« Joakim Noah | Main | Catastrophe Keeps Us Together »
Baseball Balance
Aha! An interesting quantitative discussion of the competitive balance issue in baseball:
Of course, in any given year, most teams won't come close to making the playoffs. A more significant measure is whether poor revenue potential is locking teams out of pennant races for years at a time. The numbers here are less clear: Since the expanded playoffs began in 1995, twenty-two of the thirty big league teams have reached the postseason at least once; two of the remaining eight, the Phillies and Blue Jays, had just met in the final World Series under the old setup. Compare that to baseball's "golden age," when the Phillies once went thirty years without finishing higher than fourth while teams like the St. Louis Browns and Washington Senators rarely even sniffed a pennant race.Well off course placing bets on division winners based solely on TV market size is a stupid idea. But if 11 percent of the variation in playoff appearance really is accounted for by variation in TV market size, that's a pretty big effect. Someone should run that with the other sports.That said, the Yankees are one of two teams never to have missed the postseason under the current system (the Braves are the other). If we chart postseason appearances against average team revenue, we find that a little more than half of getting to the postseason is determined by team revenue.
But there's a problem here. High revenue may help lead to the postseason, but postseason appearances increase revenue as well. Not only are playoff tickets a lucrative item, but a winning team typically sees regular-season sales soar. To avoid this dilemma, we can compare postseason appearances not with revenue but with TV market size. Beyond the obvious -- you really don't want to play in the tiniest markets, or in Canada -- the correlation between market size and playoff appearances is extremely weak. What explains the Cardinals' or the Indians' success, or the Phillies' lack of it? Market size accounts for 11 percent of the cause -- meaning anyone who's tempted to place bets on division winners based solely on TV market size is kidding himself.
April 5, 2006 | Permalink
TrackBack
TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345160fd69e200d8345ce34469e2
Listed below are links to weblogs that reference Baseball Balance:
» BEST OF MP3 MUSIC, SOUNDTRACKS, COLLECTIONS AND FULL ALBUMS from MP3 Directory
BEST OF MP3 MUSIC, SOUNDTRACKS, COLLECTIONS AND FULL ALBUMS. ... 17.04.2006 Silent Voices Silent Voices: Silent Voices - Full Album: Building Up The Apathy ... [Read More]
Tracked on Apr 27, 2006 1:58:50 PM
» Advanced MP3 Search Download from MP3 Music - Peoplesound
Advanced MP3 Search download page. Music search software for people who frequently search for music... [Read More]
Tracked on May 3, 2006 10:00:29 AM
» Google Buys Mozilla Foundation from aquiring the
those rumors about GBrowser were true, but in a way no one guessed. Google is aquiring the Mozilla [Read More]
Tracked on May 8, 2006 3:43:21 AM
» Immigration Reform: Demographics the Decider from national suicide
Arlen Specter (R-PA) is currently striking a compromise in the Senate between the two major immigration reform bills already proposed: [Read More]
Tracked on May 8, 2006 9:10:57 PM
Comments
Yes, quite interesting. But I have questions. First, is TV market size a good proxy for team revenue (absent the bad effects the author mentions)? More importantly, whynot just look at spending? As I posted on an earlier thread, I'd like to see whether there is a correlation between spending and winning percentage. After all, is spending the thing we are really talking about retarding through a salary cap? The author goes through the gymnastics of saying spending is 60% of revenue, then look at revenues (or a proxy). Why not go directly to looking at spending?
Posted by: Al | Apr 5, 2006 2:20:41 PM
whynot just look at spending
Because, as the author spent considerable effort saying, that the causation arrow runs both ways. Spending may make teams better but better teams accumulate more money. Good players get more money, good teams sell more tickets. Correlation does not equal causation, etc.
Posted by: quietstorm | Apr 5, 2006 2:32:59 PM
Al, TV market size is a proxy for potential team revenue. Incompetent owners who produce a bad product on the field also tend to promote their teams badly. Perhaps what we really need is a salary floor to weed out the bad owners.
Posted by: James B. Shearer | Apr 5, 2006 2:48:14 PM
TV market size is a prtial proxy for revenue, but it's nto a great one. Not sure if it's still true, but for a long time the CUbs had a very nice TV deal with WGN which was a national cable station. Meanwhile the White Sox at first hsd not TV deal and then signed with a much smaller local sports station. Same market, very different revenue streams.
