Previously, I wrote an article discussing that MLB should consider expansion into Japan. I proposed that MLB should relocate the Tampa Bay Rays and Oakland Athletics to Japan while adding teams in Tokyo, Osaka, Nagoya and Yokohama for a total of 32 teams. Here’s some more detail about this might work.
I propose a structure of 8 divisions consisting of 4 teams each. Such a plan would eliminate the AL and NL.
The logistics only work if all four Japanese teams are in a single division and having a Japanese division in a specific league would put that league at a significant disadvantage. There were two ways that I found that made sense to organize the divisions.
I don't think it matters if MLB chooses these exact four Japanese cities. MLB certainly needs a presence in Tokyo. If they can't build a team there, then this project has limited value. Aside from that, it would be nice if MLB could put teams in Osaka or Nagoya but other solutions could probably be found. Yokohama isn't a large city and it may make more sense to put a team in Kobe or Nishinomiya instead.
The first structure, and the one that I developed a schedule for consists of the following:
Division #1: Braves, Reds, Nationals and Marlins
Division #2: Mets, Indians, Tigers and Pirates
Division #3: Red Sox, Orioles, Phillies, Yankees
Division #4: San Diego, Dodgers, Diamondbacks, Giants
Division #5: Cubs, Brewers, Cardinals, Blue Jays
Division #6: White Sox, Twins, Rangers, Astros
Division #7: Mariners, Angels, Rockies, Royals
Division #8: Osaka, Nagoya, Yokohama, Tokyo
The idea behind this grouping was to attempt to minimize intra-division travel while maintaining some familiar rivalries. One major challenge is that there are only seven West Coast teams if the Athletics are relocated and this requiring a Midwestern team to play on the West Coast. Kansas City is the best option to be placed in such a division and therefore gets put into a tough situation. Each new division has at least two teams that were in a previous division together. I presume that the New York, Chicago and Los Angeles teams would need to play in different divisions as is currently the case.
The second way, and probably the better one, consists of the following:
Division #1: Braves, Rangers, Astros and Marlins
Division #2: Reds, Cubs, Cardinals, Brewers
Division #3: Red Sox, Orioles, Blue Jays, Yankees
Division #4: San Diego, Dodgers, Diamondbacks, Giants
Division #5: Mets, Nationals, Phillies, Pirates
Division #6: White Sox, Twins, Tigers, Indians
Division #7: Mariners, Angels, Rockies, Royals
Division #8: Osaka, Nagoya, Yokohama, Tokyo
This set of divisions has less internal change than the first set and also requires less intra-division travel. Teams like the Mets, Twins, Reds, White Sox and Nationals will be forced to travel less under such a structure while only the Braves and Indians have to travel more often. I probably would have a more optimal situation had I developed a schedule for this second set of teams rather than the first.
This schedule is a proof of concept and shouldn’t be considered even a rough draft. For starters, I didn’t do an adequate job ensuring that each team has the same amount of home weekend games. I changed a few decision rules about schedule structure midway through developing this attempt, and therefore would need to tweak the schedule to ensure better consistency. This schedule also does a poor job ensuring that teams don’t need to travel over the weekend, but rather can play only one opponent in one location. Better optimization tools and better thought-out schedule criteria would allow me to address these problems, but at the cost of a significant amount of my time.
The basic schedule structure is like this. The season is 182 days long, or about the length of the standard MLB season, and there are 152 games played by each team. Those 152 games are split into 66 in division games (22 games against each division opponent) and 86 out of division games. For the out-of-division games, teams play between three to five games against opponents in six of the seven divisions. They face opponents in three of the divisions at home and in the other three on the road.
For simplicity’s sake, I have divisions play all of their games against each other over the same period. For example, if one team in Division 1 is playing a team in Division 4, then all teams in Division 1 and 4 are playing each other. Furthermore, once teams in Divisions 1 and 4, start playing a team from a different division, teams from those two divisions won’t play against each other for the rest of the season.
