The On Deck Circle

Baseball History, Commentary and Analysis

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:

http://www.citymayors.com/gratis/uscities_100.html

http://www.census.gov/population/www/documentation/twps0027/tab18.txt

http://www.ocalmanac.com/Population/po26.htm

http://www.city-data.com/

http://deadspin.com/2014-payrolls-and-salaries-for-every-mlb-team-1551868969

http://espn.go.com/mlb/attendance

http://usatoday30.usatoday.com/sports/baseball/al/tigers/story/2012-04-11/Mike-Ilitch-Red-Wings-Tigers/54227648/1

 

 

 

 

 

 

 

 

 

 

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14 thoughts on “Small Markets, Large Markets, and the Games Baseball’s Owners Play

  1. Great piece! I thought Sacramento should have been on the top ten w/o a Major League team, but after some research they only have a population of 475,000 and some change.

    • Hi Gary, And even though Sacramento doesn’t break the top ten, it still has more people than some of other MLB towns. The NFL seems to have more fully embraced the population shift in America by having more teams in growing metropolitan areas than does MLB. It’s worth asking if that’s one reason why the NFL has become America’s favorite sport (if not necessarily the favorite sport of the people who read our blogs.)
      Take care, Bill

  2. Wow, what a great pile of stats on a very important topic. Thank you for putting this together.

    My three cents? I love baseball and have since my childhood in the 60’s/70’s. I lived 60 miles from Shea, but went to many games in my teen years. My interest in baseball correlates specifically to the ability to follow the games. Back then, it was easy, no blackouts, and local am stations covered all of the games, ticket prices were reasonable.

    Since baseball viewing and listening has become a subscriber only product, you can’t stay in touch with the teams and therefore interest drops.

    It’s very sad. I do believe that fans are built by allowing them to participate as tv viewers. One of the points that Ken Burns makes in his documentary is that in spite of the fear that tv would ruin baseball attendance, the exact opposite happened.

    And, back in the day, the stadiums weren’t nearly as infested with advertising and sponsorships as they are now. Is it player’s salaries or ?? I don’t know, but it would be nice to be able to see more games on tv or listen on the internet to your favorite team without spending a fortune. Ticket prices too, especially for families, are way over-priced. How about a special deal for families?

    Okay, that’s my rant!
    Debra

    • Hi, You raise an interesting point about the cost of attending games or even paying for subscriber options on T.V., and its impact on working class / middle class families. Where I live in Greenville, SC, we have a Single-A minor league club in a very nice ballpark. Most games are well-attended, and the prices are affordable. But even here at this level, there is a distinct hierarchy of which folks get the best seats, and the game is basically a local, innocuous hobby until football season rolls around, which is taken far more seriously in this region. I do think that MLB used to be more of a working-man’s game, where the average family could show up, get decent seats, and still have money left for food at the end of the week. Clearly, and player salaries must necessarily play a role in this, pro-baseball today does cater to the upper-middle class and the corporate establishment. But if that’s the case, does location (in many declining metro areas) then limit how high a ceiling MLB has for future growth? How do they cater to the local, less-wealthy populations left behind and still field a highly-competitive team?
      Thanks for reading, and for the interesting comment.
      Bill

      • Hi Bill,
        DOn’t you love minor league play? I am fortunate to have the Salem-Keizer Volcanoes near by and my husband and I go the games as oftne as we can. You’re right – they’re affordable and the small intimate parks make for a great ballpark experience.

        I recently went back east to visit family in Durham, NC and got to see games plaed in both the original Durham Bulls stadium and the new one. That was another great baseball experience and the Bulls games that I attended there were packed! $8.95 for a seat located on the third base side mid-level. Now that’s affordable!

        Perhaps MLB needs some different pricing structure. If I were running the show, I’d discount tickets to anyone under 16, students and groups of four or more, and if tickets weren’t selling by game day, I’d discount them again. Ultimately, if the fans lose interest in MLB, they’ll go broke and there’ll be no more baseball. That would be a sad day for America.

        Thanks again for the timely topic!

