The On Deck Circle

Baseball History, Commentary and Analysis

Archive for the tag “Small Market Teams”

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.

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A Delicate Imbalancing Act

It is the conventional wisdom among many fans and sports-writers these days that baseball suffers from a serious case of competitive imbalance.

The rich teams like the Yankees (always the Yankees) enjoy an unfair competitive edge over their disadvantaged competitors  due to the monstrously large size of their media-market.

A few other teams, notably the Mets, Red Sox, Dodgers, Angels and perhaps the Cubbies also get to bid on the high-profile free agents, leaving the small-market teams gazing woefully in the window like so many Dickensian street-urchins.

Things have gotten so bad, so the logic goes, that only a salary-cap can save baseball from itself.

The on-line blogosphere, Twitter, and all of the other domains frequented by the chattering masses, constantly sling arrow after arrow at this paper tiger, trying, ostensibly out of a sense of fairness, to slay this ravenous beast before it ruthlessly devours yet another season.

And yet, the reality is that the competitive balance between baseball’s thirty teams is as strong as it’s ever been, and is much stronger than it has often been.

Since the year 2001, eight different teams have won the World Series in nine seasons of competition.  Only the decade from 1978-87, when ten different teams won the World Series, featured a greater diversity of championship teams.

Moreover, although free agent signings have played a part in the overall formula of putting together a championship baseball team, a significant proportion of the star players on these teams have either come up through the team’s farm systems, or they were acquired in astute trades.

Let’s use the 2006 champion St. Louis Cardinals as an example.  Only two significant players on that team, Chris Carpenter and Jason Isringhausen, were obtained via free agency.  The combined cost of these two players, however, was a nominal three million dollars.  One would think that even teams like the Royals and the Pirates could have afforded one or both of those players.

The total team payroll for the Cardinals that championship season was a relatively modest 88 million dollars.

The 2005 Chicago White Sox are another example of how a franchise can build a championship baseball team without leading the league in spending.  The entire payroll for this team was about 75 million dollars, and the only significant free-agent the White Sox added that season was Jose Contreras, who ended up with a reasonably productive fifteen victories.

And although last season’s Yankees won the World Series after purchasing both Mark Teixeira and C.C. Sabathia, they also had farm system products Derek Jeter, Mariano Rivera, Andy Pettitte, Jorge Posada, Robinson Cano, and Phil Hughes to thank as well for their 27th World Series Championship.

That’s far more talent than the Royals and Pirates have produced from their farm systems combined over the past decade.

While it’s true that the Yankees broke the bank last season with a payroll in excess of 200 million dollars, it is also true that their example has been an anomaly over the past decade.  Most teams, like the Mets, for example, who have relied primarily on free agent signings (Johan Santana, Carlos Beltran, K-Rod) to bring a world championship home, have failed miserably.

Conversely, most teams that have won, or have simply played in the World Series over the past decade, have been in the middle or upper-middle tier of spenders.  A couple have even been near the bottom of the payroll list.

Now the argument at this point becomes, of course, that small market teams  just can’t generate enough revenue to compete with even the medium market teams.  Well, there are three basic flaws with that argument:

Flaw #1:  Each franchise is owned by a millionaire, or a group of millionaires, who have to decide how important it is for them to field a championship ball-club.  The truth is (as we have just witnessed with the penny-pinching Marlins signing of Josh Johnson to a long-term contract) that the money IS ALWAYS there, if ownership decides to open their collective checkbook.  Meanwhile, what is the excuse for poor scouting, player development, and lack of sound judgment when making trades?

Flaw #2:  The second argument that advocates of competitive reform make is that baseball is a business, and you can’t expect the owners of small market teams to throw good money after bad in a vain attempt at catching the Yankees, the Red Sox, the Mets, etc.

Yet in what other realm of the American business world do owners of small franchises EXPECT and, stunningly, RECEIVE, gifts of cash from their bigger competitors to “level” the playing field.  The owners of these small baseball franchises then generally pocket the cash, fail to improve their product-line, then expect that baseball will come up with even more creative ways to allow them to enjoy a profit without being held to even a minimum standard of improvement.