This format allows for not only an all-star break, but an extended period of rest in June, July, August and September for most clubs. I do think that having only 152 games results in a large amount of off days and that 154 or 156 games makes more sense. If I was revising my first draft, I would look into a 156 game schedule, in which 78 games are played against division foes (6 three game series and 2 four game series against each team in the division), 72 games played against out-of-division foes (teams play a three game home series and a three game away series against opponents in three divisions) and 6 games played against special opponents (for example the Orioles would play the Nationals for three games at home and for three games away). The teams in Japan would play against other teams in Japan and not in the States to reduce travel distance.
This format presumes that teams need an off day when traveling from the East to West Coast and vice versa, and need two off days when traveling from the United States to Japan. Schedules were developed so that teams on the East Coast don’t need to travel to Japan AND travel to the West Coast.
Teams are allowed to play at most 17 games without an off day and doubleheaders are allowed only in cases where games are cancelled. This schedule presumes a four day all-star break and also a few breaks during the season. The schedule can be found for each team in a spreadsheet format by clicking here. Below is how the Orioles schedule would look in a schedule format.
According to Baseball Savant, MLB teams traveled 810,000 miles in 2015. According to my calculations, they traveled 827,000 miles. There are some slight differences between our calculations, but nothing major. In this new schedule, the 28 teams that exist in the old and new format would be projected to travel just 632,000 miles. When taking the fact that teams are playing fewer games in this new schedule and thus travel less into account, this results in a reduction of 75,000 miles or roughly 2,900 per team. The chart found here shows how things change.
The four Japanese teams are projected to travel roughly 46,600 miles. This is the highest allowed in my sample by far, but it’s only 3,500 miles more than the Mariners traveled in 2015. It isn’t ideal, but it certainly is reasonable. With better optimization software, I could likely reduce the distance traveled from 46,000 miles.
There are challenges that may prevent MLB from expanding into Japan. It will be hard to come to an acceptable deal with the NPB. It may also hard to convince Japanese cities to provide necessary support for MLB teams to ensure that their financial success. However, despite the many challenges, it is clear that an optimized schedule will prevent distance from being one of them.
Showing posts with label MLB Expansion. Show all posts
Showing posts with label MLB Expansion. Show all posts
04 April 2016
28 March 2016
How MLB Expansion Makes Sense
As Commissioner Manfred said in an interview with Joe Passan, baseball is a growth business and sooner or later, growth businesses expand. Manfred told reporters that he’d be interested in expanding from 30 to 32 franchises and that baseball would have a better structure as two 16-team leagues split into four divisions of four. It seems that the addition of two new franchises is almost inevitable. Many articles have been written discussing the merits of adding franchises in cities such as Montreal, Vancouver, Portland, Austin, Las Vegas, Nashville, Sacramento, Indianapolis, San Jose, Memphis, Charlotte, Virginia Beach and San Antonio.
But there are significant challenges to expanding the league. Large-market clubs are upset about the amount of money that goes towards revenue sharing. Adding two small-market clubs would force large-market teams to devote a higher percentage of their budget towards revenue sharing while reducing revenue they receive from league merchandise, the national TV deal and MLBAM. If MLB is going to expand, they’ll need to choose markets that can support teams without requiring significant revenue sharing.
MLB hasn’t had such good luck with expansion recently. In 1998, MLB expanded to include Tampa Bay and Arizona. Tampa Bay has financially been a complete failure since its creation. In their inaugural year, they were able to attract over 30,000 fans per game. Since then, despite having a successful period from 2008-2013, they’ve attracted no more than roughly 23k fans a year and have ranked last or second last in attendance in the American League for 13 of the 18 years they’ve been in existence. Their TV deal is considered to be poor and isn’t eligible for renewal until after 2018. They typically have one of the lowest payrolls in the league and are able to stay above water solely due to revenue sharing and other league shared revenues.
