MLB market size disparity: A lemonade stand thought experiment

My first foray into this “contract year” between MLB and the MLBPA looked at how franchise values continue to grow at wildly unequal—if steadily upward—rates.

This time around, the focus is on geography. So, get out that green folder (don’t fight me on this) from eighth grade and let’s find the section on “population density”.

First, a thought experiment:

Imagine three lemonade stands run by the same proprietor operating on three different streets.

The first one operates on a street where 1,000 people walk by every hour.

The second sees 500 people/hour stroll by.

The third only draws 100 passersby in the same period.

Every single day, these three lemonade stands are in competition with each other for sales that can be poured (pardon the pun) back into the business. For product-saturation reasons, the less-trafficked stands cannot simply horn in on the busier stands’ territory.

One can imagine the inequity this setup might produce between the rival-but-all-in-the-same-gang stands. Stand 3 could have the highest-quality lemonade and service in the business, but never win the competition simply because the volume of potentially thirsty patrons is so low. Stand 1 could dominate in sales by pairing a strong product with high traffic—or put out watered-down lemonade and probably still come out on top because, well, there are just so many potential consumers on that hourly basis.

This is what is happening in MLB geographically right now.

Using this U.S. Census Data (no guarantees on if any fava beans or Chianti were consumed in the process), here is a basic tiered layout of MLB markets by population density/size…

Tier 1: 19 Million

Tier 2: 12 Million

Tier 3: 7-10 Million

Chicago, Arlington, & Houston

Tier 4: 5-7 Million

Toronto, Washington, Philadelphia, Atlanta, Miami, Phoenix, Boston

Tier 5: 3-5 Million

Oakland, San Francisco, Detroit, Seattle, Minneapolis/St. Paul, Tampa Bay, San Diego, Denver, Baltimore, St. Louis

Tier 6: 2-3 Million

Pittsburgh, Cincinnati, Kansas City, Cleveland

Tier 7: <2 Million

Something else to remember: though often hard for us “die hards” to comprehend, most daily ballpark attendance comes from folks simply “looking for something to do”. Yes, the competitiveness of the on-field product can and will certainly tip the scales in one direction or the other. But the access to larger numbers of individuals who may decide to go—and take their family/friends with them—to one or more of 81 yearly contests is also an enormous profit consideration.

It isn’t just “butts in seats”, either. TV deals are largely valued on advertising. The more potential eyes on the glowing box (or device), the more $$$ clubs can get for their media wares. While perhaps more prominent in the bygone age of cable TV, it still stands to reason that larger markets = larger potential advertising profits, especially with MLB mostly being a regional-over-national success media-wise.

This takes us back to our lemonade stand. Except now, replace the citrusy stop with a MLB ballpark but keep the varying street traffics. No matter how good or bad the product is, high volume is going to have an inherent advantage over its opposite. The Dodgers can build an empire by consistently winning, while the Mets can still rake in the dough as lovable losers. Meanwhile, the Twins or Pirates can turtle up and not compete at all, or clubs like the Brewers & Tigers can continue trying to swing with the big boys and never quite reach that level but for an extraordinary run of development/injury good fortune.

To be clear, I’m not at all saying that player dev and smart personnel decisions don’t matter. The Rockies have failed that exam for years and look where they are, while the Rays seemingly ace the test every term. I simply think it is important to remember that certain MLB franchises have significant built-in advantages over others by population density alone.

Advantages that could be leveled at least somewhat by a salary cap/floor structure in the upcoming collective bargaining agreement.