April 23, 2014

Study Says Cleveland is Extremely Overextended Market for Three Sports Teams

Earlier this month, an article was published on The Business Journals’ blog “On Numbers”  that stated that Denver is the most overextended market for professional sports in the United States. Of particular interest to fans of Cleveland sports, though, is perhaps the fact that #2 on the list in none other than Cleveland.

According to the article’s author, G Scott Thomas, Cleveland has a deficit of $71.445 billion in terms of personal income to total break even point for one team each in the NFL, the NBA, and MLB. When I first saw this article, I can’t say I was completely shocked. I’ve been pondering for the past couple years whether the rapidly declining population of Cleveland is eventually going to make it unsuitable to have 3 sports teams. 

Heck, already the Indians play to criminally tiny crowds and we’ve yet to really see the impact of losing LeBron to the Cavs (thanks to last year’s season ticket renewals being due before “The Decision”). So maybe that time is here already, I thought. But I wanted to look a little deeper at what these numbers mean. So let’s read what Thomas says about this study first:

On Numbers analyzed 85 metropolitan areas in the United States and Canada to determine if they have the financial ability to support professional teams in baseball, football, basketball, hockey and soccer.

The Denver area would need total personal income (TPI) of $209.3 billion to provide an adequate base for its five existing teams, according to the study. (TPI is the sum of all money earned by all residents in a given year.) But Denver’s actual TPI is $121.9 billion, yielding an income deficit of $87.4 billion.

This shortfall doesn’t necessarily mean that any of Denver’s teams will move or fold. But it’s a reliable sign that those teams can expect continued volatility in attendance and revenues.

Nineteen other markets are overextended, based on estimates by On Numbers. Among them are five areas with TPI deficits larger than $50 billion: Cleveland, Pittsburgh, Tampa-St. Petersburg, Kansas City and Milwaukee.

The first question this raises is whether taking Total Personal Income is really a proper way to gauge sustainability in sports. But before we even get that far, let’s first take a closer look at these numbers themselves.

According to the study’s data methodology report, they used multiple factors including team revenues and average ticket prices to figure out each sport’s break even point. They found that the break even point for a MLB franchise is $85.4 billion per season, for an NFL team is $36.7 billion per season, and for an NBA franchise is $34.2 billion. Adding those three numbers to represent the Indians, Browns, and Cavaliers and you get the $156.3 billion that Cleveland needs to break even.

From there you merely subtract that number from each market’s TPI to find the surplus or deficit that every market has. So in this case, according to the US Bureau of Economic Analysis the Cleveland-Elyria-Mentor MSA had a 2010 TPI of $84.854 billion. Subtracting Cleveland’s 3 sports teams from that leaves us with the reported $71.445 billion deficit cited in the article.

There are several problems I have with this methodology, however. First of all, the Cleveland metropolitan area is bigger than just the Cleveland-Elyria-Mentor MSA. In my opinion, if you’re going to use MSAs rather than just each city’s incorporated population, then you need to include both the Akron MSA ($26.667 billion TPI) and the Canton-Massillon MSA ($13.514 billion TPI) with the Cleveland MSA.

Adding the three MSA’s together, you get a TPI for the entire Cleveland metro area of $125.035 billion. This then leaves Cleveland with “just” a $31.265 billion deficit. While still overextended (according to this theory), this would place Cleveland in a slightly more comfortable position of 11th on the list, in between Cincinnati ($37.524 billion deficit) and Buffalo ($30.874 billion deficit).

However, the bigger problem I have with this article is the very principle itself, that Total Personal Income is a suitable sole measure of a market’s ability to support its sports franchises. First of all, there seems to be no accountability for regional differences in cost of living. While cost of living might be reflected in the TPI figures, it is ignored by the irrational decision to use the same break even numbers for every sport and for every market.

For example, there is absolutely no way it costs the same amount of money for the Indians to break even in Cleveland as it does for the Yankees to break even in New York. This is going to be the same for every sport, meaning that Cleveland’s relatively low cost of living is likely to reduce the overall deficit.

There are plenty of other factors that this study fails to take into consideration. Corporate partnerships is one, but another major factor is each team’s stadium situation. Some sports franchises are handcuffed by bad stadium deals and/or unfavorable lease agreements with the cities or ownership groups.