Arizona has been more successful than Tampa Bay. They ranked in the top half of the National League in attendance from 1998 to 2004, while winning the division three times during that period including a World Series victory. However, since 2004, the Diamondbacks attendance has been ranked between 11th and 14th in the National League. As part of their deal to get a stadium, the Diamondbacks agreed to have low ticket prices so they receive minimal revenue from attendance. As a result, the Diamondbacks have struggled to spend enough money to field a competitive roster and have only once spent more than the $102M that they spent in 2002 on payroll. Jayson Stark wrote that he was told that the Diamondbacks received almost $80M from revenue-sharing in the past three years. Their new TV deal will help, but it pays less than large-market TV deals (my article). This may be better than Tampa Bay, but it isn’t a very good result.
In 1993, the MLB expanded to add the Marlins and Rockies. Jon Heyman reported that the Marlins’ revenues are lower than the Rays and Athletics and that the Marlins received $50 million in revenue sharing this past year. Despite this, the Marlins are still not making a profit. The Rockies have been more successful. They had a stretch from 1993-1999 where they led the NL in attendance. They’ve leveled off since then, but are ranked about at the midpoint in attendance. However, the Rockies still receive revenue sharing funds each year and aren’t known for having high payrolls. All four of these teams are annually eligible for the competitive balance lottery, which is eligible only to clubs in one of the ten smallest markets or has one of the ten smallest revenue pools. It’s safe to say that these four clubs are some of the weakest in baseball.
The American City Business Journals recently did a study to determine whether any market in North America had the economic capacity to support an MLB franchise. They didn’t find a single market strong enough to support an MLB team. Even worse, they felt that Montreal was the best candidate in North America for a new MLB team, but that it only had a limited chance of success. Montreal already failed to support one team and it’s questionable that they’d do better with a second chance. If Montreal could support another team, there are plenty of franchises that could benefit from relocation.
The arguable failure of previous expansion attempts combined with the lack of any remaining large markets available illustrates why further expansion in the United States will be a significant challenge. Therefore, it should come as no surprise that Commissioner Manfred has stated that he feels that the best available markets in North America aren’t United States markets but rather Canadian or Mexican. Canada only has two possible remaining markets for an MLB team, Montreal and Vancouver. Metro Vancouver has fewer than 3 million residents and would be a small market at best while Montreal has been discussed above. Mexico, on the other hand, is interesting.
Mexico has three metropolitan areas that could potentially support an MLB team; Mexico City, Guadalajara and Monterrey. According to the OECD in 2014, Greater Mexico City had an estimated population of 20.4 million people and a GDP of $421 billion ($21,000 GDP per capita). Metro Guadalajara had a population of 4.9 million people and a GDP of $70.87 billion (14,463 GDP per capita). Metro Monterrey had a population of 4.8 million people and a GDP of $117 billion ($24,400 GDP per capita). In contrast, Baltimore has 2 million people and a GDP of $114 billion ($57,000 GDP per capita). In my opinion, Mexico City and Monterrey are the two best Mexican candidates for an MLB team.
A team in these locations will still have significant challenges. These cities have a low GDP per capita and therefore teams will need to be able to attract the upper class. Oscar Suarez, an MLB player agent born in Cuba that represents multiple Mexican players, stated that Mexico is a big country and parts are heavy into baseball, but that he isn’t sure whether the general population can afford sustaining a big-league team. The Boston Globe reported that other challenges include high altitude, the lack of new stadiums and safety issues. In addition, Mexico City is 650 miles away from Houston, 930 miles away from Dallas and over 2,000 miles away from New York. Not only this, but politics will be a potential concern as there has been significant tension between Mexico and presidential candidate Donald Trump.
But Manfred does have a significant interest in having a team in Mexico. Manfred has stated that a team in Mexico could help grow the Hispanic market in the United States. As of mid-2014, Mexico had an estimated 15.4 million cable and satellite subscribers and Mexico has a robust $1.5 billion ad market. If a cable station broadcasting Mexican MLB games could charge a subscriber fee of $1.50 per month, then it could earn over $300 million in revenue. If so, one would expect these teams to earn slightly less than $100 million in rights fees starting in 2016 with significant room for growth as Mexico’s broadcast market grows and their populace becomes more prosperous, which would go a long way towards ensuring MLBs financial viability in Mexico. Best of all, unlike a team in Canada or the United States, a team in Mexico wouldn’t cannibalize another teams’ existing market. For all of the potential challenges, Mexico has a significant chance of helping the league financially rather than being a burden.
