Yes, Virginia, there is no AFL

December 22, 2008
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All he wants for Christmas are his two front-row seats. Instead, the Grand Rapids Rampage season ticket holder will get a refund. The other 599 or so season ticket holders will also find refunds in their stockings, as will all corporate sponsors — proving that ’tis not the season to be jolly if you’re a Rampage fan, player or employee.

Rampage General Manager Scott Woodruff said the action the Arena Football League took 11 days before Christmas was disappointing, but not devastating. He compared the cancellation of the upcoming AFL season to the shutdown of the National Hockey League that wiped out the 2004-05 season.

“When the NHL took a year off to get its house in order, many predicted that they would suffer for years. They haven’t,” said Woodruff in an e-mail to the Business Journal prior to the suspension.

“In fact, by retooling their operation — particularly their cost structure — the NHL has come back in a much better competitive position,” he added.

Woodruff makes a valid point. The NHL suspended play to rein in escalating player salaries and free-spending franchises like the Toronto Maple Leafs, New York Rangers and Detroit Red Wings, and did so with an eye to ensuring long-term financial stability. The league emerged from its year-long self-imposed lockout with a new collective bargaining agreement from the players union, a 25 percent across-the-board cut to player salaries, and a salary cap of $39.5 million. Since then, player salaries have grown, revenue to the NHL has increased, and the salary cap has risen to $57 million this season.

But there is one somewhat glaring difference between the actions taken by the NHL and the AFL. The NHL made it clear that the league would be back in a year, while the AFL said it would return as soon as it’s possible.

“I believe what is best for the AFL is best for the Grand Rapids Rampage. When the league is ready, the Rampage will play,” said Dan DeVos, who owns the franchise with his wife, Pamella, at a press conference last week.

Other uncertainties underline the suspension. One owner said the league’s economic model didn’t work in the current economy, which placed its 22-year longevity in grave jeopardy.

“It’s important for the Arena Football League to think about the next 20 years. And the economic model, combined with the economic environment we’re in currently, doesn’t allow us to take that perspective,” said Casey Wasserman, owner of the L.A. Avengers, to the Los Angeles Times.

The report didn’t detail what was wrong with the economic model.

The players agreed to a pay cut that dropped the salary cap by 30 percent, from $2 million to $1.4 million, and average game attendance reached a record level last year at 12,958. Arena games shown on ESPN2 last season had a 12 percent increase in viewers from 2007. And, according to the Associated Press, AFL merchandise sales also rose in 2008.

“We’re readying contracts right now for when we’re ready to move forward with free agency. We’re buying helmets and jerseys as if it’s a regular season. We don’t want to get caught with our pants down, so to speak,” said Luke Stahmer, vice president of operations for the Colorado Crush, to four days before the league suspended play.

Stahmer wasn’t alone in wanting the 23rd season to kick off this year. DeVos, and at least five other owners, reportedly voted to play in the first tally the league took. But he wouldn’t reveal how he voted the second time, when the suspension became official, and he wouldn’t disclose how many of the 16 owners went along with the suspension.

“I fully support the direction the league is taking,” he said.

But DeVos did say that the contract the league has with ESPN had nothing to do with the decision. The cable channel has a minority interest in the league and some reports had ESPN saying it wouldn’t televise the games if some of the larger franchises were absent from the league. Those reports concluded that threat forced the league to cancel the season.

DeVos also said no one with the AFL spoke to him about having the Rampage, or any other small-market team, drop out of the league. But he didn’t explain last week what was wrong with the economic model, other than expenses have been higher than revenues for years.

“We’ve struggled for a long time,” said DeVos.

One franchise, New Orleans, ceased operations a few months ago.

The biggest hint on how the model can be fixed came last week from Jim Renacci, owner of the Columbus franchise. He told the Associated Press that the AFL needs to centralize its business operations. Instead of having teams do marketing and sell sponsorships and tickets, Renacci said the league should do those tasks. He also said the AFL needs a single worker’s compensation fund instead of the 17 that currently exist.

But Renacci didn’t indicate where those fix-up dollars would come from, and the league didn’t disclose what happened to the potential equity investment that was reported earlier. One can only assume that neither source is available now.

Apparently a suspension wasn’t even close to being on the drawing board last March when then-AFL Commissioner David Baker came here to meet with some of the Rampage’s corporate sponsors. Baker told them that investing in the Rampage was a good way for them to make money, have fun and do some good in the community.

“This is where you want to put your money,” he said, about four months before he retired from the league.

Baker also told sponsors that he wouldn’t be surprised if the AFL reached an overall value of $1 billion in the not-too-distant future.

Woodruff told the Business Journal that he didn’t think Baker knew then that the league’s fortunes would dramatically change just eight months later.

Rampage Chief Operating Officer Scott Gorsline said last week the suspension was bad for the short term, but could be the best thing for the long term. He also said the timing was bad, though, with the local franchise on a roll. The Rampage advanced to the conference championship game last summer, its deepest playoff drive since winning the Arena Bowl in 2001, and had its second consecutive attendance increase of nearly 10 percent last season.

Gorsline pointed out that media outlets and other sport teams and leagues are also going through tough economic times, as all are losing ad revenue and sponsorship dollars during such a poor economy — all but the Chicago Blackhawks, it seems. Blackhawks management said season-ticket sales were up by more than 300 percent this season, to 14,000, and sponsorship money grew by 45 percent.

Still, revenue to Van Andel Arena and DeVos Place is down this fall from last year. The arena will lose $76,400 in rental income because of the Rampage not playing its eight home games there. But the rental revenue isn’t all profit. SMG Regional General Manager Rich MacKeigan said the building netted $3,600 after expenses from the team last season.

MacKeigan said the financial loss isn’t too painful for the arena, but not having the Rampage play in the building hurts because the franchise has been a good tenant since 1997.

The Convention and Arena Authority, though, will lose $80,000 due to the games not being played. The lease agreement the franchise has with the board requires the Rampage to deposit $10,000 into the CAA’s capital improvement fund for each of the eight games.

There was no talk of suspension when the International Hockey League folded in 2001. Rumors then said the IHL’s demise came from too much expansion into too many larger markets.

But hockey remained at the arena, as the Grand Rapids Griffins, with DeVos as the majority owner, joined the American Hockey League the following season.

If the report is true that it was the big market AFL teams with ownership ties to the National Football League that forced the suspension, then the AFL may join the IHL in the sports museums.

But the arena games could remain at the Van Andel if the Rampage joins Arena 2, which is unaffected by the AFL suspension. So what is now known as the AFL’s minor league could become the only major indoor turf game in town.

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