Defining Large, Mid, and Small Markets

Oftentimes you’ll hear that Team X is a Large Market team or that Team Y is a Small Market Team.  But aside from knowing that the Yankees are a large market team and Pittsburgh is a small market team, how are the other teams defined?  And what exactly is a mid market team?

Using readily available data, this article will categorize the 30 teams into these three tiers by three separate categories: Metro Population, Payroll, and Cost per Win.  This article will be a little number-crunchy, so if you like to read the end of the book to see how it ends before you start, feel free to skip down to the Conclusions section.

METRO POPULATION

Listed below is each team along with their metropolitan population, using 2011 population estimates from the U.S. Census Bureau (and Wikipedia for Toronto):

Team Metro Pop 2011
New York Yankees 19,015,900
New York Mets 19,015,900
LA Dodgers 12,944,801
LA Angels of Anaheim 12,944,801
Chicago Cubs 9,504,753
Chicago White Sox 9,504,753
Texas Rangers 6,526,548
Houston Astros 6,086,538
Philadelphia Phillies 5,992,414
Washington Nationals 5,703,948
Miami Marlins 5,670,125
Toronto Blue Jays 5,583,064
Atlanta Braves 5,359,205
Boston Red Sox 4,591,112
San Francisco Giants 4,391,037
Oakland Athletics 4,391,037
Detroit Tigers 4,285,832
Arizona Diamondbacks 4,263,236
Seattle Mariners 3,500,026
Minnesota Twins 3,318,486
San Diego Padres 3,140,069
Tampa Bay Rays 2,824,724
St. Louis Cardinals 2,817,355
Baltimore Orioles 2,729,110
Colorado Rockies 2,599,504
Pittsburgh Pirates 2,359,746
Cincinnati Reds 2,138,038
Cleveland Indians 2,068,283
Kansas City Royals 2,052,676
Milwaukee Brewers 1,562,216

The average of these 30 markets comes to 5,896,175 people.  For markets like NY, LA, and CHI each population was included as if they were separate markets.  Although there are many people who are fervent Mets-only or Yankees-only fans, for example, there are many who may go to both in these markets.  This also accounts for corporate support that may alternate sponsorship between teams or even sponsor both to cover their bases.

Next, a standard deviation was calculated in an attempt to assign ranges to help define large/mid/small markets.  A standard deviation is, loosely, an average of the differences for each data point from the calculated average.  The standard deviation for the population data came out to be 4,533,972.  However, this standard deviation would allow for too broad of a middle zone, as it would be everything from approximately 1.3M people to 10.3M people.  Instead a 1/2 standard deviation of 2,266,986 was used in its place.  This gives the following tiers, using the average +/- 1/2 standard deviation:

Large Market — greater than 8.16M people (6 teams — Yankees, Mets, Dodgers, Angels, Cubs, White Sox)

Mid Market — between 3.63M and 8.16M people (12 teams — Rangers, Astros, Phillies, Nationals, Marlins, Blue Jays, Braves, Red Sox, Giants, Athletics, Tigers, Diamondbacks)

Small Market — less than 3.63M people (12 teams — Mariners, Twins, Padres, Rays, Cardinals, Orioles, Rockies, Pirates, Reds, Indians, Royals, Brewers)

While these results make sense from a population standpoint, there are quite a few markets that don’t pass the MLB eye test, like the Red Sox as a mid market team for example.  Let’s take a look at payroll in the next section.

 

PAYROLL

Using Cot’s Contracts Opening Day payrolls for each team, the average payroll was calculated from the most recent 5 year period of 2007-2011.  2012 was not used because subsequent sections will need to rely on win totals.  Additionally, only 5 years were used because the economic dynamics of MLB have shifted drastically in recent years due to TV contracts and other new revenue streams.

Team Avg. Payroll 2007-11
New York Yankees $204,115,433
New York Mets $134,338,858
LA Dodgers $109,863,887
LA Angels of Anaheim $121,009,240
Chicago Cubs $126,237,633
Chicago White Sox $111,359,733
Texas Rangers $72,228,931
Houston Astros $89,852,066
Philadelphia Phillies $120,971,380
Washington Nationals $57,443,686
Miami Marlins $38,855,444
Toronto Blue Jays $81,942,431
Atlanta Braves $92,389,508
Boston Red Sox $146,018,911
San Francisco Giants $92,781,234
Oakland Athletics $63,008,593
Detroit Tigers $117,779,822
Arizona Diamondbacks $64,752,318
Seattle Mariners $101,759,601
Minnesota Twins $80,913,540
San Diego Padres $51,838,165
Tampa Bay Rays $49,240,114
St. Louis Cardinals $96,341,636
Baltimore Orioles $77,721,561
Colorado Rockies $72,972,047
Pittsburgh Pirates $43,407,121
Cincinnati Reds $74,711,868
Cleveland Indians $66,620,607
Kansas City Royals $61,818,509
Milwaukee Brewers $81,221,067

The same process was used here as above with the Metro Population data.  The average payroll from the data above is $90,117,165.  The standard deviation for this data was again too splashy ($34,670,012), due to only 30 data points and large variations among the data points.  As a result, a 1/2 standard deviation ($17,335,006) was used to define the bands.