As far as spending, there is some causation both ways but I think it's a lot weaker in the "good teams lead to higher spending" direction. There are many, many examples of good teams in smaller markets losing players because they couldn't afford to sign them. The Pirates of the early 90's and the A's since are prime examples, and the Expos lost their fair share of top players as well. These were all good teams who couldn't afford to spend the money to maintain their rosters. The A's have maintained success, the Expos and Pirates went into nosedives.
Posted by: Doug T | Apr 5, 2006 3:12:14 PM
This is all very tangled, but much of it boils down to the fact that the baseball playoffs are a lot shorter. If you look at the top 4 teams in each conference over the last ten years of basketball, you'll get roughly the same amount of competitiveness. You have a lot of teams that are repeatedly high caliber: San Antonio, Dallas, the Lakers, Sacramento for a while in the West; . True, they don't account for all the top 4 seeds every year, but then again, the Red Sox have missed the playoffs a few times, as have Houston, Oakland, and St Louis.
During the era of the Shaq-Kobe Lakers, the last time I looked at it basketball was less competitive than baseball. LA, Dallas, and Sacramento were always in the top 4 in the West.San Antonion oscillated with Portland for the other spot, depending on whether Tim Duncan was healthy and shooting free throws. The east was moderately stable, with NJ, Detroit, Indiana, and and Philadelphia getting lots of high seeds. Meanwhile, in baseball, the AL West was in turmoil, the D'Backs rose and then fell, the young Twins team finally matured, the Marlins had their freak world series win, etc. So competitiveness comes and goes. The Yankees and the Braves make baseball look a lot less competitive. But then the Lakers & Celtics, and in the '90s the Bulls & Jazz, made basketball look pretty uncompetitive.
The correlation between TV market size and revenue is weak, because lots of teams draw fans from a regional base. The Cardinals, Braves, Cubs, Reds, and Mariners have built-in advantages of having long traditions as regional teams (in the case of the first four) or having no one to compete with for several hundred miles (in the case of the M's).
Posted by: Nicholas Beaudrot | Apr 5, 2006 3:57:36 PM
Back in the "Golden Age of Baseball" that we read about so much, New York City teams comprised 14 of the 16 teams to appear in the World Series from 1949 through 1956. Basically, baseball was pretty boring back then, unless you lived in New York, which is where so many of today's nostalgia writers lived.
Posted by: Steve Sailer | Apr 5, 2006 4:00:25 PM
I think the take on revenue sharing is a little messed up. It presumes increasing payroll is an effective way to increase revenue. He doesn't give too much evidence of that. If a team owner knew that for a given expense he was guaranteed some positive rate of return he'd do it. The problem is there are few better ways to lose money than by trying to buy a good sports team. The Yankees, RSox, and Cubs are brands. It would take a decade of being terrible for them to lose fans, and even that might not do it. Heck, Man U vs. Chelsea, Chelsea's revenues have gone up, but they aren't anywhere near profitable.
The author even misses the lesson of Tom Hick's ARod signing, Hicks actually stated he believed the deal would end up increasing revenue and value by more than $25 million a year. That signing alone helps illustrate how weak the relationship between payroll and revenue is. There are coutless more, the Dbacks in their WS year needing a loan from MLB to make payroll, The marlins spending boatloads of money in the first WS run and still playing to tiny crowds.
The whole article plays like an economists rational actor theory applied to sports fans; who are, almost by defition, irrational.
Posted by: Crack | Apr 5, 2006 4:18:57 PM
There is a de facto salary floor - the minimum league salary, $316,000. For a full roster of 25 players, that comes to $7.9 million. I haven't actually looked at it, but I think every team has at least one player making that much in salary. I could be wrong about that though...
Posted by: Trickster Paean | Apr 5, 2006 4:36:52 PM
i'll repeat what i've said on other, related threads: there is no problem with competitive balance in baseball. It's the salary cap sports that have a problem with competitive balance.
that said, it's entirely at the owners' discretion to solve the variation of tv revenues by pooling all local tv revenues on the theory that you can't broadcast without an opponent. i'm actually rather surprised that some of the smaller market teams haven't yet tried this.
there is no excuse for a team to be hopelessly uncompetitive for years other than management failure.
Posted by: howard | Apr 5, 2006 10:17:52 PM
Come on Matt. Social commentary - that's what you're good at. Give us your thoughts on Duke Lacrosse.
Posted by: Chad | Apr 6, 2006 8:35:08 AM
Howard, please give some evidence of the competitive balance in baseball and evidence of the lack of competitive balance in salary cap sports.