      • Salem-Keizer Volcanoes? I’m intrigued. Whose MLB-farm system are they a part of? Never have been to a Durham Bulls game, though I can put that on the list of places I’d like to see a game. I guess the real money for MLB isn’t so much gate sales (though that’s always important), but comes more from T.V. revenue and merchandise sales. But for minor league clubs, a greater proportion of their revenue comes from butts in seats. That’s why, unfortunately, I don’t think MLB has a great incentive to go out of its way to make ticket prices more affordable for the average fan. The Mets are using something called Dynamic Pricing this year, where all ticket prices are constantly updated online, and are based on supply and demand. So, if you buy a ticket for a particular game way in advance, chances are that the price other fans pay for those same seats on that same day will be different (either higher or lower) depending on how the software determines what the price should be for that game on the day of that game. The price of the ticket you bought in advance is fixed, but once you get to the game, the guy sitting right next to you may have gotten a better deal, or may have paid much more. I have no idea how that’s been working out for the Mets so far this year, but it does appear that big tickets like Mets-Yankee games will be less affordable for the average fan, but a Tuesday night home game vs. the Astros might be doable. I’ll have to talk to some other Mets bloggers I know to see how that’s working out.
        Thanks again,
        Bill

      • Volcanoes are a SF Giants franchise in the NW League. They consistently have a great winning team. The ballpark is very small and intimate.

        It will be interesting to see of the Mets new system fills Not-Shea 🙂

      • I should think winning some more games on the field would have a much greater affect on attendance, but it’s not clear they would know what to do with that extra revenue anyway.
        Cheers, Bill

  3. Interesting analysis, particularly concerning “small market” revenues and the owner’s personal revenue.
    I think it’s also important to note that the size of a town does not necessarily equal the size of the local audience. St. Louis is small now, but the surrounding area is full of people in the suburbs. Slipping to basketball for a moment, Oklahoma City has suburbs, but they’re not very large so the bulk of the audience is from the town itself. That kind of stat may make it possible to view St. Louis as a “large market” town.
    v

    • That’s an excellent point, and as I pointed out with Anaheim, though the city itself is moderately sized, it certainly draws from the much larger city of L.A. next door. The Rockies apparently draw from all over the mountain states as well, and are not completely dependent on Denver. The question then becomes, how important does the local market (within city limits) become if it is continuously declining? Can even the fact that T.V. brings the team out to the suburbs forestall what seems to be a cultural shift to the South and Southwest? If the NFL is now bigger than baseball, could it be that part of the reason is that the NFL is much bigger and has more of a presence in those growing metropolitan areas than does baseball? And how many Mike Ilitch’s can baseball count on in the future to spend whatever it takes, simply out of loyalty, to keep baseball vigorous in declining markets? I guess we’ll find out, if we live long enough.
      Thanks, man
      Bill

  4. This is a great analysis of the business behind MLB. It leaves me liking the owner of the Detroit franchise even more.

  5. Generally, MLB has been slow to react to demographic changes, even when building a new stadium was not the cost-prohibitive affair it is today. As far as the economics involved…well, how much time do you have? I think much of the doom-and-gloom prophesized at the beginning of the free-agency era may be coming home to roost. During the 1990s, there were a total of five 100-loss teams; in the first decade of the new century, there were 15. That doesn’t prove anything by itself, but I think it suggests that the gap between the haves and have-nots is increasing, and the proliferation of huge local cable deals combined with what is in-effect an anti-small-market CBA is going to make the gap bigger. What baseball needs is true revenue sharing along the NFL model, along with a salary cap/salary floor, to ensure that all its clubs can compete (and, conversely, some of its clubs cannot pad its profits by putting a Quad-A club on the field) year in and year out. I’m not hopeful about such a prospect; the idea is a little socialistic for MLB ownership–or, for that matter, the MLBPA–to embrace, and until a crisis comes (and one will, there’s no doubt about that) I can’t see any real economic reform coming to the game.

    • Excellent points, W.K. I, too, think that baseball will react, rather than being proactive, to some future economic crisis within the game, and I think part of that crisis will be caused by pooling too many of its clubs in what are basically declining markets, without any real long-term plan. I doubt we’ll ever see salary caps, which I myself have mixed feelings about, but clearly there are now some owners who are gaming the system to their personal advantage, rather than doing what’s in the best interests of the fans of the team they own, let alone for MLB in general. It’s actually amazing that we’ve now had about 20 years of peace between labor and management in the game. But continuously rising player salaries, coupled with general demographic changes in where Americans actually live (even despite the proliferation of T.V. channels available for baseball fans), will at some point result in another economic crisis that MLB will have one helluva time solving.
      Thanks, man
      Bill

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