Tipping Pitches: Sports: MLB Economics and Competitive Balance (Pt. 1)


Monday, November 2, 2009

Sports: MLB Economics and Competitive Balance (Pt. 1)

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[This is Part 1 of a four part series]

It's no secret that I have serious problems with the current economic structure of Major League Baseball. It's this uneven playing field that prevents MLB from being the best it can be. It's the even playing field that exists in the NFL that makes that league superior.

In the process of understanding the similarities and differences among the leagues when attempting to put together some sort of plan that would work for baseball, I started researching the competitive landscape within each league.

Look.  I know I can't fix baseball.  I won't claim that I can.  But when something is so obviously wrong with something I love, I will at least make an attempt to throw something together.

The problems are so obvious that someone like me should be able to throw something together that makes more sense than the current system.

Still, researching is a dangerous first step. When you research you have to be open to disappointment in what you find.  It may or may not support your theories.

So my preface is that I never expected to use this data to prove that baseball's economics prevents competitive balance (we'll see if it will). And it's possible that some could use the data, foolishly, against such arguments.

Data has holes, people. Data doesn't tell the entire story. Even if the research revealed a competitive balance in baseball, it would say nothing about the fact that each team played with grossly different resources to reach their goals.

I understand that having money never guarantees success. But having financial advantages also allows you do do things that other teams cannot.

If the Yankees set their mind to it, they can acquire anyone in baseball. Anyone. There is no player whom the Yankees are prevented from acquiring due to their own financial restrictions.

That's a problem. But it isn't the purpose of this entry.

Venting over (until later).

Let's compare the competitive balance between the NBA, NFL and MLB during the past five and 10 years. I want to fully understand just how balanced MLB is in relation to the other major sports leagues.

From there, we'll move forward to Bud Selig's door.

Defining Competitive Balance
First, we need to know what we're looking for. Competitive imbalance would be loosely defined by the following characteristics (but again, data can lie):
  • Same teams finishing in the top of the league year after year
  • Same teams finishing in the bottom of league year after year
There isn't much ambiguity here.  If a large minority of teams has no perceived chance to succeed, there is an imbalance.  If a small minority of teams has advantages that others do not that keep them at the top of the standings, there is an imbalance.

The research isn't intended to explain how the league got to be balanced or imbalanced.  For example, you could have an economic system in place (salary cap) that puts every team on an even playing field.  That doesn't guarantee competitive balance.  The teams are still responsible for achieving success.

Quick Note
I focused entirely on regular season successes and failures.  While I could have defined finishing first overall as the team that won the league's championship, I chose to focus instead on win/loss record.

You may disagree, and you are entitled to that.  But I feel that a small sample size (which defines the playoffs) is much less dependable than the larger sample size (the regular season).  Good teams can be great when it counts.  Great teams can falter.

Because of this, you will note examples where there are more than five teams that finished with the best record during the past five years, or something similar.  This happens due to ties.

Now let's look at that data.

Accessibility of Success
For there to be competitive balance, attaining success shouldn't be dominated by a small minority of teams. The higher percentage of teams that reach the top echelon of the league, the more competitive balance. At least in theory.

You can view the data here.

What it Means: Not too surprisingly, the NFL is the most balanced when offering all teams access to success, at least when looking at the past 10 years.

While I wouldn't consider the differences incredibly significant, the NFL comes up on top in each comparison when looking at a 10 year window. All but three teams have had a record in the top 10 of the league at some point during that time period in the NFL. That's a good sign of parity.

More surprising, though, was that 75% of all NFL teams have finished in the top five during the past 10 years. That seems high to me, although MLB isn't that far behind at 66.7%.

So while success is most easily attained in the NFL during the past 10 years, the picture isn't as clear when limiting our data to the past five.

MLB has actually seen a much larger percentage of teams see some level of success during that time. More than 80% of MLB teams have finished in the top 10 and more than half have finished in the top five during the past five years.

The stat for finishing with the best regular season record, whether the past five or 10 years, is quite amazing. Five different teams in each league have accomplished this feat during the past five years in each league. Other than a tie at the conclusion of a season in baseball, there was a different team in each league every year with the best record. The data for past 10 years is nearly as favorable for parity.

So on the surface, this data shows that, while the NFL offers the most parity, there have been similar numbers in all three major sports when it comes to equal access to success.  Again, purely on the surface.

Why You Should Care:  I've heard smart people say that parity is overrated.  That baseball needs a team like the Yankees.  That all leagues need dynasties.

This overlooks a fundamental problem.  You can have dynasties and still have parity.  The above data can coexist with dynasties.

In the NFL, the Colts and Patriots can be the league's greatest teams every season as long as other teams are competitive.  You don't create more parity at the expense of those teams that earned success.

In other words, I have two ultimate concerns:

1) All teams need to have a chance at success.  That doesn't mean that they succeed.  But when your team fails, you need to have some hope that they can turn it around.  Maybe not this year.  Maybe not next year.  But eventually.

2) When teams are dynasties, they need to do it through means that could have gotten any team to that pinnacle.  Economics are not an issue.  Smart management, smart people, smart moves.

How can you have a successful league without #1 existing?  If one half of the teams have no reasonable chance for consistent success because of factors outside of their control (very different than factors within their control), how passionate can you be as a fan?

Teams will move.  And die.  Not good for a league's success.

Seriously, eventually your patience as a fan has to run dry.  You're rooting for the near impossible.  Meanwhile, the Yankees win again.

Has baseball shown signs of more competitive balance of late?  Kind of, but it's deceiving.  A team like the Tampa Bay Rays won last season.  But they'll never sustain it.

And they didn't.

That's what separates the NBA and NFL from Major League Baseball.  While any team can technically win in any given season, you can only reasonably expect a small market team to sustain that success in the NFL and NBA.

Or at least, sustaining that success in those leagues falls squarely on the shoulders of management.  Sustaining success has little or nothing to do with economics, other than cap management.


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