Large Market — greater than $107.5M payroll (9 teams — Yankees, Mets, Dodgers, Angels, Cubs, White Sox, Phillies, Red Sox, Tigers)

Mid Market — between $72.8M and $107.5M payroll (11 teams — Astros, Blue Jays, Braves, Giants, Mariners, Twins, Cardinals, Orioles, Rockies, Reds, Brewers)

Small Market — less than $72.8M payroll (10 teams — Rangers, Nationals, Marlins, Athletics, Diamondbacks, Padres, Rays, Pirates, Indians, Royals)

There are franchises that are definitely on the move between the mid and small market categories.  The Rangers prior to last season were in the midst of bankruptcy and slashed their payroll significantly.  If 2012 data were incorporated, they would be in the mid market category.  The Nationals have also established themselves as a franchise with designs on having mid market ambitions.

One last layer of texture, though, is the Cost Per Win for each franchise.

 

COST PER WIN

Are teams spending efficiently and seeing a good return on investment on their payroll?  Let’s add in the average win totals from 2007-2011 for each team and then calculate how much each win cost that franchise.

Team Avg. Payroll 2007-11 Avg. Wins 2007-11 Cost/Win 2007-11
New York Yankees $204,115,433 95.6 $2,135,098.67
New York Mets $134,338,858 80.6 $1,666,735.21
LA Dodgers $109,863,887 84.6 $1,298,627.51
LA Angels of Anaheim $121,009,240 91.4 $1,323,952.30
Chicago Cubs $126,237,633 82.2 $1,535,737.63
Chicago White Sox $111,359,733 81.4 $1,368,055.69
Texas Rangers $72,228,931 85.4 $845,772.03
Houston Astros $89,852,066 73 $1,230,850.22
Philadelphia Phillies $120,971,380 94.6 $1,278,767.23
Washington Nationals $57,443,686 68 $844,760.09
Miami Marlins $38,855,444 78.8 $493,089.39
Toronto Blue Jays $81,942,431 82 $999,297.94
Atlanta Braves $92,389,508 84.4 $1,094,662.42
Boston Red Sox $146,018,911 93 $1,570,095.82
San Francisco Giants $92,781,234 81.8 $1,134,244.91
Oakland Athletics $63,008,593 76.2 $826,884.42
Detroit Tigers $117,779,822 84.8 $1,388,913.00
Arizona Diamondbacks $64,752,318 80.2 $807,385.51
Seattle Mariners $101,759,601 72.4 $1,405,519.35
Minnesota Twins $80,913,540 82.2 $984,349.64
San Diego Padres $51,838,165 77.6 $668,017.59
Tampa Bay Rays $49,240,114 86.8 $567,282.42
St. Louis Cardinals $96,341,636 86.2 $1,117,652.39
Baltimore Orioles $77,721,561 67.2 $1,156,570.85
Colorado Rockies $72,972,047 82.4 $885,583.09
Pittsburgh Pirates $43,407,121 65.2 $665,753.39
Cincinnati Reds $74,711,868 78.8 $948,120.15
Cleveland Indians $66,620,607 78.2 $851,925.92
Kansas City Royals $61,818,509 69.4 $890,756.61
Milwaukee Brewers $81,221,067 85.2 $953,298.91

Each market size is defined by how hard a team has to work to stretch their payroll dollars in order to put together a winning season.  Large market teams are able to make mistakes here and there, while small market teams have a much smaller margin for error.  The average cost/win from the data above is $1,097,925/win.  The standard deviation is $352,709 and the 1/2 standard deviation is $176,355.  Using the same methodology as the previous two sections, here are the spreads between the markets:

Large Market — greater than $1.27M/win (10 teams — Yankees, Mets, Dodgers, Angels, Cubs, White Sox, Phillies, Red Sox, Tigers, Mariners)

Mid Market — between $921K and $1.27M/win (9 teams — Astros, Blue Jays, Braves, Giants, Twins, Cardinals, Orioles, Reds, Brewers)

Small Market — less than $921K/win (11 teams — Rangers, Nationals, Marlins, Athletics, Diamondbacks, Padres, Rays, Rockies, Pirates, Indians, Royals)

There are some quirks in this phase of the data.  The Mariners are quite a schizophrenic team — a small market by population, a mid market by payroll, and large market by cost per win.  Most of that is due to being horrible these past 5 years while having a bloated payroll of terrible veterans.  This will stabilize in subsequent years as their payroll is already dropping rapidly.  Additionally, the Rockies dropped into the small market category for cost/win from mid market for payroll.  This is not surprising as the Rockies barely qualified as a mid market payroll team  by just $100,000 and are close to the $921,000/win threshold for the cost per win.

