More Teams in Boston and New York?

Michael Mandel argues that Major League Baseball should place a third team in New York and a second in Boston to improve competitive balance:

It’s the post-season, and once again the Yankees and the Red Sox are in the playoffs. Here’s a very simple reason why: There are too few baseball teams in New York and Boston relative to the size of the local economies. As a result, New York and Boston teams have access to more economic resources than anyone else. The conclusion: If baseball wants competitive balance, the best way is to add an extra team in NY and Boston.

Michael is essentially arguing for division of large local economies. Mark at the SportsBiz blog argues it won’t solve much:

This is not simply a market size phenomenon, although that is certainly part of it. The Mets have not benefited from the market size of New York in quite the same way as the Yankees and there is no reason to expect that a third team in New York will make a significant dent in the Yankees enormous local television revenue which is the key to their ability to spend so freely on payroll. The Yankees and the Red Sox are both sitting home thinking about next year(and the Mets haven’t made the post-season in so long I can’t remember when it was). Of the remaining teams in the playoffs, the Angels represent the third largest market and have the fifth largest payroll, although they play in Anaheim despite what they call themselves or it says in your newspaper. However, the other teams are not quite from the upper echelon of markets based on Mandel’s personal income test. Their payroll’s, however, are in the upper tier. The White Sox are the lowest at 13th, with St. Louis 10th and Houston 11th.

He argues for more equitable sharing of local TV revenues, something addressed by the latest Collective Bargaining Agreement in baseball. Brian over at Hardball Times argues:

In addition to the arguments that Mark presents, the addition of teams to the New York and Boston areas would face stiff resistance amongst the ownership group. A change in the territory of a team requires a 75% vote, and it’s unlikely any of the owners would vote to take away a precious asset—the exclusive territory of a given team—from one of their own.

I wonder how much resistance there would be. Teams like the Blue Jays and the Orioles might be receptive. The million dollar question is how much resistance there would be from other teams fearing that their exclusive territories might be next. Having an increased chance to make it to and advance in the playoffs might be a tradeoff some owners might accept.

Another barrier to entry facing an expansion team is the expansion fee. Expansion fees generally compensate existing owners for lost revenues through revenue sharing and for negative impacts on local revenues (would Baltimore fans rather watch a game against the Yankees or against the Devil Rays?). Would a new team in New York generate enough profits to warrant paying the expansion fee? This hinges not only on the size of the market but also on the loyalty NY and Boston fans have to their existing teams. How deep does the loyalty run and how does loyalty change over time?

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Author: Phil Miller

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