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Competitive Balancing Act II—This Is Pop: Redefining Large- and Small-Market by Population
2004-03-23 12:47
by Mike Carminati

Other entries in the series:

Competitive Balancing Act I—The King James Version: An Overview of the Literature, Scenes I, II, III, and IV
Competitive Balancing Act II—This Is Pop: Redefining Large- and Small-Market by Population
Competitive Balancing Act III—C'mon Freddy, Everyone into the Poo-el: Reviewing the Available Player Pool
Competitive Balancing Act IV—Natural Resources: Attendance and Competitive Balance

Like many businessmen of genius he learned that free competition was wasteful, monopoly efficient. And so he simply set about achieving that efficient monopoly.

—Mario "Mendoza" Puzo regarding Don "Joe" Vit(iell)o Corleone

What is a small-market team?

In 1872 the Middleton (CT) Mansfields fielded a team in the National Association, the precursor to today's National League. Middleton had around 6900 people. They competed against teams in New York with about 1.5 M people, Brooklyn (400 K), Boston (250 K), Philadelphia (675 K), Baltimore (275 K), and DC and Cleveland (about 100 K each). Now that was a small-market team. I guess it's no surprise that their record was 5-19. There is no record of their attendance, but I'm thinking they would make Expo games seem crowded.

Altoona, PA was a charter member and briefly fielded a team in the Union Association, a one-year, rival major-league—considered the weakest major league all time—in 1884. They were the first (of many) UA teams to fold, with a 6-19 record. With so many UA teams folding, they propped themselves up by co-opting the minor Northwestern League's entire roster. Kansas City replaced Altoona. Consider that Altoona, PA had about 20,000 people.

Today a small-market team connotes a team with an old stadium (e.g., the A's) or one that has a bad stadium deal (e.g., the Marlins) or one whose cable deal is not remunerative enough (sometimes intentionally if they have a common owner) or one whose stadium lacks luxury skyboxes or one whose stadium is not publicly funded, etc., depending on the individual defining the term. Basically, it's a team with limited resources, that is, low revenue. With revenue sharing becoming more and more an issue with the last CBA, a team that spends less money on players is a small-market team.

Take a look at the Phillies. For the last four years of the old Collective Bargaining Agreement the Phils received $42 M dollars. Money they have since invested in free agents like Jim Thome and David Bell, used to re-sign Bobby Abreu and Pat Burrell to long-term deals, and allowed them to take on the contracts of Kevin Millwood, Eric Milton, and Billy Wagner. In some ways you could say the Indians paid the Phils to snatch Thome from their roster: Thome made $9.5 M in 2003, the first year in the contract he signed with the Phils. The Phils made $11 M in revenue sharing in 2002 and $8.8 M in 2003. The Indians paid about $13 M in revenue sharing in 2001 and paid again in 2002 (though I cannot find the exact figures). Cleveland's metropolitan population is about half of Philly's.

Basically, the Indians were penalized for having developed and trying to maintain a premier team and the Phillies were rewarded for ignoring their team and their natural resources, the fans, for many years. The Phils' coffers were bursting but they waited to use the extra funds until they were moving into a new stadium (well, it started the year before).

Clearly, any sharing of funds based on how a team makes decisions (i.e., payroll luxury tax) or what those decisions yield (i.e., sharing local revenue) affect how teams will run their teams in the future. That's the point. Baseball owners want to keep salaries low and, especially with a small-market commissioner, are jealous of teams with high local revenues.

The Indians, even before Thome left, had started to slash payroll even though they were still making a modest profit based on revenue. The Red Sox reportedly did not consummate the A-Rod deal ultimately because the added $3 M it would have taken to get him (after the union balked at Boston cutting his salary) would have put them too close to the luxury tax threshold.

Apparently, a team that spends money on players and/or generates a good deal of revenue is a large-market team. A team that spends less and/or makes less in local revenues is small market. This may work for their purposes, but not mine.

So what are my purposes? I propose top study the relationship between fanbase size and team record. A small-market team to me doesn't entail local media contracts, stadium age or quality, capital available to ownership, community concessions, etc. Those things change over time. Some are a product of team management or mismanagement—or the team may be hiding revenue/costs from one business, say, a cable channel, in another, say, a ballclub— and of the state of MLB in general.

I want to look at the most important resource available to a given team and the one it has the least control over, population (although Steve Garvey did do his part, the team player he's always been). There could be an investor who wants to bring major-league baseball back to Altoona but he probably would not get very far. I want ask, "Have the more populous cities' teams been more successful throughout baseball? And if so, are they still more successful today?"

Another interesting question is whether those small-market teams have been allowed to relocate to greener, that is more populous, pastures when they are available? As the population has moved to or expanded in the west and south in recent years, has major-league baseball followed? Does the fact that baseball has not had a team relocate in thirty years mean that there are no areas that could better support a team, other than the six that baseball has since expanded into?

The reason that I ask these questions is to help determine if there is a competitive imbalance on the playing field between large- and small-market teams (using my definitions), and if so, does it make a substantial enough dent in their financial statements that they are forced to pull up stakes and leave, that they are negatively impacted to such a degree that they have to relocate to survive? (No team has folded since 1899 and that was to reduce the NL's number of franchises from an unmanageable 12 down to the traditional eight.)

So small markets are less populous than the large ones, but how much smaller and where's the dividing line between the two groups? In the 1872 NA it was relatively easy to see that Middleton, CT had decided disadvantages, but are Kansas City and Cincinnati in the same boat?

Well, let’s start with the dividing line and go from there. In some instances, especially, in the nineteenth century, if we consider the top half of the teams as large markets and the bottom half as small, we will misrepresent the sizes of the cities relative to the most populous cities in the country.

For example, New York and Philadelphia, the two largest cities in the country at the time, both had teams kicked out of the National League (i.e., forfeited to the league) by baseball czar William Hulbert in 1876 after they failed to complete a road trip in the west (i.e., Midwest). They didn't field a major-league team until the maverick American Association was formed in 1882 (and even they did not have a New York team. The original Mets, until the next year). The NL did have teams in Troy (NY), Syracuse (NY), and Worcester (MA), however.

Los Angeles was probably the third most populous city in the US in 1958 (they passed Philly sometime between the 1950 and 1960 censuses) when the Dodgers moved there, but had been ignored by the majors until its inclusion was almost required (two of the other three major league sports had already had teams in LA; and the minor-league Pacific Coast League had been given special "open" classification making it almost a third major league). Then it had a second team within three years.

My dividing line will be determined by taking the number of major-league teams dividing by two (rounding down), and finding the city whose rank in population matches that number, irrespective if the have a ballclub or not. Then any city that has at least as large a population as the dividing-line city is a large market. Anything below the dividing line city is a small market. It's somewhat arbitrary but it's consistently arbitrary. If LA was in the top three or four most-populous cities in the Fifties and there were 16 teams (dividing line at the eighth most-populous), than in reality there was at most seven large-market cities.

Also, I have defined fanbase as consisting in the portion of the community available to the team, Therefore, the fanbase in cities where there are multiple major-league clubs equals the population of the city's metropolitan are divided by the number of clubs. Maybe that overstates the fanbase of, say, the old Boston Braves and understates the Red Sox's, but both teams had the same fanbase available and the NL club had been popular for years when they were successful (before the AL). They lost their fanbase through long years of sucking. Besides in any city there are fans of teams unrelated to the area. Should we poll Cub fans in Houston and educe the Astros fan base accordingly? Also, in multi-team cities there are fans, usual casual ones, of both teams. What do we do with those? Well, using Solomon-like wisdom, I have split them in half. Besides what portion of the local or national fanbase embraces a team is a function of how well managed and marketed a team is. The Yankees changed uniforms on a regular basis until they became the Yankees. The uniform has barely changed in eighty odd years since and are seemingly ubiquitous. It's a good thing they didn’t resemble the 1916 Giants unis.

One last thing, population is defined by the government via the census. Therefore, teams from different cities sometimes represent the same metropolitan area (e.g., San Fran and Oakland, Baltimore and DC). If the government calls it one community, so shall we. I know that some will take issue with the way the government draws its metropolitan borders. For example, Trenton is considered part of the New York metro area, but is closer to Philly; however, Atlantic City is part of the Philadelphia metro area but is considerable farther. Take it up with Uncle Sam. Their definitions are the best I have. One other issue with them is that they are reassessed with each census. The concept of metro areas as a concept came about in the Fifties. Before that they just counted everyone in the city limits. So in one census Baltimore and DC are separate metropolitan areas, but in the next they are one. Eh, what are going to do?

One last thing continued, if a team does not play a full season or moves to a new city midseason, both of which were common in the nineteenth century, that club will be considered as existing the entire season. Dividing teams by the percent of the schedule completed is too cumbersome and may actually be misleading given the unbalanced schedules of the era. (The only exception is if a team in a given city replaces another team in the same city, as happened once with the Reds once, I believe in 1890, they're considered one team since that's how baseball saw them.)

To be continued…

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