This week in LWIB, a new study on potential markets for franchise relocation/expansion plus Bloomberg Sports announces their entry in to the world of baseball statistical analysis.
FRANCHISE RELOCATION / EXPANSION
Are there any viable markets for MLB expansion or franchise relocation? The threat of moving to an â€śuntappedâ€ť market has long been of significant benefit to franchises negotiating with local governments to secure public investment in a new stadium. Expansion fees have also long been a lucrative source of revenue for owners in all the â€śstick and ballâ€ť leagues. There is also a constituency amongst the MLB fan base that believes expansion to 32 franchises from the existing 30, allowing for 16 teams in each league, would be an improvement over the existing format. But realistically, where could/would/should MLB expand to? And what are the criteria that determine if a market is capable of supporting a â€śbig leagueâ€ť team. LWIB saw the publication of a Portfolio.com/bizjournals analysis of which US pro sports markets are â€śoverextendedâ€ť and which markets have capacity for additional â€śbig leagueâ€ť franchises. Following is the analysisâ€™ summary for MLB:
- Open markets: MLB has few options. Only two open markets in North America have sufficient income bases to adequately support new teams, and one of them (Montreal) lost a franchise to Washington five years ago.
- Existing markets: Thirteen MLB teams play in 12 metropolitan areas that are currently overextended. (The San-Francisco-Oakland market has two teams.)
- Scenario: MLB couldnâ€™t expand by more than two teams. The best bets would be New Jersey (part of the New York City market, which already has two franchises) and Southern California (San Bernardino-Riverside).
The study is based on TPI (Total Personal Income), â€śthe sum of all money earned by all residents of an area in a given year.â€ť The next steps in the methodology are:
We used team revenue data and average ticket prices to calculate the amount of TPI needed to adequately support a team in each league. Minimum income bases were estimated to be $86.7 billion for MLB, $37.3 billion for the NFL and NHL, $36.4 billion for the NBA, and $13.9 billion for MLS.
We then calculated each areaâ€™s available personal income (API) by subtracting the TPI needed to support the marketâ€™s existing teams. Philadelphia, for example, has TPI of $274.1 billion. But its four existing franchises (MLB, NFL, NBA and NHL), along with an MLS expansion team that will begin play next year, need a base of $211.6 billion, resulting in API of $62.5 billion.
If an areaâ€™s API is expressed as a negative number, the market is said to be overextended.
The study examined 82 markets which are home to professional sports franchises in the â€śbig 5â€ť (MLS is included). Of those 82, 19 were categorized as â€śoverextendedâ€ť. Of those 19, Denver, Cleveland, Pittsburgh, and Tampa, all home to MLB franchises, were considered the markets facing the biggest challenges in being able to support â€śtheirâ€ť teams. The study concluded that there were 16 - 18 â€śopenâ€ť markets for the NHL, NBA and NFL, and only 2 for MLB. The reason for the great discrepancy being that an MLB franchise requires an income base easily double that of the franchises in the other leagues.
The SportsBiz blog commented on the Portfolio.com/bizjournals analysis:
While I'm not so sure I would use the same metrics to determine the capacity in a particular market, I don't particularly quibble with the results. To me, a better measure of a market's capacity to support a professional sports franchise is to first look at its corporate community and see what public corporations have either headquarters or very significant regional or subsidiary headquarters in the market. Then, look at the private corporate community for similar sized private companies that have been large supporters of United Way or the local collegiate athletic department and may be reasonably thought to become sponsors or suite holders of a professional sports franchise. It is the suite sales and sponsorships that make or break a franchise more than it is the sale of tickets, although a significant amount of tickets do need to be sold. The personal income of the market is important but the corporate community is probably more important.
Last year The Biz of Baseball ranked The Top Ten Markets for Relocation or Expansion. The top 5, in ascending order, were San Antonio, Las Vegas, Charlotte, Portland and New Jersey.
Earlier this year, Tom Van Riper of Forbes compiled a report titled â€śAmericaâ€™s Next Sports Citiesâ€ť. Prominently mentioned in the report as possible candidates for expansion franchises (not necessarily MLB) or relocation were Las Vegas, Portland and Sacramento. Mr. Van Riperâ€™s analysis relies heavily on migration patterns, he reasons that â€śwhere people go, so do sports teams.â€ť
Housing affordability has people migrating inland from the West Coast to central California and Nevada and north to Oregon, according to urban expert Wendell Cox, who runs Demographia.com, which tracks population shift. The trend will continue once this recession ends.
