Wednesday, 13 June 2012

Why an MLB franchise costs more?

In a previous post, I noted very clearly that a Major League Baseball franchise requires twice as much urban income to be adequately supported as do franchises in the National Basketball Association, National Football League and National Hockey League.

Whilst the epic season length of MLB, as I noted before, is likely to be part of the cost of a franchise in that league, the case of the National Football League, with its 16-game regular season and still higher costs than the NBA, shows that the issue cannot be as simple as that.

I have attempted, without research since I unfortunately do not know where to start, to assess the factors that could cause the cost differences. Possibilities identified are:
  1. Season length: it obviously costs more to run a team playing over a hundred and fifty games than one playing twelve or fourteen as they do in Major League Lacrosse (not considered here)
  2. Roster size: it should cost more to run a team in a league where roster sizes are large than one where they are small
  3. Talent pool size: if the talent pool is small due to naturally specific body types (i.e. height as in basketball or netball or volleyball) being required, the cost will be higher.
    • If the talent pool is restricted by the sport not being widely played, it should have the same effect, but this may be countered by a smaller money supply in the relevant league.
  4. Protective equipment: if a sport requires specialised equipment, especially of the protective kind, as in gridiron, ice hockey, lacrosse and to a lesser extent baseball, it should cost more
    • I considered the level of training (such as strength training) required to play a sport, but thought the variable too dependent on this fourth variable I shall test to be worthwhile as an addition.
  5. Stadium utility: if a stadium can be used for activities other than the sport which is its chief user, costs should be less
  6. Minimum required stadium size: large capacity stadiums should cost more to build and upgrade than smaller facilities. This may be more a cost of land than money.
  7. Fan loyalty: if a sport’s fans are more likely to view every game either on television or more especially live, rather than only a few games, then costs should be reduced.
I will give a table of how the five leagues compared by David Berri fare on these questions. Purple indicates a high value will reduce costs; red-brown indicates a low value lowers costs.
Season length 162
1682 34
Roster size ≈25 ≈25 ≈45 ≈15 ≈35
Talent pool Medium Medium Large Very small Very large
Protective equipment Medium High High Low Low
Stadium utility Low Medium High Very high High
Stadium size (minimum)25,00015,00050,00015,00015,000
Fan loyaltyLow High HighHighMedium
From the table above, one can see that:
  1. Apart from roster size, Major League Baseball is by no means ideal for affordable franchise formation.
  2. The National Football League has problems with a large roster, large stadium size and high (weight-)training costs, but stands favourably in other areas
  3. The National Basketball Association stands favourably in terms of roster size and stadium utility but the fact that training cannot make people taller means it has a tiny talent pool of potential players who become of extreme price when they are good.
  4. Major League Soccer stands very favourably placed because:
    1. it has stadiums of a shape for very good extra-sport utility which lowers costs
    2. it is not difficult to find players suitable for playing the sport and little protective equipment is needed
    3. the season length is relatively short
The National Hockey League, however, seems a little difficult to understand. It has a long schedule, has only moderate utility of electrically frozen rinks (figure skating) and requires very specialised equipment. Ice hockey is not a widely played sport and the NHL’s strong point of small stadium size may be counterbalanced by refrigeration costs. Yet, a National Hockey League franchise costs only a tiny bit more to run than one in the NFL and NBA. This suggests ice hockey must have tremendous fan loyalty that I am underestimating, or that other factors I have overlooked reduce the cost - one of which, a smaller league money supply, I have hinted at.

Still, it is interesting to see that potential NHL relocation/expansion markets were not discussed in a study of baseball, gridiron and basketball markets, despite a promise to do so. In my view, ice hockey struggles for viable relocation markets, with Seattle and Portland, Oregon being the most promising. Other theoretically possible ice hockey relocation markets have high living costs and declining populations or cultures and climates unsuited to ice hockey.

The analysis also perhaps fails to suggest that MLB teams should cost as much more than NHL, NFL or NBA teams than they do. Ticket prices may explain a lot of this since they are so much lower in MLB than in the other leagues, but ticket prices would be reflected as part of the fan loyalty criterion and may be multiplicative.


owning a franchise said...

I heard about it MLB franchisee but, I don't know the exactly reason behind about it.It is as important to know about is pros and cons.

jpbenney said...

I don’t myself know the exact reasons but what the post was about was looking for reasonable explanations and for lessons that might be learnt in sports not covered, such as the AFL and NRL in my Australian homeland. The AFL is a more popular sport than the NRL, but it almost certainly costs more to run an AFL team because of the larger roster size and smaller talent pool.