The smart bet would be to expect MLB to ultimately expand into Mexico City and Monterrey while potentially relocating a team to Montreal. Despite all of the challenges, there’s significant growth potential in Mexico and there’s a plausible path for franchises in those cities to be net assets for MLB that don’t require revenue from other markets. Even if things don’t work out, it’s still good PR. But if I was a consultant for MLB, I’d recommend looking at a different solution. I’d look into adding MLB teams in Japan.
I’d add two new teams in Japan, while also relocating the Oakland Athletics and Tampa Bay Rays to Japan, resulting in MLB having four teams in Japan with MLB having a total of thirty-two teams. These four teams would be placed in Tokyo, Osaka, Nagoya and Yokohama. The OECD states that Tokyo has a population of 35.9 million people and a GDP of $1.475 trillion ($41,000 GDP per Capita), Osaka has a population of 17.3 million people and a GDP of $597 billion ($34,508 GDP per Capita), and Nagoya has a population of 6.5 million people and a GDP of $255.7 billion ($39,300 GDP per Capita). Other sources suggest that the Nagoya metro area consists of 9.1 million people and has an average GDP per Capita PPP of $40,000. The OECD doesn’t measure the population or GDP of Yokohoma, but others rank its population at about 3.7 million with a GDP per capita of roughly $30,000. Realistically, Tokyo and Osaka should be considered large markets, Nagoya should be considered a strong mid-sized market and Yokohama would be a strong small-market.
Japan has a strong broadcast market that was projected to earn $12 billion in revenue. The NPB draws over 20 million fans to its games, proving that there is high demand for baseball. In 2014, Japan’s government suggested that baseball expansion could help it get out of its recession. If so, it’s possible that Japan would be willing to pay for necessary items such as stadiums. In short, Japan is a rich country and could potentially make current MLB owners a huge amount of money. It's worth devoting time and making sacrifices to potentially expand to this market.
There are a number of challenges that this expansion would face. By far, the largest challenge would be the distance between Japan and the US. In addition, MLB would need to come to an agreement with Japan’s baseball league, the NPB. But NPB franchises have historically struggled and it should be plausible to come to a mutually beneficial arrangement.
Solving the distance challenge would be difficult, but not impossible. A 152 game season compared to a 162 game season might cost MLB as much as $500 million in revenue per year, but I’d expect the actual losses to be half of that number. Meanwhile, a successful entry into the Japanese market would be worth billions of dollars of revenue per year not to mention that the extra rest could potentially improve player health. MLB would have to be willing to significantly restructure the schedule and cut between 6-10 games out of the season in order to make this plan work. Still, better schedule optimizing techniques and different scheduling structures will offset MLB travel mileage.
In fact, I developed a proof of concept schedule for a potential expanded league in which every team traveled far less than 50,000 miles. If I spent the time to use better optimization techniques, I’m reasonably confident I could ensure that all teams travel fewer than 45,000 miles. To put that in context, the Mariners are expected to travel 46,000 miles in 2016 and the Angels are expected to travel nearly 45,000. In the second installment, I’ll discuss how a potential division realignment could look, how the schedule would be required to change, and what a possible schedule might look like if MLB did expand to Japan. Based on my initial results, I’m convinced that expansion into Japan could work if MLB decides to do so.
But there are significant challenges to expanding the league. Large-market clubs are upset about the amount of money that goes towards revenue sharing. Adding two small-market clubs would force large-market teams to devote a higher percentage of their budget towards revenue sharing while reducing revenue they receive from league merchandise, the national TV deal and MLBAM. If MLB is going to expand, they’ll need to choose markets that can support teams without requiring significant revenue sharing.
