Major League Baseball seems to be perennially in crisis in terms of its relationship with its fan base. Free agency, strikes, steroids, competitive imbalances, short attention spans of millennials, a lack of stars, an aging fan base, and other factors have been cited to explain why baseball has either lost or is in danger of losing its position as the national pastime.
On the other hand, the league keeps setting revenue records. This article from Forbes reports that baseball has set revenue records for 16 straight years.
When thinking about baseball and its fans, it is safest to say it is a mixed bag of positives and warning signs. Record revenues show that baseball has been able to develop innovative revenue streams and attract high value sponsors. But there does seem to be trouble on the horizon in terms of the next generation of fans.
In terms of demographics, MLB has one of the oldest fan bases (up there with golf). It is also largely viewed as the most family oriented sport. This is an interesting pattern. An aging fan base is a concern for the future if fans are aging out of attending games. Of course, an aging fan base is also potentially an increasingly wealthy fan base. The family orientation is an enormous positive. Sports fandom is largely transmitted through the family and the nature of the game helps bring the next generation into the fold (summer schedule, 81 home games, relatively cheap tickets, etc…).
There is also the issue of “tanking.” Tanking has been most frequently mentioned in the context of the NBA but it’s also a concern for baseball. Losing 100 games has long been considered epic futility. In 2018, the Orioles lost 115 games, the Royals lost 104, and the White Sox lost 100. The Marlins and Tigers lost 98. Tanking is a fan issue because it speaks to the quality of the product that fans (in certain markets) are asked to buy.
Tanking brings us to the issue of the Collective Bargaining Agreement. While the Collective Bargaining Agreement is usually discussed in terms of the labor relationship between owners and players, the CBA is a critical issue for fandom because this agreement essentially defines how the league operates. For example, the CBA largely defines the rules related to revenue sharing, luxury taxes, and salary caps. These rules directly impact fans by creating the structures that influence player movements and competitive balance.
Baseball is notable for having relatively little revenue sharing and no salary cap. Controlling the distribution of spending by teams matters because there is a significant correlation between spending and winning in baseball. The Red Sox won the World Series and also led the league with a payroll of about $240 million. At the bottom, The White Sox had a payroll of around $80 million. Remember, the White Sox lost 100 games.
The CBA matters because teams will find strategies that work for their circumstances. There is some speculation that small market teams like the Royals are using business models that involve developing low cost homegrown talent, trying to win for a few years and then dumping payroll to pursue draft picks. The Royals reduced payroll from $185 million in 2017 to $135 million in 2018. The Royals lost 104 games in 2018 after making the playoffs in 2014 and 2015. In 2018 the Dodgers had the 4th highest payroll at about $195 million. But that payroll was $59 million less than the previous season’s amount. This decline allowed the team to drop below the luxury tax threshold. Are these strategies designed to maximize fan enjoyment?
The run-up to the 2019 MLB season has also included a “glacially” slow free agent market. Eventually, the big name stars signed with teams outside of the major markets. Manny Machado signed with the Padres for $300 million for ten years and Bryce Harper signed with the Phillies for $330 million over 13 years. “Stars” matter to fans. Fans like winners but they also like stars. While the NBA is and has been for a long time all about stars – Larry, Magic, Michael, Kobe, LeBron, Steph…. – MLB doesn’t seem to produce household names anymore. This article states that ESPN’s annual ranking of the most famous athletes includes 13 basketball players, 2 table tennis stars and no baseball players. This lack of “media” stars matters. Maybe not in the short-term where winning mostly drives attendance but likely in the long-term. When I have looked at the factors that build brand equity in sports, two items really jump out. Winning championships and having a history of Hall of Famers and All Stars.
The Best Baseball Brands
My last statement about how brands are built is based on logic and by running numbers on fandom in MLB and other sports leagues. As we enter the 2019 season, it’s time for my annual data based look at MLB fandom across the MLB brands. This analysis starts from questions like “Who has the best fans in Major League Baseball?” and “What are the best brands in MLB?”
These are simple questions without simple answers. What makes for a great fan or brand? Fans that show up even when the team is losing? Fans that are willing to pay the most? Fans that are willing to follow a team on the road or social media? Even after we agree on the question(s), answering it is also a challenge. How do we adjust for the fact that one team might have gone on a miraculous run that filled the stadium? Or perhaps another team suffered a slew of injuries? How do we compare fan behavior in a market like New York with fans in a place like Milwaukee? What if a team just opened a new stadium? Did the fans stream in to see the building or to see the team?
For the past few years, I have been studying fandom across professional and college sports. My approach to evaluating fan bases is to use data to develop statistical models of fan interest (more details here). The key is that these models are used to determine which cities fans are more willing to spend or follow their teams after controlling for factors like market size and short-term variations in performance.