Posted by: Crack | Apr 6, 2006 9:00:33 AM
Tying a couple of previous points together, small market teams can be competitive, but it's harder. And many of them consciously make the choice to put a terrible product on the field and pocket their extra revenue. The KC Royals are famous for this, and for a long time the LA Clippers were in the NBA. No amount of revenue sharing can avoid the problem with those owners who are trying to maximize profits (or minimize risk), rather than putting a decent team on the field. What's needed for them is a salary floor.
ALso, I think the biggest advantage of being a mid-to-large market team is that there's a ratchet effect, in that you can re-sign good players on your team. Whereas small market teams like the A's, Expos, and Pirates require a continuous supply of farm prospects to stay on top, which is a lot toguher than developing a few great players and keeping them on your team for 12-15 years. If Jeter and Rivera were Pirates, they'd now both be on some other team. But the Yankees were able to keep them, in addition to adding some other free agent.
Posted by: Doug T | Apr 6, 2006 9:01:34 AM
Part of the problem is that sports writers buy ownership lines about small markets. Miami (metro pop of 5 million) and Minneapolis (3 million, 15th in the US) are not small cities. "Large market" St.Louis is at 2.7 million.
Posted by: Rob | Apr 6, 2006 9:38:54 AM
"Yes, quite interesting. But I have questions. First, is TV market size a good proxy for team revenue (absent the bad effects the author mentions)? More importantly, whynot just look at spending?"
Because if you look at spending, you ignore the fact that revenues are highly mutuable (one could even take the radical step if seeing player salaries as ivestments ratger than expenses.) In the early 90s, the Blue Jays outdrew the Yankees by a large margin. Looking at spending, therefore, doesn't address the primary whine of hyper-socialist owner apologists, which is that the same teams always win and nobody else has a chance. If any team can in fact invest significant money in payroll when their team is good and their revenues are going up, this complaint goes away.
Posted by: Scott | Apr 6, 2006 9:45:04 AM
Doug T notes the Cubs' sweetheart deal with WGN TV, but doesn't note that both the Cubs and WGN are part of the same media-entertainment conglomerate, The Tribune Corp. Sports economists have for years argued that this has allowed the Cubs to low-ball their revenue estimates.
Posted by: Donald A. Coffin Donald A. Coffin | Apr 6, 2006 11:44:20 AM
There is a long tradition in baseball of owners buying teams, moaning about how much money they're losing, and then selling the team to somebody else for a lot more money, who then proceeds to do the same thing.
Posted by: Barbar | Apr 6, 2006 12:13:52 PM
Yeah, there's nothing funnier than the media repeating crap about how much money teams are losing, which according to MLB includes the Dodgers. Because, of course, even though the Dodgers own Dodger staidum, they certainly don't benefit from its profits!
Posted by: Scott Lemieux | Apr 6, 2006 1:03:57 PM
You should go read up with people like the late Doug Pappas if you really care to dig into baseball economics. The folks at Baseball Prospectus also write about it regularly. A bit less baseball-specific, check out Neil DeMaus's great work on stadium funding.
TV is a much lower percentage of team revenue in baseball than it is in football, and somewhat lower than basketball's. That being said, as an earlier commenter pointed out, "TV market size" is a reasonably good approximation for the size of population that a team might convince to spend some money on their entertainment.
There's a fairly direct relationship between how many games a team wins and its revenue. *That* is why A-Rod is worth his contract: he helps the team win enough more games to pay for his salary in increased ticket sales, TV contract and advertising revenue, etc.
(There's ample room for skill on the part of team construction, of course. Note that the Athletics are one of the most successful teams of the past decade, despite having one of the lowest revenues.)
For the record, one of the things I hate about pro basketball and football is that the players' unions rolled over and caved, and allowed the owners to institute salary caps. Caps don't do anything other than keep the team revenues in the owners' pockets.
Posted by: ctate | Apr 6, 2006 5:26:23 PM
The Cubs and the Tribune Co. are the perfect example of poor ownership in baseball. Wrigley Field sells out no matter how large their payroll. What incentive is there to field a winning team? All they need are one or two stars to provide hope. The Tribune Co. goes so far as to scalp their own tickets! They sell a portion of each games seats directly to their own ticket agency before they are made available to the public often creating "sell outs" that allow them to televise the game. The ticket agency then routinely sells tickets to a "sold out" game for more than face value. It's a racket.
Posted by: Just Karl | Apr 6, 2006 9:01:17 PM
Here a link about the Tribune Co. scam.
http://www.bullz-eye.com/NewsAndCommentary/2003/120201.htm
Posted by: Just Karl | Apr 6, 2006 9:08:10 PM
The comments to this entry are closed.