MLB hasn’t had such good luck with expansion recently. In 1998, MLB expanded to include Tampa Bay and Arizona. Tampa Bay has financially been a complete failure since its creation. In their inaugural year, they were able to attract over 30,000 fans per game. Since then, despite having a successful period from 2008-2013, they’ve attracted no more than roughly 23k fans a year and have ranked last or second last in attendance in the American League for 13 of the 18 years they’ve been in existence. Their TV deal is considered to be poor and isn’t eligible for renewal until after 2018. They typically have one of the lowest payrolls in the league and are able to stay above water solely due to revenue sharing and other league shared revenues.
Arizona has been more successful than Tampa Bay. They ranked in the top half of the National League in attendance from 1998 to 2004, while winning the division three times during that period including a World Series victory. However, since 2004, the Diamondbacks attendance has been ranked between 11th and 14th in the National League. As part of their deal to get a stadium, the Diamondbacks agreed to have low ticket prices so they receive minimal revenue from attendance. As a result, the Diamondbacks have struggled to spend enough money to field a competitive roster and have only once spent more than the $102M that they spent in 2002 on payroll. Jayson Stark wrote that he was told that the Diamondbacks received almost $80M from revenue-sharing in the past three years. Their new TV deal will help, but it pays less than large-market TV deals (my article). This may be better than Tampa Bay, but it isn’t a very good result.
In 1993, the MLB expanded to add the Marlins and Rockies. Jon Heyman reported that the Marlins’ revenues are lower than the Rays and Athletics and that the Marlins received $50 million in revenue sharing this past year. Despite this, the Marlins are still not making a profit. The Rockies have been more successful. They had a stretch from 1993-1999 where they led the NL in attendance. They’ve leveled off since then, but are ranked about at the midpoint in attendance. However, the Rockies still receive revenue sharing funds each year and aren’t known for having high payrolls. All four of these teams are annually eligible for the competitive balance lottery, which is eligible only to clubs in one of the ten smallest markets or has one of the ten smallest revenue pools. It’s safe to say that these four clubs are some of the weakest in baseball.
The American City Business Journals recently did a study to determine whether any market in North America had the economic capacity to support an MLB franchise. They didn’t find a single market strong enough to support an MLB team. Even worse, they felt that Montreal was the best candidate in North America for a new MLB team, but that it only had a limited chance of success. Montreal already failed to support one team and it’s questionable that they’d do better with a second chance. If Montreal could support another team, there are plenty of franchises that could benefit from relocation.
The arguable failure of previous expansion attempts combined with the lack of any remaining large markets available illustrates why further expansion in the United States will be a significant challenge. Therefore, it should come as no surprise that Commissioner Manfred has stated that he feels that the best available markets in North America aren’t United States markets but rather Canadian or Mexican. Canada only has two possible remaining markets for an MLB team, Montreal and Vancouver. Metro Vancouver has fewer than 3 million residents and would be a small market at best while Montreal has been discussed above. Mexico, on the other hand, is interesting.
Mexico has three metropolitan areas that could potentially support an MLB team; Mexico City, Guadalajara and Monterrey. According to the OECD in 2014, Greater Mexico City had an estimated population of 20.4 million people and a GDP of $421 billion ($21,000 GDP per capita). Metro Guadalajara had a population of 4.9 million people and a GDP of $70.87 billion (14,463 GDP per capita). Metro Monterrey had a population of 4.8 million people and a GDP of $117 billion ($24,400 GDP per capita). In contrast, Baltimore has 2 million people and a GDP of $114 billion ($57,000 GDP per capita). In my opinion, Mexico City and Monterrey are the two best Mexican candidates for an MLB team.
A team in these locations will still have significant challenges. These cities have a low GDP per capita and therefore teams will need to be able to attract the upper class. Oscar Suarez, an MLB player agent born in Cuba that represents multiple Mexican players, stated that Mexico is a big country and parts are heavy into baseball, but that he isn’t sure whether the general population can afford sustaining a big-league team. The Boston Globe reported that other challenges include high altitude, the lack of new stadiums and safety issues. In addition, Mexico City is 650 miles away from Houston, 930 miles away from Dallas and over 2,000 miles away from New York. Not only this, but politics will be a potential concern as there has been significant tension between Mexico and presidential candidate Donald Trump.