Adding up the national numbers shows that the big-league U.S. sports markets hold 152.7 million people watching 113 NFL, NBA, MLB and NHL teams, setting a standard of just over 1.3 million people per team. Household incomes and other demographic factors (age, educational levels) also play a role in a market's viability to support big-time sports, but to a lesser degree. More than anything else, it's about having enough eyeballs watching the action, whether on television or at the arena.
"The single biggest factor is population," says Bernie Mullin, who runs The Aspire Group, an Atlanta-based sports consultancy. "The makeup of that population comes second."
Complicating the issue of franchise relocation/expansion is the matter of â€śterritorial rightsâ€ť/â€ťterritorial indemnificationâ€ť. It is widely believed that had Jim Balsillie succeeded in relocating the Phoenix Coyotes to Hamilton without compensating the Toronto Maple Leafs, they (Toronto) would have sued the league. Neither the NHL or the Leafs will admit that a â€śvetoâ€ť over franchise relocation exists in their leagueâ€™s constitution. Many believe that the league fears an admission of the existence of such a â€śvetoâ€ť would result in litigation over violation of anti-trust regulations. Last month the Biz of Baseball interviewed Stanford economics professor Roger Noll. Amongst the subjects raised was the ability of leagues to control where their franchises are located, particularly in light of the â€śAmerican Needleâ€ť â€śsingle entityâ€ť case currently before The Supreme Court.
Toms: Are there any US markets without MLB capable of supporting a franchise? Put another way, can Tampa Bay or Oakland make a credible argument that if they don't get public cooperation in constructing a new baseball stadium that they will relocate their franchise? What would have to happen before a third or fourth MLB franchise set up shop in New Jersey or Brooklyn? Does this bring us back to the significance of American Needle?
Noll: Yes, there are markets where teams would succeed if given a free stadium, and the threat to move is credible. Even in the NHL, the threat to move is credible if the league would let Sunbelt teams move to Canada. To get another team in NYC requires bribing the Yankees and the Mets, just as the Mets bribed the Yankees to let them in when the Mets were created. The status of franchise location antitrust in MLB is uncertain â€“ there has never been a case that was litigated to completion. Thus, American Needle may not be important for MLB.
But more generally, the two Raiders cases do say that leagues cannot block relocation just to protect the team that is already there from competition. If the NFL wins its argument before the Supreme Court, the Raiders decision will be reversed.
Select Read More to see details on Bloomberg Sports' entry into baseball analytics
BLOOMBERG & MLBAM ARE PARTNERS IN STAT ANALYSIS
At last weekâ€™s Winter Meetings, Bloomberg Sports officially announced that they have entered the world of baseball statistical analysis. Bloomberg is rolling out products tailored both to the consumer market (fantasy players) and to the industry (franchises, player agents and media). Of particular note is that Bloomberg has partnered with MLBAM. Bloomberg has complete access to MLBAMâ€™s vast and growing amounts of game data, generated from BAMâ€™s partnership with Sportvision. Sportvision invented the technology that is KZone and PITCHf/x (amongst many others). Sportvision and MLB are set to build upon the success of PITCHf/x by introducing a system in all MLB ballparks which will measure fielding, base running and throwing in unprecedented detail. While the use of statistical analysis in MLB has had an indisputably major impact on how the game is played, and on how players are valued, up until now its use has largely been restricted to hitting (which includes walking) and pitching. The next handful of seasons should see MLBAM, via the Sportvision technology, gathering a staggering amount of intricate data which will allow the â€śobjective analysisâ€ť community to deconstruct fielding and base running to the same degree as is done with the other facets of the game.
Richard Sandomir reported in The New York Times that BAM CEO Bob Bowman, â€śwanted Bloombergâ€™s fantasy software to lure users to MLB.com from competitors like Yahoo and ESPN.com.â€ť Eric Fisher of The Sports Business Journal wondered if BAMâ€™s emboldened foray into the â€śfantasyâ€ť market was a reaction to the â€śCDM Fantasy Sports caseâ€ť. The Biz of Baseball reported last year that, â€śThe Supreme Court left intact that 8th Circuit decision, which holds that fantasy companies have a first amendment right to use baseball statistics without permission from or payment to Major League baseball.â€ť Mr. Fisher also reported that BAM and Bloomberg will share revenues generated from the sale of â€śfantasy softwareâ€ť to consumers.