 

CONCLUSIONS

One interesting observation from the payroll and cost per win data is that the Atlanta Braves are the “average, typical” franchise in MLB.  Their average payroll of $92.3M and cost per win of $1.09M/win were the closest duo of data from the average for any of the 30 franchises.

The data provides numerical backup to the sniff test  of whether a franchise is large, mid, or a small market team.  Although some teams on the boundaries between two market classifications may switch back and forth (Rockies, for example), by and large the data makes sense to the eye with preconceived notions about franchises.

The data also shows that there is a decent correlation between payroll and wins produced, as only 2 of the 10 large market teams (Mets and Mariners) did not average a winning season over the last 5 years, whereas only 3 of the 11 small market teams (Rangers, Rays, and Rockies) averaged winning seasons over the past 5 years.

The Pirates are clearly a small market franchise by any metric.  Three weeks ago, Tim took a look at the Pirates’ potential 2013 payroll which came to an estimate of $63.9M.  Using the $921,000/win for small markets as an upper threshold, the Pirates would need to theoretically support a $75.5M payroll in order to have a better than average chance to sustain a winning record.  It will be imperative for the Pirates to find values for their investments in order to compete with less than that $75.5M payroll on a consistent basis.

Author: Kevin Creagh

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  • szielinski

    “The Pirates are clearly a small market franchise by any metric. Three weeks
    ago, Tim took a look at the Pirates’
    potential 2013 payroll which came to an estimate of $63.9M. Using
    the $921,000/win for small markets as an upper threshold, the Pirates would
    need to theoretically support a $75.5M payroll in order to have a better than
    average chance to sustain a winning record. It will be imperative for the
    Pirates to find values for their investments in order to compete with less than
    that $75.5M payroll on a consistent basis.”

    Talent wins games, not dollars spent. Years ago, during my IrateFans days, I
    dumped payroll and win/loss data into a spread sheet and found that winning was
    weakly (.30 to .40) and positively correlated to winning baseball games. With
    respect to the Pirates, this means that the team must spend its money wisely.
    It also means that the organization must commit itself to acquiring young and
    inexpensive talent in the draft, the international market, trades and waiver
    wire claims. The correlation result also implies that spending money at the
    major league level does not cause the organization to win at a given rate. Ask
    Mets fans about that. It only suggests that winning teams will need to spend
    some money to pay for and retain their better players.

    The Pirates are doing what they need to do to win at the major league level.
    The organization is strongly committed to finding players in the draft, the
    international market, trades and waiver wire claims. It has also shown its
    willingness to retain players it believes to be worth retaining, albeit at
    salaries it can afford.

    The upshot: The Pirates will need to spend as much money as the organization
    can afford to field a team which bests the McClatchy Line. If Cole and Taillon
    make it to the majors next year and pitch to their talent level, the Pirates
    will win a lot of games while spending far less than $75M on the ML team.

    • http://www.facebook.com/tim.bucey Tim Bucey

      What this metro figure doesn’t take into account is cities within say 150 miles of the the major league city from which these teams draw. Cities like Altoona, Wheeling, Steubenville (all relatively small) are the largest in the Pirates market. Youngstown is shared with Cleveland. Now look at Cincinnati: Louisville, Lexington, Columbus, Dayton, Indianapolis. They are all large cities in Reds territory. Plus there are many smaller cities like Springfield, O., Middletown, Hamilton. In other words, Cincinnati has a much larger drawing area than Pittsburgh.

      • http://www.facebook.com/bryan.graham.773 Bryan Graham

        Hey, what do you call Curwensville, PA? LOL
        I think the Pirates best place to spend money would be to bribe the league to only play a 110 game season.

      • Kevin_Creagh

        As I mentioned above, metro population was only the starting point. I went on to payroll and cost per win to further refine it. While I agree with you that teams draw from more than just their metropolitan area, how many games do you think someone living 150 miles away will see a year? Not many.
        Teams draw the bulk of their repeat customers from the immediate metro area.

  • Gettotheairmen

    Kevin, great article and attempt to delineate between small/mid/large market teams. However, I’ve got to agree with Tim Bucey. The population data as a baseline seems flawed. A team’s reach/financial viability/ ability to spend would seem to be more tied to their television contracts and viewing area. For example, I live in DC and go to North Carolina for vacation every year. The “local” baseball broadcast there is the Nats, in so much as the carry MASN as the sports cable network. The Metro area population is just one part of their reach. Not to mention, as Tim pointed out, places like Richmond, Roanoake, Norfolk being well within reasonable driving distance to travel to a game and then head home.

    It’s more complex than what you’ve laid out IMO but a good start.

    • Gettotheairmen

      Also, not to beat a dead horse but the population of the six states that make up New England was 14.4 M in 2008 just behind the NY market …would better explain the Red Sox payroll

    • Kevin_Creagh

      At the end of the Metro Population paragraph, I mention that most of the markets (using the Red Sox, specifically) don’t match the eye test. That’s why I went to Payroll and then Cost Per Win.

  • pirates21

    this should take the population of the territory into consideration. for example st louis’s territory encompasses 5 states.