Over the last couple of years, there has been a steady stream of negative news about the state of Major League Baseball.
The picture that these articles paint is of a business in chaos – one that's in need of serious reinvention. Now consider the following: MLB revenues have more than doubled over the last decade.
So which picture is right – Do the revenues tell the whole story or is baseball headed for disaster?
For a manager in any business, this type of situation poses a particularly difficult challenge. The world is full of Chicken Little moments. There's always someone screaming that the sky is falling and if you follow up on each one, you can quickly become overwhelmed and lose focus. On the other hand, every business that hit the wall was at one time posting solid revenue gains and was either unaware of, or chose to ignore, warning signs that could have helped them avoid their fate.
So is it time for Baseball to reinvent itself to forestall a looming disaster or should it stay the course?
To answer a question like this, the key is to cut through the hyperbole and get to the real facts.When I started this post, I went in thinking that Baseball was in real trouble. Having been drawn in by the hype, I expected to find stagnant revenues, plummeting attendence, and small market teams relegated to second class status due to the payroll power of their big market bretheren.
Now, after having looked closely at the facts, not one of these assumptions have held up.
- Revenues: As previously mentioned, revenue has doubled over the last 10 years to $7 billion
- Attendance: Although down from its all time high in 2006, is up over the last decade and steady over the last 6 seasons
Total MLB Paid Attendance by Year
- Small Market Teams: While big market teams do enjoy a competitive advantage, the situation is far from dire. The teams from the 10 smallest markets, the bottom third, earned a third of the playoff spots in 2010 and 2011 and just over a quarter of all playoff spots since 2006. Furthermore, small market teams are just as successful as big market teams when it comes to filling up their stadiums.
Market Size Does Not Correlate with Attendance as a % of Stadium Capacity
R Squared = .06
So, what does this mean for Baseball? Overall, it’s a game and a business that is in pretty good shape.
Like every other business, there are some areas of concern that need to be addressed and I’ll close by quickly addressing two very important ones.
- Terrible Franchises: While being a small market team isn’t an automatic ticket to the bottom, there are four small market teams that appear to be in real trouble – Kansas City, Seattle, Pittsburgh and Baltimore. These teams enjoy neither success on the field nor the attendence success that comes from being a lovable loser (think the Chicago Cubs). All of the discussion on helping these teams has been focused on fixing payroll disparities with revenue sharing. Instead, Baseball should consider addressing what is likely another cause of the problem – bad management. If small market clubs from Milwaukee, St. Louis and Colorado can can generate wins and/or attendence, it suggests that with better management, these franchises could as well.
- Declining Little League Participation: Of all of the statistics we looked at, the only one that really seemed to harbor long term risks for Baseball was declining Little League participation. Between 2000 and 2009, the number of 7 to 17 year olds playing Little League dropped by 24%. I’ve been unable to find any studies that correlate youth participation with the success of the professional league. But, because the question is a poor candidate for empirical research and the risk of doing nothing is extremely high, it is something that Baseball should address right away.
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