August 9th, 2012
There are several important findings I can add to my previous post on the financial payoff from reaching the postseason, as well as the overall impact of winning on revenues. There are clear exceptions to this largely valid model, with the Tampa Bay Rays at the top of the list of exceptions. The absence of a suitable ballpark facility in an acceptable location have aborted this virtuous cycle of playoffs, followed by a jump in revenues. Despite leaping from a 66-win team in 2007, to averaging 92 wins for the next four seasons, including a World Series appearance as a 97-win team in 2008, the Rays have shown little gains in revenue—far below what any MLB-wide models or analysis would expect. Interpret this to mean there needs to be a baseline of underlying factors that make for a healthy franchise. Despite one of the best leadership teams in all of MLB, the payoff from winning in Tampa is nowhere to be found. This is not conclusive evidence that the Tampa/St. Petersburg market cannot sustain a big league club, but a confirmation that the Rays’ stadium situation is untenable. The stadium is poorly situated in a part of the metropolitan area away from the population center. The perfect storm of a devastating economic climate, lengthy drive times to the ballpark, and a generally unappealing facility, all served to inhibit attendance and revenue growth following a highly successful four-year run, including three trips to the postseason.
A more general pattern I’ve discovered and quantified is the distinct time lag in how fans respond to a winning team during the season, particularly if the success was not anticipated. If a team with modest fan expectations gets off to a hot start, attendance may take months to respond. For the fan, the time lag allows for validation. A 15-5 start in April is a good sign, but a 45-30 record in June means a lot more to a skeptical fan. Even when a fan makes an affirmative decision to come out to the ballpark, there is another time lag to fit the event into his/her busy schedule. So, a strong April and May, on average, might trigger a June decision, which may materialize into a July or August visit to the ballpark. While teams constantly ask fans to be patient as they build toward competitiveness, the reverse is also true. Teams need to be patient in their expectations of fans response to winning. (Incidentally, broadcast ratings for game telecasts seem to rise more quickly, with little lag, as TV viewing presents fewer obstacles than planning a trip to the ballpark.) The most interesting aspect of this phenomenon is a team’s inability to monetize a strong second half performance, should it fail to land in the playoffs. A strong July, August, and September is commingled with the events of the following offseason to shape fans perceptions and expectations of the club’s outlook, while a strong April through June, converts enthusiasm more directly into July, August, and September revenues.
The addition of the second wild card will alter the probability of reaching the postseason at various win totals. The sweet spot on the win-curve—the 86-91 win range in the NL and the 89-94 win levels in the AL—carry an even higher probability of reaching the postseason, in the new playoff system. It represents the most likely range of wins for the new (2nd) wild card qualifier. However, we still need to see how the wild cards are treated by fans under the new structure. While I love the new playoff format, because it truly provides advantages for division winners and handicaps wild card entrants (see my earlier post), it may change the financial payoff from reaching the postseason. How will fans and the media treat the new wild cards? Is the one-and-done play-in game viewed as a “trip to the postseason”, or more like a 163rd tie-breaker game to get into the “new” postseason? In the old playoff format, it seemed that fans and the media treated the eight teams as near equals. In the new format, I could envision four strata of playoff teams—wild card losers (losers of the play-in game), wild card winners, #1 seeds and the remaining division winners—with each strata carrying different levels of fan expectations about their ultimate postseason success.
From my perspective, there is an enormous gap between winning a division and earning a wild card, in the new system. For the last seventeen years we have used the term “wild card” in baseball to mean something very different than what it now means. In the new system, it’s the right to flip a coin after 162 games to see if you advance into the final eight—the old playoff format. A team that wins the coin flip earns the right to enter the tournament, but their ace starter will move to the back of the rotation, because he just pitched in the play-in game. Even though on paper the wild cards are a big disadvantage, it may take several years of poor showings by wild card entrants to alter the mindset of fans and dampen their enthusiasm. Maybe this is one instance when a small sample size works to the advantage of a team, as fans remain stuck in the old mindset and continue to reward clubs for earning a wild card. For Part 3 on this topic, my next post will discuss a “Revenue Opportunity Index” I’ve developed, comprised of various factors, to estimate which teams have the most to gain (financially) by improving their performance on the field.