in Dawsonville, Georgia, says, “We won,” like baseball fans do when their team wins. These professional athletes have no homefield advantage because they have no home field. It’s easy to see how such sentiments can lead to more fans and generate more revenue for owners. And if more fans mean more money, then owners will attempt to locate teams in the most populous cities. It is no surprise that MLB has at least one team in all but two (Portland and Sacramento) of the top twenty-six cities in the U.S. The greater the fan base is, the greater the revenue owners will receive.
However, this is where the problem starts. The Blue Ribbon Panel, which Commissioner Selig organized to study the impact of market size on competitive balance, identified the importance of fan-base size for the profitability of teams as a fundamental flaw in MLB’s inherited league structure. The following is from their final report in 2000:
Many observers of MLB believe that the root of the competitive balance problem is the fact that clubs located in smaller or less fertile markets are unable to generate sufficient revenues to support the level of payroll necessary to be competitive on the field. The inability of a club to generate sufficient revenue in a particular market may be related to a lack of population, poor demographic composition, a lack of sufficient corporate presence and/or the proximity of other clubs. 44
It just so happens that North America lacks thirty identically sized cities. Table 12 ranks the population of every metropolitan area with a major-league team. Extending the logic that geographic ties generate fan loyalty, this means that bigger cities ought to yield more revenue to owners than smaller cities. More people means more loyalty expressed
in fans purchasing tickets. Teams in large cities have a greater pool of fans to enjoy wins; therefore, wins ought to be more valuable to big-market teams than small-market teams. In an open market for players, the best players will gravitate toward the teams with the highest salary offers. This means trouble for teams in small cities, because the big cities will be able to pay higher salaries that teams in small markets cannot match. While an extra win per season in Kansas City may increase yearly attendance by 10,000, one more win for a New York team could generate a 100,000 more fans, as New York has the population of ten Kansas Cities.
So much for the notion that teams should have a near-equal shot at winning. The joy of competition is watching players on the field exploit all of their abilities to win the game. The uncertainty of the outcome is part of the thrill of witnessing sports events. If fans just wanted to watch good games, they could simply go to ESPN Classic Sports. The uncertainty of the outcome is important, if not critical, to the fun of watching. If certain teams have an advantage over other teams solely due to the population of their fan bases, the indeterminacy of competition disappears. The end result of competitive imbalance from the league’s standpoint is that fans will stop watching the sport altogether.
At first glance, the recent history of baseball seems to confirm our suspicions that the population bases of teams influence the play of the game on the field. Over the past decade, the New York Yankees— representing a metropolitan area of 18 million—have been a dominant team, while several smaller markets—such as Milwaukee, Kansas City, and Pittsburgh—have been pushovers.
Although larger cities may have a revenue-generating advantage over smaller markets, it does not mean necessarily that small markets are doomed to perpetual failure. As long as the advantage is not too large, the league may possess a sufficient level of competitive balance. And any prolonged under/overperformance by small/big-market clubs does not prove market size to be the main culprit. Poor management and plain old bad luck may be contributing, if not dominating,
However, this is where the problem starts. The Blue Ribbon Panel, which Commissioner Selig organized to study the impact of market size on competitive balance, identified the importance of fan-base size for the profitability of teams as a fundamental flaw in MLB’s inherited league structure. The following is from their final report in 2000:
Many observers of MLB believe that the root of the competitive balance problem is the fact that clubs located in smaller or less fertile markets are unable to generate sufficient revenues to support the level of payroll necessary to be competitive on the field. The inability of a club to generate sufficient revenue in a particular market may be related to a lack of population, poor demographic composition, a lack of sufficient corporate presence and/or the proximity of other clubs. 44
It just so happens that North America lacks thirty identically sized cities. Table 12 ranks the population of every metropolitan area with a major-league team. Extending the logic that geographic ties generate fan loyalty, this means that bigger cities ought to yield more revenue to owners than smaller cities. More people means more loyalty expressed
in fans purchasing tickets. Teams in large cities have a greater pool of fans to enjoy wins; therefore, wins ought to be more valuable to big-market teams than small-market teams. In an open market for players, the best players will gravitate toward the teams with the highest salary offers. This means trouble for teams in small cities, because the big cities will be able to pay higher salaries that teams in small markets cannot match. While an extra win per season in Kansas City may increase yearly attendance by 10,000, one more win for a New York team could generate a 100,000 more fans, as New York has the population of ten Kansas Cities.
So much for the notion that teams should have a near-equal shot at winning. The joy of competition is watching players on the field exploit all of their abilities to win the game. The uncertainty of the outcome is part of the thrill of witnessing sports events. If fans just wanted to watch good games, they could simply go to ESPN Classic Sports. The uncertainty of the outcome is important, if not critical, to the fun of watching. If certain teams have an advantage over other teams solely due to the population of their fan bases, the indeterminacy of competition disappears. The end result of competitive imbalance from the league’s standpoint is that fans will stop watching the sport altogether.
At first glance, the recent history of baseball seems to confirm our suspicions that the population bases of teams influence the play of the game on the field. Over the past decade, the New York Yankees— representing a metropolitan area of 18 million—have been a dominant team, while several smaller markets—such as Milwaukee, Kansas City, and Pittsburgh—have been pushovers.
Although larger cities may have a revenue-generating advantage over smaller markets, it does not mean necessarily that small markets are doomed to perpetual failure. As long as the advantage is not too large, the league may possess a sufficient level of competitive balance. And any prolonged under/overperformance by small/big-market clubs does not prove market size to be the main culprit. Poor management and plain old bad luck may be contributing, if not dominating,
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