Home » Cory Humes, Headline, Pirates

MLB teams by market size and budget: Should the Pirates spend more?

3 February 2010 View Comments

I’m currently reading The Last Night of the Yankee Dynasty. Buster Olney’s diction caught my attention:

Luis Sojo #14

When the Yankees let [Luis] Sojo go after the 1999 season and looked for another utilityman, Bernie Williams’s wife, Waleska, lobbied Brian Cashman to bring him back, telling him how much Sojo and his family were missed and what a positive influence he was. For the 2000 season, however, the Yankees committed to giving D’Angelo Jimenez a chance to be the utilityman, and Sojo signed with the Pittsburgh Pirates, one of baseball’s many struggling small-budget franchises.

We often hear professional sports franchises — and baseball teams in particular — described as being small market. Olney’s use of small budget as a qualifier interested me. Unlike the market a team calls home, a budget’s size can be adjusted (within reason) by management and ownership.

Pirates owner Bob Nutting told the Post-Gazette’s Dejan Kovacevic in late January that his team’s big-league budget will increase as its talent demands. During that question and answer session, Kovacevic asked Nutting if the Pirates would eventually aim to spend at the level of division rivals, such as Cincinnati and Milwaukee. Nutting said they would.

I was curious to see the relationships that exist between market size and budget in Major League Baseball. Using work published by Al Streit and Rich Lederer, I quickly threw together three Venn diagrams.

I broke the 30-team league down into thirds: small, medium and large. Each group of 10 teams compared market size (as compiled by Streit, as of 2001) and budget (as compiled by Lederer, average payroll between 2006 and 2008).

Small

Medium

Large

In short, it seems as though the Pirates are spending appropriately. There are obvious caveats. Spending at the bottom of a 10-team tier isn’t the same as spending at the top; the Pirates’ average payroll during Lederer’s window was about $48.5 million, while the Padres’ was just over $70 million. New York’s consolidated statistical metropolitan area, measured at 21 million people when Streit’s analysis was posted, was three times the size of the Bay Area’s CSMA. Both areas were considered to be large for these diagrams, despite the fact that the Athletics and Giants are splitting a much more modest pie.

I’ll defer to savvier business minds for stronger statistical conclusions, but in the NL Central, the Pirates, Astros and Cubs seem to be playing within their means. The Cardinals, Brewers and Reds may be stretched a bit thin.

Pirates fans might want to be careful what we wish for. If Nutting (or Mario Lemieux and Ron Burkle) decides to field a $75 million roster for an extended period of time, it may do more harm than good. Building strategically and spending economically would seem to be the better bet if avoiding another extended stretch of losing seasons is a priority.

  • New York’s consolidated statistical metropolitan area, measured at 21 million people when Streit’s analysis was posted, was three times the size of the Bay Area’s CSMA while there are many option available to share out in the blog.
  • Kovacevic asked Nutting if the Pirates would eventually aim to spend at the level of division rivals, such as Cincinnati and Milwaukee while there are various different option available.
  • dave
    you have to include the wealth of the ownership and willingness to spend.example-carl lindner is one of the richest men in the world,but when he owned the reds he ran a tight ship.results-not good.in contrast,marge had a fraction of his money but was willing to spend what she had for the team.result-one world series title and many better teams overall..........alot of times its the personality of the owner that determines won-loss records,not individual wealth of that owner.
  • Hey Cory,

    Great piece. "Small market" is a term that gets thrown around baseball circles, but rarely properly defined.

    I really like what you guys are up to here. Have you ever given any thought to joining the Yardbarker network? I think you'd be a nice fit. If you're interested in hearing more, you can contact me at jeff@yardbarker.com

    Sorry to do this in the comments, but I couldn't find a contact form.

    Jeff
  • MarkInDallas
    Something you are missing here is the other - and actually more important - part of the revenue equation, which is attendance. The thing that is somehow ridiculously misunderstood by most sports fans is that there are almost no owners of sports teams that spend above their revenue. They all take the money that they pay out from the money they take in.

    This shouldn't be earth shattering stuff, but still people have the illusion that sports owners make a choice to "open their wallets" - as if they need to dip into their personal piggy banks to make payroll. Quite simply, nobody does that.

    The Cardinals and Brewers actually have more money than they are spending right now. The reason is these teams are near the top of MLB is attendance, where most teams make the bulk of their revenue.

    Given the Cardinals attendance, the average team would have spent close to $119M on payroll in 2009. They actually spend $88M, which is $30M less.

    With the Brewers, the average team would have spent $109M, but they only spent $80M, also close to $30M less.

    The Pirates, on the other hand, spent only $8M less than the average team would have spent given their attendance, and that coincides with what the Pirates stated budget ceiling has been over the past several years - $55M. They only spent $48M simply because they didn't feel there was a smart use for that extra money in those years.

    I have done a study of this attendance to payroll correlation, and it has surprisingly predicted several things this year.

    1. The two teams that were outspending their correlation by significant amount were the Indians and Tigers - both due to unexpected attendance drops. Both teams came out saying they were losing money and traded high priced players. The Indians actually said they were losing $17M in 2009, which was only $1M off from what the average team would spend given their payroll.

    2. The two low payroll teams that were seriously underspending their attendance correlation were the Padres and Marlins. The Marlins, of course, were asked to spend more.

    3. The Cards, Brewers and Twins were three franchises seriously underspending their correlation. The Cards recently added payroll with Holliday, the Brewers last year offered Sabathia a large contract, which proves they could afford to raise payroll, and the Twins are in talks with Mauer to give him a hefty raise as well.

    4. The Post-Gazette did their own study of the Pirates' finances, and determined they had profited $11M over a 2 year period - around $5.5M per year - which is in the range of the $5M - $8M their attendance correlation suggests they underspent. According to the Pirates, that money, along with some extra borrowed money, has gone into the capital improvements they have done to Pirate City, the Dominican Academy, and purchasing the Reds' farm team in order to move it to Bradenton.

    It's also clear from my data that large market teams with high attendance experience a multiplier effect on revenue. The Yankees, Mets, Cubs, Blue Jays and White Sox all out spend the correlation by large amounts, as does Seattle. Seattle has major Japanese sponsorship which accounts for their extra revenue.

    You can also look at payroll in another logical way as well. Revenue sharing is a narrowing factor on revenue disparity. No team can leap-frog another team on the revenue totem pole due to it.

    The Pirates are the #26 team in market size, and have been #27, #28 or #29 in attendance the last 5 years. If they were spending the average amount they should spend, one would expect them to be #27 or #28 in payroll. And that's exactly where they have consistently been for the last 5 years.
blog comments powered by Disqus