent seats is a start, an additional 15,000 (mostly sideline) seats are required as temporary seating will not cut it for a franchise. There is no indication yet they city/province are considering paying for permanent expansion. It also faces challenges with the corporate market and attracting fans from all over the region, including Halifax, the largest Canadian Maritime city. It does boast strong and passionate local football support as well as a central location. It needs to be proven that can stand over the long term and during lean years.

Quebec City has many things going for it — size, football interest and a Montreal rivalry to expand the CFL‘s exposure into French Quebec. Today the city is focused on a new hockey arena and returning the NHL to the city. There is behind-the-scenes ownership interest, but without public commitment to a stadium, they are not likely to commit publicly to a CFL franchise. Without a substantial development in the stadium situation, Quebec City will remain off the radar likely until things change or the CFL is ready for an 11th franchise.

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Depth of Moncton Market Unclear was published on August 3, 2011 10:15 PM by dbo.

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This article is categorized under League and tagged with expansion, halifax, moncton, quebec-city and touchdown-atlantic.