Market Size and Competitve Balance in the MLB and NFL (Part 2)

This is the second in a three part look at how market size affects the competitive balance of the NFL and Major League Baseball. Here is a link to part one.


Previously, we worked to obtain a decent working list of what constitutes divisions between the ‘large market’ and ‘small market’ teams.  The list we settled on (read the comments section of the article) was this:

Large Markets (more than 6 million people):

New York, Los Angeles, Chicago, Baltimore/DC, Boston, Oakland/San Francisco, Dallas, Philadelphia, Houston

Mid-Markets (more than 3 million people):

Atlanta, Detroit, Miami, Toronto (MLB), Seattle, Phoenix, Minneapolis, Montreal (ex-MLB), San Diego, and Denver

Small-Markets:

Cleveland, Saint Louis, Tampa, Pittsburgh, Charlotte (NFL), Cincinnati, Kansas City, Indianapolis (NFL), Milwaukee/Green Bay, Nashville (NFL), Jacksonville (NFL), Buffalo (NFL), New Orleans (NFL)

The result is that baseball is skewed to be a ‘big city’ sport, while the NFL is geared more toward smaller cities.  Baseball has 47% of its teams in large markets, 30% in medium markets, and just 23% in small markets.

The NFL, on the other hand, has just 34% of its teams in large markets, 25% in medium markets and a whopping 40% of its teams in small markets.

With careful consideration, it makes sense. Baseball requires large population centers to sustain a 162 game season. Football requires one day a week, and lends itself more readily to long, weekend road trips.  Football can survive in markets that are challenging for baseball.

Football has two other market controls that are favorable to small markets. The first is revenue sharing. Going back decades, the NFL has operated under the concept of ‘league-think’.  All television money is pooled and divided equally among the teams. Except for pre-season games, there are no local TV contracts to create revenue disparities in football.  The second market control is the salary cap.  Part 3 of this series will examine which of these two tools is actually more responsible to creating parity.

Baseball and Market Size

On the surface, baseball has clearly developed a market size based system.  The following chart shows per-team numbers from 1995-2010.  The percentages are the likelihood that any given team in a size class will make the playoffs or win the World Series in any given year.

Win % % to make playoffs % to win WS
Large .518 33.6% 5.1%
Medium .494 23.4% 2.6%
Small .473 18.3% 0.9%

On the surface, you can see that large market teams win more frequently during the regular season, make the playoffs more often, and are twice as likely to win the World Series than medium market teams and five times more likely to do so than small market teams.

So does that mean that small market teams can’t compete under baseball system?

No.  Baseball has a very small number of small market teams, and among those are Pittsburgh and Kansas City.  Though by not the smallest markets in MLB (that honor probably goes to Milwaukee), they have by far the worst records over the past 16 years.  The reason is that they have horrible management structures. The teams are profitable, but until recently have made no effort to compete. Essentially, the small market numbers in baseball are plagued by two outliers.  Two small market franchises, Cleveland and Saint Louis, have actually been outstanding. 

During the time frame studied, Saint Louis ranks 4th in winning percentage and playoff percentage among MLB cities.  Cleveland ranks fifth in both categories.  Despite a shortage of small market teams, two of baseball’s top 5 franchises over the past 16 years are small markets. The other cities are New York (specifically the Yankees), Boston, and Atlanta (a high mid-market team).  In all, baseball produced 10 different champions in the 16 years.

Baseball faces a balance problem not created as much by a lack of a salary cap as much as by the fact that franchises can make a profit without trying to win games.  This is a problem that even effects teams in high mid-markets like Miami.  The Marlins learned that they could make more money by not trying to win and operating with the smallest payroll in baseball.  This decision has nothing to do with the size of their market, but rather a cynical attempt to profit at the expense of winning.

Ultimately, baseball generates in-season parity by having so many large market teams. When nearly half the league qualifies as large market, it’s not nearly so big a problem to have a large market dominated league.  Half the teams are in it from the start, and the best run small market teams also compete at the highest level. 

Football and Market Size

The NFL starts with all teams on a much more level playing field due to shared television revenue.  The results show up clearly in the following chart:

Win % % to make playoffs % to win Super Bowl
Large Markets .507 39.4% 3.5%
Medium Markets .482 37.5% 1.6%
Small Markets .506 45.6% 4.7%

As you can see, small and large markets win at the same rate in the NFL over the past 16 years.  Medium markets have had their numbers drastically reduced by the presence of the Detroit Lions. The large markets were similarly hurt by the expansion Houston Texans.  Those outliers aside, the small market teams in the NFL boast some of the winningest franchises in football over the same stretch.  Pittsburgh, Indianapolis, and Green Bay all rank among the most successful cities in the league.

The top five NFL cities over this stretch clearly are: Boston (large), Indianapolis (small), Green Bay (small), Pittsburgh (small), and Denver (medium). In all, the NFL produced 11 different champions in 16 years.  It is important to note here that the NFL includes a much higher percentage of teams in the playoffs than baseball does.

However, the question has to be raised as to whether the NFL has done itself a disservice by having so many small market teams.  Consider the Chicago/Los Angeles question. Baseball has four teams in the second and third biggest markets in the United States. The NFL has just one.  Instead, the NFL has teams in Jacksonville, Buffalo, and New Orleans.  The NFL is currently in a lockout caused in part by owners worried about flattening revenue streams.  Perhaps by ignoring the second biggest market in the US in favor of small, struggling cities the NFL has helped to cause its own shortfall.

The big question is whether the NFL’s balance is created by revenue sharing or a salary cap.  Part 3 will examine that question by comparing these same numbers from before the salary cap era (pre-1993) and after.

Summary

It’s difficult to compare the NFL with Major League Baseball because they types of markets they occupy are dissimilar.  By sheer numbers, the NFL is a small city league and MLB is a big city league. While it is not true that the NFL has ‘more parity’ than baseball, it is true that the NFL’s parity is more randomly distributed by market size.  Baseball has similar rates of teams making the playoffs and winning championships, but those teams are more intensely concentrated at the top of the population scale, simply because there are more of those teams in baseball to begin with. 

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