Cleveland is fortunate from this standpoint, too, in that the oldest stadium in actually Jacob’s Field, which opened in April 1994 (The Q shortly followed that October). And though none of the stadiums are owned by the teams themselves, we’ve also not heard any outward complaints from the teams that their lease agreements are unfavorable.

Ultimately, I still believe Cleveland may some day be in trouble with having three sports teams if the city and state leadership is unable to turn around some of the economic problems with NE Ohio. I worry what a lockout will do to the strong local support the Cavaliers have built in recent years. I worry about whether MLB’s ridiculous economic system will some day make a team in Cleveland no longer work at all.

But I don’t believe that Cleveland is overextended to the tune of a $71 billion deficit as this market reports. We know the Indians are tight on revenues due to declining attendance and other factors. We know the Cavaliers were not extremely profitable even when LeBron James was here, due in part to high payroll. But I don’t get the sense that Cleveland is under any imminent danger of losing one of its teams. Certainly not on the basis of just measuring personal income of the immediate Cleveland MSA.

  • B-bo

    Can’t believe that Akron and Canton are excluded from the calculations. That is just one weakness in the methodology, which Andrew did a fine job of critiquing here. It’s clear though that places like Cleveland, Tampa-St. Pete, KC, Milwaukee, and the burgh do have some trouble, but I’m not sure this study is the best way to explore it.

    That said, if it ever did reach that point, and I truly hope it does not, I would vote the Cavs off the island. Love them, but pro basketball is by far my least favorite of the major pro sports.

  • stin4u

    Give me my Browns. Give me my Indians. Everything else can go.

  • Emjay

    Good observations. It’s also worth noting that the loyalty and passion of a fan base would seem to make a difference. I don’t think it’s a stretch to suppose that fans in Cleveland and Pittsburgh are willing to spend a higher percentage of their disposable income on the teams they love than folks in some other cities might be. (Miami, I’m looking in your direction.) Whether the difference is substantial enough to make a meaningful impact on the numbers, I have no idea.

  • mgbode

    first off. I agree that Akron/Canton and even Youngstown need to be included. however, I don’t think they should be ‘fully’ included.

    the farther out from the city, the less a % should be included. so, perhaps 50% of Canton/Akron’s and 20% of Youngstowns. it could be argued that 5-10% of Columbus and Toledo then needs to be included as well.

    ————-

    also, completely agree on COL index needs to be used somehow. it artificially inflates certain regions when their actual disposable income might be more on par.

    ————-

    finally, despite all it’s flaws (add in the individual TV deals), I think it still does hit a bunch of cities that have or will have issues (just in a terribly inaccurate way).

    *KC built an arena but cannot attract a NBA team.
    *Cinci could barely sell out PBS when the Bengals were competing for division championships.
    *Buffalo has to play games in Toronto to help bring in income.
    *Cleveland obviously has had attendance issues with the Indians.
    *Tampa has one of the best teams to watch in MLB, but are 28th in attendance.

    We have seen an unprecedented time lately with the relative lack of franchise moves and contractions when looking at sporting history. I am expecting that the current recession coupled with a significant population shift in the last 15 years to at some point come to a crest and cause more changes to our sporting world.

    When this happens, hopefully, Cleveland is strong enough to hold onto it’s teams.

  • Brendon

    Whatever they do, just keep the Browns in town for the love of God!

  • mgbode

    @3 – backing you up with a little info.

    http://espn.go.com/mlb/attendance

    that shows the current MLB attendance (cmon Tribe fans, we can still catch Toronto).

    of note, there are teams near the bottom that you would definitely expect to be much higher based on their city populations and the fact their teams are good this year:

    1. Arizona – I lived there for almost 5 years. Most people have no connection to their teams and that especially goes for the Diamondbacks (who play downtown which most people try to avoid).

    2. Toronto – no. they haven’t been in contention because of their division. but, they do have a really good offense that is fun to watch. you’d think more people would show up in ‘white’ with binoculars to help the home team out.

    other high population teams near the bottom:

    1. DC – they will likely soar once they get their burgeoning farm system developed. but, they have no long-term fixture with the area and that has hurt them thus far.