But Manfred does have a significant interest in having a team in Mexico. Manfred has stated that a team in Mexico could help grow the Hispanic market in the United States. As of mid-2014, Mexico had an estimated 15.4 million cable and satellite subscribers and Mexico has a robust $1.5 billion ad market. If a cable station broadcasting Mexican MLB games could charge a subscriber fee of $1.50 per month, then it could earn over $300 million in revenue. If so, one would expect these teams to earn slightly less than $100 million in rights fees starting in 2016 with significant room for growth as Mexico’s broadcast market grows and their populace becomes more prosperous, which would go a long way towards ensuring MLBs financial viability in Mexico. Best of all, unlike a team in Canada or the United States, a team in Mexico wouldn’t cannibalize another teams’ existing market. For all of the potential challenges, Mexico has a significant chance of helping the league financially rather than being a burden.
The smart bet would be to expect MLB to ultimately expand into Mexico City and Monterrey while potentially relocating a team to Montreal. Despite all of the challenges, there’s significant growth potential in Mexico and there’s a plausible path for franchises in those cities to be net assets for MLB that don’t require revenue from other markets. Even if things don’t work out, it’s still good PR. But if I was a consultant for MLB, I’d recommend looking at a different solution. I’d look into adding MLB teams in Japan.
I’d add two new teams in Japan, while also relocating the Oakland Athletics and Tampa Bay Rays to Japan, resulting in MLB having four teams in Japan with MLB having a total of thirty-two teams. These four teams would be placed in Tokyo, Osaka, Nagoya and Yokohama. The OECD states that Tokyo has a population of 35.9 million people and a GDP of $1.475 trillion ($41,000 GDP per Capita), Osaka has a population of 17.3 million people and a GDP of $597 billion ($34,508 GDP per Capita), and Nagoya has a population of 6.5 million people and a GDP of $255.7 billion ($39,300 GDP per Capita). Other sources suggest that the Nagoya metro area consists of 9.1 million people and has an average GDP per Capita PPP of $40,000. The OECD doesn’t measure the population or GDP of Yokohoma, but others rank its population at about 3.7 million with a GDP per capita of roughly $30,000. Realistically, Tokyo and Osaka should be considered large markets, Nagoya should be considered a strong mid-sized market and Yokohama would be a strong small-market.
Japan has a strong broadcast market that was projected to earn $12 billion in revenue. The NPB draws over 20 million fans to its games, proving that there is high demand for baseball. In 2014, Japan’s government suggested that baseball expansion could help it get out of its recession. If so, it’s possible that Japan would be willing to pay for necessary items such as stadiums. In short, Japan is a rich country and could potentially make current MLB owners a huge amount of money. It's worth devoting time and making sacrifices to potentially expand to this market.
There are a number of challenges that this expansion would face. By far, the largest challenge would be the distance between Japan and the US. In addition, MLB would need to come to an agreement with Japan’s baseball league, the NPB. But NPB franchises have historically struggled and it should be plausible to come to a mutually beneficial arrangement.
Solving the distance challenge would be difficult, but not impossible. A 152 game season compared to a 162 game season might cost MLB as much as $500 million in revenue per year, but I’d expect the actual losses to be half of that number. Meanwhile, a successful entry into the Japanese market would be worth billions of dollars of revenue per year not to mention that the extra rest could potentially improve player health. MLB would have to be willing to significantly restructure the schedule and cut between 6-10 games out of the season in order to make this plan work. Still, better schedule optimizing techniques and different scheduling structures will offset MLB travel mileage.
In fact, I developed a proof of concept schedule for a potential expanded league in which every team traveled far less than 50,000 miles. If I spent the time to use better optimization techniques, I’m reasonably confident I could ensure that all teams travel fewer than 45,000 miles. To put that in context, the Mariners are expected to travel 46,000 miles in 2016 and the Angels are expected to travel nearly 45,000. In the second installment, I’ll discuss how a potential division realignment could look, how the schedule would be required to change, and what a possible schedule might look like if MLB did expand to Japan. Based on my initial results, I’m convinced that expansion into Japan could work if MLB decides to do so.
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