On the consumer side, a similar co-branded, though less extensive, version of the analytical product will be marketed to fans via MLB.com starting in February. The product, slated to cost roughly $30 a year, will be positioned primarily to fantasy players both preparing for a draft and conducting their own roster management during the season. It also will be compatible with every major commissioner game on the market and can be adapted to self-created games, as well.
MLBAM additionally will generate editorial content from the Bloomberg system for MLB.com.
â€śWe think thereâ€™s a real chance to grow the market with draft kits and believe ours will be second to none,â€ť Bowman said. â€śWeâ€™re also very excited about what this will mean for our fantasy content area of the site, which already does well.â€ť
Financial terms for the deal were not disclosed, but the pact will resemble what MLBAM did with StubHub for secondary ticketing in which there was an upfront payment to align with the MLB.com brand and begin the program, and then a back-end revenue-sharing component. The Bloomberg-MLBAM alliance, however, is tilted more toward the revenue sharing.
In July, Alan Schwarz (author of The Numbers Game, a history of sabermetricians) reported for The New York Times that MLBAM was working with Sportvision to expand upon the existing PITCHf/x system in place in all 30 MLB ballparks. Sportvision is about to alter forever how base running and fielding is measured and evaluated.
As baseballâ€™s statistical revolution marches on, the last refuge for the baseball aesthete has been the sportâ€™s less quantifiable skills: outfieldersâ€™ arm strength, base-running efficiency and other you-wonâ€™t-find-that-in-the-box-score esoterica. But debates over the quickest center fielder or the rangiest shortstop are about to graduate from argument to algorithm.
A new camera and software system in its final testing phases will record the exact speed and location of the ball and every player on the field, allowing the most digitized of sports to be overrun anew by hundreds of innovative statistics that will rate players more accurately, almost certainly affect their compensation and perhaps alter how the game itself is played.
Which shortstops reach the hard-hit grounders up the middle? Which base runners take the fastest path from first base to third? Which right fielders charge the ball quickest and then throw the ball hardest and most accurately? Although the game will continue to answer to forces like wind, glaring sun and the occasional gnat swarm, a good deal of time-honored guesswork will give way to more definite measurements â€” continuing the trend of baseball front offices trading some traditional game-watching scouts for video and statistical analysts.
â€śIt can be a big deal,â€ť the Cleveland Indiansâ€™ general manager, Mark Shapiro, said. â€śWeâ€™ve gotten so much data for offense, but defensive objective analysis has been the most challenging area to get any meaningful handle on. This is information thatâ€™s not available anywhere. When you create that much data you almost have to change the structure of the front office to make sense of it.â€ť
Sportvision has worked with Major League Baseball Advanced Media, the leagueâ€™s Internet subsidiary, in the venture that will eventually cost upward of $5 million to install the system in all 30 stadiums, according to executives involved with the project.
Last month, Bill King reported for The SportsBusiness Journal that Sportvisionâ€™s tracking of fielders will also be used to generate new TV and online graphics.
Sportvision Inc. is working to outfit Major League Baseball parks with graphics systems that will use existing video feeds to log the positioning of fielders and track their movement, along with the movement of the ball. It can use the data to produce TV and online graphics that will monitor often-discussed but rarely quantified aspects of the game, such as the jump a fielder gets on a ball and the distance he covers to get to it.
While baseball long has been the most statistically geared of all major sports, data on defense is relatively thin.
Because MLB parks already are outfitted with Sportvisionâ€™s Pitch f/x system â€” tracking equipment that monitors the path and speed of the ball from the pitcher to home plate for use on MLB.com â€” the company can position the new technology as an expansion of its existing system. While it will be used to create TV graphics, it also can provide scouting data, meaning the cost â€” a detail Adams would not discuss â€” might be spread across users.
â€śWe havenâ€™t sorted out who is going to write the final check,â€ť Adams said. (LWIB note: â€śAdamsâ€ť is Sportvision CEO Hank Adams)
For fans of â€śobjective analysisâ€ť, a new heyday awaits. The windfall of fielding and base running data will lead to the creation, criticism, tweaking and endless debate of new metrics amongst sabermetricians. Some players will find their value increased and some decreased as clubs mine the new data generated by improving â€śmotion technologiesâ€ť. The debate over whether â€śobjective analysisâ€ť will become a permanent part of MLB is long over, perhaps â€śobjective analysisâ€ť has only begun.
Pete Toms is an author for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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