Which Major North American Sports League Suffers Most From The “Big Market Effect”

By Andrew Puopolo

Major North American sports leagues suffer from a competitive imbalance, where teams from bigger cities like New York and Los Angeles have traditionally had more success than teams from small cities like Cincinnati and Milwaukee. This theory is grounded in the fact that teams from bigger cities receive more revenue from jersey sales and local television deals, and thus have more money to spend on improving the team. Teams from big markets like the New England Patriots, New York Yankees and the Los Angeles Lakers have all dominated their sports in recent years.

This got me wondering, which professional sports league suffers from this problem the most? And by extension, has this problem improved or worsened over time? To answer this question, I implemented the following methodology to try to answer this question as best as I could.

Step 1: Rank all teams in each league by the size of the media market that they play in. Rankings for media market size were taken from News Generation. Cities with multiple teams (New York, Los Angeles, Chicago) were not affected by this. For example, the Mets and Yankees both received the maximum score (29.5), while the smallest market team received a score of 1.

Step 2: Subtract each team’s rank from the average score for each team in the league. Therefore, all leagues are uniform distributions centered around 0. This is done to adjust for the fact that the NFL has 32 teams.

Step 3: Going back exactly 20 seasons for each league (offset for the NHL by a year due to the 2004/5 lockout), find the adjusted rankings for each of the final 8 teams still around in the playoffs for each season. 20 seasons was chosen because 1998 was around the point of the last wave of expansion for most of the major professional sports leagues, and therefore all results before then would favor big market teams (as some of the smaller market teams did not exist).

Step 4: Assign each team that made the last eight in each season a weight as follows:

– Champion: 6

– Losing Finalist: 4

– Losing Semifinalists: 2

– Losing Quarterfinalists: 1

We then find the sumproduct of these weights and the team’s market score to achieve the leagues score for a particular season. These weights were chosen so that the champion of the league would account for a third of the total score, whereas each of the other rounds would weigh in equally. This also means that the champion of the league has a strong weighting, but will not overly skew the distribution. Other weightings were tested, and similar results were found.

To make this a bit more clear, consider an example of the 2016 NBA season. In this season, the Cavs won the title in the 19th biggest market (but 20th biggest team), contributing a score of (11-15.5)*6 = -27. The Warriors were the runner up, contributing a score of (22-15.5)*4 = 26.
The rest of the points were score by as follows:
Oklahoma City Thunder: -12.5*2 = -25
Toronto Raptors: 9.5*2=19
Atlanta Hawks: 2.5*1
Miami Heat: -1.5*1
Portland Trailblazers: -7.5*1
San Antonio Spurs: -9.5*1
for a total season score of -23.

This would represent a season where teams from smaller markets performed better than teams from bigger markets.

If there is no big market effect, we would find that the total scores would be centered around 0 in the long run, as the average score for all teams is 0. We find that the higher the total score is, the bigger a problem there is with big markets.

The first question we wanted to tackle was which league has the biggest problem. We find the average score for each league for each of the past 20 seasons.

This tells us that the MLB has the biggest problem with big market teams dominating, whereas in the NFL there is (almost) a level playing field. It makes sense that the MLB would have the biggest issue with this, as there is no salary cap and teams are forced to pay the market price for players. This heavily benefits big market teams, as they have more money to spend on players.

On the flip side, it makes sense that the NFL has less of a problem with this. The NFL has a very strict salary cap and must fill a roster with 53 players. Compared to other sports, the NFL is very dependent on coaching quality, which makes it less dependent on big market players.

It also makes sense that basketball has a low score. Of all major professional leagues, the power balance in the NBA is most dependent on star players. Star players are often stuck with the team that drafted them for a considerable amount of time, which gives smaller market teams a much better chance of competing.

What is surprising, however, is the NHL having a relatively big problem with this. The NHL is considered to have the most parity of any league, yet has a much bigger problem with big market teams dominating than the NFL and NBA.

The second question we wanted to answer was has this problem improved or worsened over time. To answer this, we regressed the scores for each league for each of the 20 seasons to see if there was a change over time. We get the following results:

What this is telling us is that the NHL has had its problem with big market teams worsen over time, while the NBA and MLB have seen improvement. This makes sense, as the dominance of the New York Yankees and Los Angeles Lakers in the early 2000s is long over, and we are now seeing small market teams like the Kansas City Royals and the Cleveland Cavaliers win championships. Long gone are the days of the Yankees and Red Sox being able to outspend everyone and be the clear two best teams in the American League.

The NHL, on the other hand, has seen a worsening of the problem. The early 2000s saw many teams (like the Tampa Bay Lightning and Carolina Hurricanes) win championships, while the last 7 or so years have been dominated by big market teams like the Chicago Blackhawks, Los Angeles Kings and the Boston Bruins.

Given that the MLB and NBA are the most advanced in terms of sports analytics, perhaps that is a reason why smaller market teams being able to compete more in those two sports? Food for thought.

Please share in the comments if you have any alternative ways of measuring this. This methodology is relatively simplistic, so I would love to hear people’s thoughts on expanding upon this post, or also to figure out how to find a way to solve the problem that all teams in multi team cities (like the New Jersey Devils, Brooklyn Nets and Anaheim Ducks) are considered to be from huge markets.

Editors Note: If you have any questions or comments for Andrew, please feel free to reach out to him at andrewpuopolo@college.harvard.edu.

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