The New York Yankees — the pinstriped enemy of so many American League teams and the owner of a record 27 World Series titles — always appear to have a leg up on the competition. With the magic wave of a checkbook, they can seemingly sign free agents who many other teams do not even consider. Each year, they spend more than their rivals, and this season aside, the results are often apparent.
Baseball has a unique economic structure, one that favors teams in larger markets in a way that the NFL and NBA do not. It’s something that Orioles CEO and Chairman John Angelos often points to.
“The hardest thing to do in sports,” in a New York Times article last month, “is be a small-market team in baseball and be competitive, because everything is stacked against you — everything.”
It’s true that Baltimore is a small market — meaning there are fewer people in its metropolitan area than most other MLB cities. Based upon 2021 census estimates, Charm City ranks 20th of baseball’s 26 markets. (Four markets — New York, Los Angeles, Chicago and the San Francisco Bay Area have two teams.)
And it’s true that small-market teams face a disadvantage.
That disadvantage, however, is often exaggerated by owners, some sports economists say.
David Berri, a Southern Utah University economics professor, categorizes the edge that big-market teams have as “small.” In a textbook he wrote titled “Sports Economics,” Berri studied the relationship between MLB market size and wins from 1998 to 2016 and found that although there was a slight statistical link between the two, that relationship disappeared when the Yankees, an outlier, were removed from the data set.
Teams like the St. Louis Cardinals — who won the second-most games in that time frame but play in the 21st-largest market — and the New York Mets — who are in the largest market but don’t have a history of success — illustrate the weak connection between market size and wins, Berri argues. St. Louis has a smaller market size than Baltimore, for example, and yet the city regularly hosts playoff games.
“It’s completely a myth,” Berri said of the belief that small-market teams have a significant disadvantage.
Of course, big cities have perks. Teams like the Yankees, Mets, Los Angeles Dodgers, Los Angeles Angels, Chicago Cubs and Chicago White Sox have larger potential fan bases than the Orioles. And, what’s more, the Orioles lost a chunk of their media market when the Montreal Expos moved to Washington in 2005, much to the chagrin of Orioles owner Peter Angelos.
Teams in large markets often can be better equipped to spend money on payroll than small-market teams, like the Orioles, Tampa Bay Rays or Milwaukee Brewers.
But Berri’s research found that differences in payroll only explain 16% of the variation in a team’s winning percentage. So while it behooves a team to have a big payroll (which might be a byproduct of a big market), more likely predictors of success are the decision-making of executives, player performances and simple luck, he said.
“It’s certainly the case that the deck is a little bit stacked against the small-market teams,” said Dennis Coates, a University of Maryland, Baltimore County economist. “That doesn’t mean that it’s impossible. It just means that they have to be better at identifying players and they have to be more intentional about developing their farm system.”
This year’s Orioles team is a prime example of small-market success.
Baltimore’s market size (2.84 million people) is a fraction of cities like New York, Los Angeles, Chicago, Houston, Dallas and Philadelphia and, yet, the upstart Orioles — thanks in large part to the smart, intentional development of players — have better records than all of them.
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