Small Markets, Large Markets, and the Games Baseball’s Owners Play
We often hear a lot about large market vs. small market teams. The assumption is that because a team plays in one size market or the other, their available revenue, generated through T.V. deals and fan-bases commensurate with the size of their cities, plays an out-sized role in whether or not that team can hope to realistically compete in the baseball marketplace.
Some teams have called certain cities home for a hundred years or more. There was a time when some of these cities were among the largest and wealthiest in America. For some of these cities, growth continued unabated throughout the twentieth-century and into the new millennium. For other towns, their relative position in terms of population and economic power has declined significantly over that same period of time.
Yet some teams seem content with their lot, protected from the hazards of free market capitalism by revenue sharing, and by the fact that for most Major League baseball owners, their team is not their personal primary source of wealth (they were wealthy before they ever owned a team), but is, instead a kind of status symbol akin to owning a Picasso or a small island in the South Pacific (though the actual location might be the South Bronx.)
So it might be instructive to take a look at the locations of today’s MLB franchises, and how these cities have grown or declined since the middle of the last century, with an eye toward evaluating the intersection of payroll, demographics and the on-field success of these various franchises.
Below you’ll find a list of each MLB city’s population as of 2012, the rank of each city based on population, and the population and relative position each of those cities held back in 1950:
1) New York City – 8,336,697 – 1950: 7,891,857, 1st
2) Los Angeles, CA – 3,857,899 – 1950: 1,970,358, 4th
3) Chicago, IL – 2,714,856 – 1950: 3,620,962, 2nd
4) Houston, TX – 2,160,821 – 1950: 596,163, 14th
5) Philadelphia, PA – 1,547,607 – 1950: 2,071,605, 3rd (about a 25% population decline over 60 years.)
6) Phoenix, AZ – 1,488,750 – 1950: 106,818, 99th (Modern Phoenix is about 14 times larger than in 1950.)
8) San Diego, CA – 1,338,348 – 1950: 334,387, 31st (Has added almost exactly one million people.)
14) San Francisco, CA – 825,863 – 1950: 775,357, 11th
18) Detroit, MI – 701,475 – 1950: 1,849,568, 5th (An astonishing 62% population decline.)
21) Boston, MA – 636,479 – 1950: 801,444, 10th
22) Seattle, WA – 634,535 – 1950: 467,591, 19th (Growing, but at a slower rate than many other cities.)
23) Denver, CO – 634,265 – 1950: 415,786, 24th
24) Washington, DC – 632,323 – 1950: 802,178, 9th
26) Baltimore, MD – 621,342 – 1950: 949,708, 6th
30) Milwaukee, WI – 598,916 – 1950: 637,392, 13th
37) Kansas City, MO – 464,310 – 1950: 456,622, 20th
40) Atlanta, GA – 443,775 – 1950: 331,314, 33rd
44) Miami, FL – 413,892 – 1950: 249,276, 42nd
45) Oakland, CA – 400,740 – 1950: 384,575, 27th
47) Minneapolis, MN – 392,880 – 1950: 521,718, 17th
48) Cleveland, OH – 390,928 – 1950: 914,808, 7th (A 57% population decline.)
50) Arlington, TX – 375,600 – 1950: 7,692, (Not Rated.) (If you include the nearly 1.2 million people who live just 20 miles away in Dallas, Arlington jumps into the top ten metropolitan areas.)
53) Tampa, FL – 347,645 – 1950: 124,681, 85th
55) Anaheim, CA – 343,248 – 1950: 14,556, (Not Rated.) (L.A. is 33 miles away, making Anaheim more or less a large suburb. As a stand-alone city, though, it’s population has exploded, and could some day break into the top 50.)
58) St. Louis, MO – 318,172 – 1950: 856,796, 8th. (Not necessarily viewed as a city in decline, but in both relative and absolute terms, it certainly is.)
61) Pittsburgh, PA – 306,211 – 1950: 676,806, 12th.
65) Cincinnati, OH – 296,550 – 1950: 503,998, 18th. (The ultimate small-market team, Cincinnati is the only Major League city with fewer than 300,000 people.)
The only other MLB franchise not already on this list is the Toronto Blue Jays. Toronto currently has a population of about 2.5 million people, placing it between Chicago and Houston on this list.
In terms of absolute numbers, local populations have suffered declines in 12 of 30 MLB cities since 1950, representing 40% of MLB cities. Those cities are: Chicago, Philadelphia, Detroit, Boston, Washington D.C., Baltimore, Milwaukee, Minneapolis, Cleveland, St. Louis, Pittsburgh and Cincinnati. Those 12 cities lost a combined 5,049,244 citizens in little more than half a century, with further losses expected in several of those metropolitan areas. That’s a lot of potential baseball fans.
Overall, 18 MLB towns suffered a relative decline in their demographic ranking since 1950. That represents 60% of MLB franchises. In other words, even though half a dozen of these cities gained some absolute population, their numbers did not keep up with other American cities that grew even faster.
