Competitive Balance (July 25, 2003)
One thing that interests me is how some teams, like the Jays have to suffer playing in the same division as the Yanks and the Redsox. But how much is that suffering?
Using Voros' work from last year, he shows us what each team's "Base Revenues" is, a figure based on the "environment" it plays in, if they were playing .500 ball. He also shows that a marginal win is worth 2.655 marginal million $ of revenue. So, let's convert their base revenue into a base win total. This is essentially how a team should perform, based strictly on the potential available of their environment.
Base Wins Team
99 New York (AL)
99 New York (NL)
88 Baltimore
86 Boston
85 Philadelphia
84 Anaheim
84 Los Angeles
83 Detroit
82 Texas
82 Minnesota
81 Seattle
81 Houston
81 Atlanta
80 Colorado
80 Oakland
80 San Francisco
79 Chicago (AL)
79 Chicago (NL)
78 Cleveland
78 St. Louis
78 Florida
77 Toronto
77 Milwaukee
77 Pittsburgh
77 Kansas City
76 San Diego
76 Arizona
76 Cincinnati
75 Tampa Bay
73 Montreal
That's quite an advantage the NY teams have. And that's a big slap in the face of Mets management that they can't do the job. (Though, the splitting of the territories is probably not done how it should be, with the Yanks really having a bigger piece of the NY territory. Same for the Cubs and Dodgers, etc.)
Look at what the Jays have to contend with. The Yanks at 99 wins, Baltimore at 88, Sox at 86, and the Jays are at 77. If you want to know how good the Jays management is doing, you should compare them to how much above 77 wins they get. Yanks get a 99 win (or more if the splitting with the Mets is changes) baseline.
So, what should we do? I'd put the NY teams, Boston, Baltimore, and Philly in one division. Montreal, Tampa, Cincy, Arizona, SD in another division. Let the rich fight the rich. Only one of them will make it out anyway to face one of the poor teams. Give everyone a fighting chance.
--posted by TangoTiger at 11:46 PM EDT
Posted 7:44 a.m.,
July 26, 2003
(#1) -
RMc, the only living Tigers fan
And that's a big slap in the face of Mets management that they can't do the job.
The Mets are on pace to win 68 games, 31 below their projection.
Of course, Detroit is on pace to win 43 games, or 40 below. Sigh.
Posted 9:27 a.m.,
July 26, 2003
(#2) -
Sylvain(e-mail)
Excellent stuff, as usual....
S
Posted 10:30 a.m.,
July 26, 2003
(#3) -
MAH
Tango, great article, as always. As a Mets fan, I masochistically[sp?] enjoy measurements of how bad they are. Something I've been meaning to do is quantify my hunch that they are currently the most "balanced" bad team in baseball--bad in getting on base, bad in slugging, bad in baserunning, bad in fielding (DER), bad in starting pitching, bad in relief pitching. They're the complete five[six]-tool bad team. Roger Cedeno is the perfect example of what I'm talking about--he's bad at everything, plus he makes more mental mistakes than anybody in the game AND collects a huge salary.
Another study I've been meaning to do is of the horrific history of Met free-agent signings, going all the way back to the 1970s. It may very well be the case that no team in any sport during the last quarter century has wasted more financial resources / inherent financial advantages than the New York Mets.
Your suggestion of grouping the high-Base Revenues teams with each other in the same division is a variation on a Bill James idea, proposed in TNBJHBA, that small-market teams should just refuse to play big market teams unless and until the big market teams share a sensible portion of their cable revenue. I like the idea a lot. This kind of fundamental reform is likely to be delayed, however, so long as so many pesky small-market teams keep doing well, while so many large market teams do badly.
Posted 11:46 a.m.,
July 26, 2003
(#4) -
tangotiger
Thanks guys...
One thing that I would want to do as well is to add the "expenses". The cost of doing business in NYC is alot higher than in a typical city, so the potential net income, aside from salaries, is not as great as the revenue would suggest. This is complicated, especially if you try to figure out a cost for the ballpark.
Posted 1:18 p.m.,
July 26, 2003
(#5) -
Joel Wertheimer
There is also the idea of the system that the Japenese have, where you can have as many teams in a market as that market will handle. Free movement, free markets.
Posted 11:53 a.m.,
July 29, 2003
(#6) -
Jim
Looking at the bottom 10, we see three WS winners in the last 10 years (Toronto, Florida, Arizona). Wonder how well this correlates to actual wins over a period of years? Yet this still doesn't answer questions of causation.
What I'd like to see is some breakdown showing what % of revenue is due to "inherent" factors and what % is due to factors within the team's control. We know that winning generates revenue, which certainly accounts for a significant portion of the Yankees' success. Smart management, good marketing, ticket sales would all be ways a team
could increase revenue short of moving to a better market.
Posted 2:38 p.m.,
July 29, 2003
(#7) -
tangotiger
What the Voros equation shows is that aside from winning, that all of a team's base revenues is inherent.
The only way to increase revenues (long-term anyway) is to put a product on the field that performs better than the competition.
Any short-term gimmick ("Come see our prospects!", "Come see our European players!", "Come eat our free food") will not impact revenues for an extended period of time.
(This is just like stocks where fundamentals will drive the price of the stock long-term, but the technicals will set the pace short-term. Fundamantels in a stock, its expected future earnings, is equivalent to the talent level of a team, its expected future wins.)
The one doubt I have is the linear relationship between wins and revenue (except for that curve at the end for the playoff-bound teams). I really expected something like an extra win would result in an increase in 2% revenue (that is, proportional to the base revenue), instead of the linear relationship Voros is presenting. This is what Palmer reported in the Hidden Game, and this is what I found in a very very quick look last year (where Palmer and I only looked at attendance, which is our best stand-in for revenue). And this is contrary to Voros' more detailed, but smaller sampled, study.
Posted 2:40 p.m.,
July 29, 2003
(#8) -
tangotiger
If not proportional to its base revenue, at least proportional to parts of its base revenue. And this may be where Jim is heading about a team being able to increase its revenues. I think they can only leverage a certain part of their base components, but they can't do anything, unless that leverage is based on the team winning.
Posted 4:23 p.m.,
July 29, 2003
(#9) -
Jim
"The only way to increase revenues (long-term anyway) is to put a product on the field that performs better than the competition."
I don't disagree with that at all. However, there may be some business strategies a team could use to generate some cash that would enable them to invest in some key players to help the on-field performance. For example, building additional luxury boxes.
Ultimately, consistent winning is the way to generate long-term revenues. But like any business, you may have to build up winning and revenues slowly over a period of years.
Posted 4:29 p.m.,
July 29, 2003
(#10) -
tangotiger
Sure thing.. you are talking about making an investment. Let me spend 200 million$ on a new stadium, or let me spend 5 million$ on new luxury boxes, or let me spend 500,000$ on a new scoreboard. I can drive more people to come to the game, and that will drive more revenue to my team.
I can choose, or not, to spend those revenues on my team to sustain that increase in attendance.
So, yes, there is an extra way to get more revenue. You can either get more revenue by getting more wins from your players (which may or may not cost you more money), or you can get more revenue by paying for it now (spend 10 million$ in expenses, and hope to get 1 million$ in revenue each year for the next 20 years, which discounted at a certain rate might be worth 11 or 12 or 7 million$ in revenue). If I can leverage it right, spending that money can generate more revenue.