Flaw 3:  Teams like the Royals, Brewers, Pirates, Reds, A’s, etc, are NOT directly competing with the Yankees, Red Sox, Dodgers, or Angels.  These small market teams are more accurately competing directly with the other teams in their own division for a shot at the playoffs.

The Brewers, for example, simply have to play just slightly better than the Reds, Pirates, Astros and Cubs for a shot at the playoffs.  And once in the playoffs, as several Cinderella teams have showed over the years, anything can happen.  The team with the best record during the regular season does not always win.

This is why when I read respectable sports-writers make arguments that, for example, the Brewers should trade 26-year old Prince Fielder now for maximum value so they can obtain blue-chip prospects, the lack of logic in that argument leaves me dumbfounded.

Here’s why.

The Brewers, with Fielder and Braun in the middle of their lineup, and several other at least league-average players, have a legitimate chance of competing for the top spot in their division.  Isn’t that the reason franchises field teams in the first place?  Isn’t that why fans come out to the park to see their team?  Isn’t that why (perhaps ironically) the Brewers signed free-agent Randy Wolf?

Moreover, if the Brewers did put Fielder on the open-market and obtained a couple of blue-chip prospects in return (who might be only a couple of years younger than Fielder), wouldn’t they just end up with the same dilemma a couple of years from now regarding whether or not to keep these new young players?

Would you then turn around and trade them as well for prospects?  What’s the point of making trades for young talent in the first place if you don’t plan on keeping them around long enough to help your team make a run at the playoffs?

This is called a prospect-fetish; its danger is that it masquerades as a sensible solution to the apparent dilemmas posed by direct competition.

Let’s stop for a minute and ask another question.  Why do some people assume that what is in the best interests of small market teams is naturally in the best interests of Major League Baseball?

Those who advocate for a salary cap, for example, base their arguments on the presumption that because this salary cap would, in effect, “hurt” the Yankees chances of future success, then small market teams can only benefit.  And if this new system allows small market teams greater access to top-tier talent, they can only be more competitive as a result.

But I ask once again,  how is this zero-sum game philosophy (your loss is automatically my win) in the best interests of BASEBALL?

This is not a rhetorical question.  Here’s why.

Guess which teams benefit the most when the World Champion Yankees or Red Sox come to town?  It is the small market teams (who refuse, or, out of sheer incompetency, are unable, to field a quality team) that benefit the most.

Attendance is always higher in Kansas City, or in any of the smaller markets, when the Yankees or Red Sox come to town.  In other words, EVERYONE WINS when these high quality teams come for a visit.   Revenues go up for both the Royals AND the Yankees.

Does baseball really want to consider putting a system in place that could, in effect, kill the goose that lays the golden eggs?

There is one solution to this so-called competitive imbalance that was once used extensively as a means by which a team would seek to enhance its bottom line.

Move the franchise.

Take a look at how many teams moved from one city to another in search of greener pastures throughout the 20th century.  The Dodgers, Giants, Braves (twice), A’s (twice), and the Senators, are just some of the teams that moved primarily for financial reasons.  Some cities gained teams; others lost them, and some of those who lost teams later gained new franchises.

There are thirty major league franchises, yet several teams play in American cities that don’t rank anywhere near the top thirty in terms of population.  Kansas City, Oakland, Cincinnati and Pittsburgh rank, respectively, 35th, 44th, 56th and 60th in population.

Meanwhile, Charlotte, NC ranks 18th, Las Vegas ranks 28th, and Tucson, AZ ranks 32nd.  Raleigh, NC, Mesa, AZ and several other cities are moving up fast.  These cities also have the advantage of being in the sun-belt, a more natural setting in which to play baseball.

Change is difficult, but baseball is a business. And if it is in the best interests of both the teams themselves and of Major League Baseball for a franchise to move, then sentimental posturing, aided and abetted by inefficient and ultimately pointless systems like revenue-sharing, shouldn’t stand in the way.

Ultimately, then, the Pirates,  assuming they commit themselves to top-notch scouting and player-development, might someday be able to afford to sign that free-agent who could turn out to be the last piece in their franchises’ championship puzzle.

Only it may happen in Charlotte instead of Pittsburgh.

But, hey, Pittsburgh, you would still have the Steelers.

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