The top ten U.S. cities in terms of total population that do not currently boast an MLB franchise are:
1) San Antonio, TX (1.383 million)
2) San Jose, CA (983,000)
3) Austin, TX (843,000)
4) Jacksonville, FL (837,000)
5) Indianapolis, IN (835,000)
6) Columbus, OH (810,000)
7) Fort Worth, TX (778,000)
8) Charlotte, NC (775,000)
9) El Paso, TX (773,000)
10) Memphis, TN (655,000)
As you can see, other than a couple of mid-western cities, eight of these ten towns are in the south or west (or the southwest.) I don’t pretend to know which of these towns, if any, would possibly welcome a relocated MLB team (though San Jose is an obvious destination for the A’s), but considering the decline of so many current MLB cities, it’s a bit odd that there hasn’t been more talk in recent years of relocation.
But it’s also true that the size of the local market does not necessarily correlate with the size of each team’s payroll. For example, New York’s National League franchise, despite its obvious advantage of playing in America’s largest city, and the media capital of the world, with a long and proud tradition of baseball, somehow ranks a scandalous 22nd in payroll, with a budget of a little over 89 million dollars on the books for 2014.
While it’s true that spending lots of money does not necessarily result in a World Championship, it is no less true that failing to invest in one’s product can also harm one’s business. As their payroll has stagnated (though they did spend some money this off-season) the Mets have experienced five straight years of declining attendance.
Declining attendance means declining revenue. Declining revenue means (at least in theory) even less money to spend on the product. Thus, the downward spiral becomes a self-fulfilling prophecy.
Though austerity is all the rage these days, and is often touted as “responsible” budgeting by those who speak in serious tones about reckless, wasteful spending, the fact of the matter is that unless you create the conditions that encourage consumer demand, austerity can be as reckless, if not worse, than the very problem it is intended to fix. In other words, as they used to say, give the people what they want, and they’ll show up.
Oddly, however, many fans seem to have bought into this austerity fetish, and spend as much or more time defending the penurious inaction of the team owners as they do actually rooting for the actual ball-club to succeed.
All of which raises the question, how does a millionaire team owner (and they are all at least millionaires) cry poverty? More specifically, what is the relationship between the net worth of a particular owner, and the baseball market he and his franchise inhabit? Does it matter — should it matter — that Royals team owner David Glass, whose net worth is said to be around 1.8 billion dollars, has up until recently (they’ve moved up to 19th-place this year) kept his team’s payroll very low?
On the one hand, the Kansas City market, as reflected in the drop in the relative position of Kansas City’s demographics, can be used to justify a small-market payroll. But, in the context of a deep-pocketed owner, does location really matter? What incentive would Mr. Glass have to increase payroll if he moved his team to Charlotte, for example? Revenue is not the same as profit, and Mr. Glass has carefully managed to profit from years of paying out low salaries (first as an accountant, and later as CEO of Wal-Mart, then later as Royals team owner.)
On the other end of the spectrum is an owner who is a throwback to the days when owners were not just businessmen, but were fans as well. Detroit Tigers owner Mike Ilitch is 82-years old. His personal fortune is estimated to be about two billion dollars. Given the state of the city of Detroit, it would be easy for him to claim that there was simply no money available to sign and retain all-star caliber players. Plenty of owners make that claim.
But Ilitch is a Detroit native, and wants to see his team win a World Series while he’s still alive. His philosophy is that “Fans want to see the stars, and if you want stars, you have to pay the price.” The Tigers currently have the fifth-highest payroll among all MLB teams.
They are also fifth in attendance among American League teams, an especially nice showing from the fans who live in a city in serious decline. Even if the Tigers do not win a championship in his lifetime, it would be hard to argue that Major League baseball in general, and Detroit in particular, are not better off for Mr. Ilitch’s efforts.
It appears, then, judging by how each team chooses to spend its money, invest in its product and connect with its fans, there is no obvious correlation between what we have come to believe are small market vs. large market teams. Yes, the Dodgers and the Yankees, two teams that operate in very large markets, spend the most money, and their fans respond in kind.
Yet there are also many examples, some of which I’ve already cited, where team owners, regardless of the health and vitality of the market in which they operate, either spend far more than one would expect under the circumstances, or who spend far less than appears to be justified.
To cite another example, the Cincinnati Reds, playing in the smallest of all Major League towns, rank a respectable 12th in payroll for 2014, and have drawn slightly more fans than have the Mets, despite a much smaller pool of potential fans to draw from. But the Reds also have a long and proud tradition. Could that tradition be easily transferred if they were to pick up and move to a larger market?
Finally, though some owners like Mike Ilitch go above and beyond due to personal loyalty to a particular team and city, it would appear to be an ultimately untenable position for MLB to continue to operate so many teams in so many declining markets, regardless of the personal wealth of the owners. How baseball’s next commissioner decides to address this looming issue will go a long way in determining professional baseball’s long-term health and viability in years to come.
Sources Used for this article: