The myth of the “small market team”

When you lis­ten to peo­ple talk about “small mar­ket teams”, or even just money and base­ball, there seems to be some con­fu­sion between not hav­ing resources and not spend­ing resources.

As I’ve men­tioned before, the main money dif­fer­en­tial between the “haves” and “have nots” in base­ball comes down to local tele­vi­sion rev­enue. Major League Base­ball has a national tele­vi­sion con­tract with FOX and with ESPN that gen­er­ates a great deal of income, which is evenly dis­trib­uted to all the teams in the league. This is good. How­ever, indi­vid­ual teams also have the right to sell their local tele­vi­sion rights to the high­est bid­der and keep all of that money for them­selves. That’s good for some, but not so good for oth­ers. How much money those teams receive from their local tele­vi­sion con­tracts depend on two fac­tors — how much adver­tis­ing money show­ing those games can poten­tially bring to a net­work, and how many net­works want to gain con­trol of those rights.

Bid­ding wars can’t be pre­dicted. Some­times a new net­work enters the fray, some­times net­works drop out, maybe a team gets more pop­u­lar because they’re win­ning more, maybe the pop­u­lar­ity drops because they’re win­ning less. Poten­tial adver­tis­ing money, how­ever, can be esti­mated pretty safely.

Now, an adver­tiser wants, ide­ally, for his ad to be seen by as many peo­ple as pos­si­ble. The more peo­ple they reach, the more value it has. So, value can be directly attrib­uted to the num­ber of poten­tial house­holds that ad will reach. Since the net­work is local (at least, in most cases), the num­ber of poten­tial view­ers is mea­sured by the num­ber of tele­vi­sion views in that met­ro­pol­i­tan area. If you go by Neil­son num­bers, this is how the TV mar­kets look in major league cities:

1 — New York (Yan­kees, Mets) — 7,355,710
2 — Los Ange­les (Dodgers, Angels) — 5,431,140
3 — Chicago (Cubs, White Sox) — 3,417,330
4 — Philadel­phia (Phillies) — 2,919,410
5 — Boston (Red Sox) — 2,391,840
6 — San Francisco-Oak-San Jose (A’s, Giants) — 2,359,870
7 — Dallas-Ft. Worth (Rangers) — 2,292,760
8 — Wash­ing­ton, DC (Nation­als) — 2,241,610
9 — Atlanta (Braves) — 2,059,450
10 — Detroit (Tigers) — 1,943,930
11 — Hous­ton (Astros) — 1,902,810
12 — Seattle-Tacoma (Mariners) — 1,690,640
13 — Tampa-St. Pete (Devil Rays) — 1,671,040
14 — Minneapolis-St. Paul (Twins) — 1,665,540
15 — Phoenix (Prescott), AZ (Dia­mond­backs) — 1,596,950
16 — Cleveland-Akron (Indi­ans) — 1,556,670
17 — Miami-Ft. Laud­erdale (Mar­lins) — 1,496,810
18 — Den­ver (Rock­ies) — 1,401,760
21 — St. Louis (Car­di­nals) — 1,216,700
22 — Pitts­burgh (Pirates) — 1,186,010
23 — Bal­ti­more (Ori­oles) — 1,087,730
26 — San Diego (Padres) — 1,025,730
31 — Kansas City (Roy­als) — 894,580
32 — Mil­wau­kee (Brew­ers) — 886,770
33 — Cincin­nati (Reds) — 883,230

Of course, this doesn’t take into effect neigh­bor­ing mar­kets, but when it comes to “local TV”, this is pretty much what we’re deal­ing with.

The suc­cess of a team plays into this, mak­ing a channel’s own­er­ship of tele­vi­sion rights more attrac­tive. Two teams with very sim­i­lar base­ball mar­kets in size, Pitts­burgh and St. Louis, are going to have very dif­fer­ent sales num­bers because the Car­di­nals win, and there­fore get view­ers. The Pirates don’t. There­fore, the Car­di­nals’ rights are going to go for a lot more than the Pirates.

Mar­ket size does play a role, though. The cost of three com­mer­cials dur­ing a Reds game is never going to approach the price that it costs for three com­mer­cials dur­ing a Yan­kees game. But teams that are rel­a­tively even (Tampa, Min­neapo­lis, and Phoenix, for exam­ple) can greatly affect their own per­for­mance by how they use the money they have instead of com­plain­ing about how much they actu­ally have.

Tampa spent early and unwisely (Greg Vaughn, Wil­son Alvarez), failed, and got labeled with the rep­u­ta­tion of a fail­ure, which drove off fans. Tampa now con­serves their money and builds a team based on youth (or at least says they do, which isn’t always appar­ent).

Phoenix spent money they didn’t have with the belief that if they built a win­ner now, they’d estab­lish the fan base early and not be as con­cerned when those big name play­ers got old and they needed to rebuild. Ari­zona has since hit their bot­tom (last sea­son) and have decided to start spend­ing again, whose results remain to be seen.

The Twins own­er­ship main­tains they’re a small mar­ket team that needs to tighten their belt in order to sur­vive. How­ever, the Twins aren’t as low in the TV money pic­ture as one would be led to believe, so their belt-tightening can only go towards profit for own­er­ship. While that’s not nec­es­sar­ily a bad thing, to blame it on mar­ket share instead of an own­er­ship deci­sion is questionable.

There’s a few num­bers in there that stand out. First off is #8, Wash­ing­ton. It’s easy to see why Ori­oles owner Peter Ange­los didn’t want to see the Expos roll into town. Ange­los’ Ori­oles could claim Wash­ing­ton as their mar­ket as well, adding the #8 mar­ket to their #23 mar­ket in Bal­ti­more. While the Ori­oles still have a TV con­tract in Wash­ing­ton (and, inter­est­ingly, the Nation­als do not), once the Ori­oles con­tract runs out, the likely focus of Wash­ing­ton DC sta­tions will be their home­town Nats instead of the O’s, leav­ing the O’s to deal with their #23 media mar­ket, putting them shoul­der to shoul­der with the Pitts­burghs and San Die­gos of the league. Another is St. Louis at #21. Now, peo­ple don’t think of the Car­di­nals as a small mar­ket team, despite them lit­er­ally being in a “small mar­ket”, smaller than 22 other teams. Yet, they ranked 10th in pay­roll. They rank lower in mar­ket size than Oak­land (split­ting the #6) and Min­nesota (#14), two teams that seem to reg­u­larly cry poverty.

In case you were curi­ous, the mar­kets miss­ing in the list that don’t have major league teams are Sacra­mento (#19), Orlando (#20), Port­land, OR (#24), Indi­anapo­lis (#25), Hartford/New Haven (#27), Char­lotte (#28), Raleigh-Durham (#29), and Nashville (#30).

So just because a team doesn’t spend money or doesn’t draw fans, it doesn’t nec­es­sar­ily mean that they’re a “small market”.