The “Overall” rankings are based on three sub-rankings – Fan Equity, Social Equity and Road Equity. Fan Equity is a revenue premium based metric that compares the team’s box office results with league standards. In other words, Fan Equity assesses how much fans are willing to “attend and spend” relative to fans across the league. The KEY idea is that we measure this while controlling for team success and market characteristics like incomes and populations.
Fan Equity is a great metric for assessing the CURRENT level of passion or engagement in a local fan base.
Social Equity is focused on the team’s social media followings (Facebook and Twitter). Again, the rankings are based on how a team’s social media results compare across the league after controlling for team success.
The Social Equity metric provides insight into the team’s POTENTIAL fan passion.
The third metric is Road Equity. This metric is based on a statistical model that looks at how teams draw incremental fans when on the road. The KEY idea is that draw outside of the home market reveals something about a club’s national appeal.
Road Equity provides a metric of passion beyond the local market. This passion can be positive (love the Cubs) or negative (hate the Yankees).
I could go on. In the past I have developed additional metrics related to win sensitivity or price sensitivity. Willingness to attend even when the team loses probably says something about loyalty. Fans that don’t watch a loser might be termed bandwagon fans. Willingness to pay is a great marketing metric. Willingness to pay to see a team that isn’t winning is another great indication of loyalty. These metrics are available upon request (mike [dot] lewis [at] emory [dot] edu – FYI, I don’t look at the comments) but I want to keep this article brief.
So, we have three metrics with different pluses and minuses. In the quest to find an overall winner, I use a weighted average of the three metrics (more weight on the Fan Equity metric). This may not be the right weighting but it’s usually a good idea to emphasize how customers actually spend.
Overall, the group of clubs that comprise the Top 6 contains little in the way of surprises. The Red Sox rank number one and are followed by the Yankees, Giants, Dodgers, Cubs and Cardinals. The Red Sox are perennially strong and finished first last year. They also won the world series. Boston is probably the best sports town in America.
In general, the clubs at the top of the list share these same traits. They are all able to motivate fans to attend and spend as they all possess great attendance numbers and relatively high prices. More to the point, these teams are even able to draw well and command price premiums when they are not winning. Historically, the Cubs are the best example of this.
The list of winners probably raises an issue of “large” market bias. However, keep in mind that the methodology is designed to control for home market effects. The method is explicitly designed to control for differences in market demographics (and team performance). While the “winners” tend to come from the bigger and more lucrative markets, other major market teams do not fair particularly well (White Sox, A’s). There is also a more subtle point. The large market teams likely have the best fan bases because they often have significant histories of success and are often featured in the media.
The topic of how these brands are built over time is another one of my favorite things to talk about. I think it’s mostly two (highly correlated) things – championships and stars. Building brand equity is a fascinating sports topic and I think it’s a difficult one for teams (in small markets) to manage. Will the current popular strategy of cycles of tanking and competing yield enough winning and “temporary” star to build brands?
The bottom of the list features the Marlins, White Sox, Indians, Athletics and Rays. It is interesting that the bottom also includes teams from major markets such as the Bay Area, Chicago and Miami. The markets with two teams seem to yield dramatically different results within each market. I think this reveals something fundamental about fandom. Fan bases are communities and many fans want to be a part of the most popular group. It is a simple theory but the end result is that the second team in a market will struggle to compete. Many fans are drawn to the bigger and more dominant community – Yankees, Cubs, Giants or Dodgers rather than the Mets, White Sox, A’s or Angels.
The case of the Marlins reveals another common problem for franchises. The Marlins finish is a reflection of how the team struggles on multiple dimensions. Attendance is often in the bottom 5 of the league despite being located in a major metro area. Pricing is also below average for MLB. Why do the Marlins struggle? Lots of reasons. Florida weather, a short history (fandom is often generational), a history of small payrolls and bad teams, and Miami being a transient city.
The Indians is an interesting case as well. Cleveland is a passionate sports town. But when you look at the numbers there is not a lot of support. An open question is how much of the problem is the Indian’s branding? The Indians have made moves to shift from the Native American imagery but have retained the team name. I suspect that half measures might be the worst approach.
In terms of year over year comparisons, there is a good amount of stability on the list. This is a good sign since sports brands should evolve slowly. Some notable movers on the list were the Blue Jays and Phillies moving up and the Diamondbacks and Indians dropping down. The Blue Jays illustrate an important feature of the model. When I calculate the brand “premiums” I use the most recent three seasons. This is intended to provide stable but evolving measures of brand equity. In the case of the Blue Jays, the improvement in ranking was mostly driven by attendance growth in 2016 and 2017. In the case of the Phillies the improvement was about growing attendance coupled with relatively high prices.
The 2019 Complete List
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