    2. Chicago White Sox – they should just contract that team. no real reason other than I hate the White Sox :)

  • Swig

    Figures people would get rid of a team that has an owner willing to spend in a sport where that can keep you competitive despite being in a small market, and keep a team with an under rolled owner in a sport with a completely messed up financial situation.

    Plus, I have better things to do in the summer than watch baseball every night. I do not have better things to do in the winter than watch basketball every other night.

    Finally, baseball is the highest cost sport, EZ decision.

  • ClemJax

    This might get long-winded, but this is a topic I’ve noodled over occaisionally…

    “Immanent” is relative in this discussion, no? I mean, none of the teams are leaving in the next 2-3 years. But towards the end of this decade? Barring an incredible economic turnaround that the region doesn’t seem to have the political wherewithal to help happen, I’d say it’s incredibly likely at least one team is history. There’s a lot of dominoes that need to fall before that happens – the biggest things helping our teams are 1) long histories that have help build generational fanbases and 2) the overexpansion or incorrect expansion of all leagues.

    Here in Jacksonville I have to remind people of #1 all the time – everyone keeps whining “why can’t the Jags sell tickets when all these terrible northern teams (insert: Browns, Lions, Bengals, Bills) regularly sell out?” A not-insignificant reason is that these are generational fan bases – bases that were created in a completely different era, but the love of the team was passed along. It’s kind of unfair to compare a team like the Jags that have existed for 15 years with a team that’s been around since the 1940s. And that generational support keeps going even after people leave the city – my son really has no choice, he’s going to be a Browns fan, part of the Tribe, and if I acknowledge the NBA still exists, a Cavs fan. So the long term established fan bases is going to help protect Cleveland’s teams even if the local economy keeps dropping.

    And that “protection” is further helped by #2 – all of the leagues have either overexpanded (see NBA, possibly MLB) or expanded into the wrong areas (NHL obviously, NFL possibly). So, with the NBA for example, there’s a round of contraction that probably needs to happen before anyone even thinks “hey, what’s going to happen with the Cavs?” In the NFL, LA is angling for a team, and there’s a handful of teams that are always mentioned as relocation candidates, and Cleveland is never in the discussion. In baseball, there are so many other markets that are not remotely supporting their teams that the Tribe isn’t going anywhere for a while (basically, I refuse to even consider the Indians leaving as long as the Rays still exist in Tampa).

    But 10 years from now with no regional economic recovery? If you figure in that timeframe the leagues get their existing issues ironed out, barring a completely change of the economics of the sports, it’s entirely possible the region just simply cannot support 3 teams. And it’s not even Total Income, just look at current market sizes. A market like professional sports is really good about adjusting itself to reflect realities, and if you look at that list, the size of the market pretty well reflects how many teams a city can support. Sure there’s some outliers (smallest city with a pro team is Green Bay, but that’s easily explained. Smallest with more than 1 is essentially a tie between Buffalo and New Orleans – again, both easily explained – Buffalo is rabid hockey and NO’s market is still recovering post-Katrina). So based on that list, right now the magic number for more that 1 team is 900k-1m (Milwaukee, Cincy, KC). After that you’ve got the 1.25-1.5m as the magic number for more than 2 teams, and so on.

    Right now, based on comparative markets, Cleveland is right where it should be (interestingly though, #1 on the list Denver is just slightly larger than Cleveland, probably DOES have too many teams for it’s market). If Cleveland’s market falls, say, below the size of Pittsburgh, can the market bear 3 teams? What if the market drops below the 1m mark (I know that’s extreme, it would require a 33% drop in population)? Or maybe not necessarily total population, but how about ranking on that chart…if the market size went from 18 to 25-30 relative to other markets, would the Cleveland market still handle 3 teams?

    This is all back of the napkin stuff I’m throwing out there, but at the end of the day, the existence of our favorite teams is directly pegged to the economic viability of the region. Without some sort of long-term turnaround (call it 10-20 years), we’re probably debating whether or not we should still cheer for the Las Vegas Cavaliers or the Portland Indians.

  • Mike

    Completely flawed study. Look at Columbus, where the two pro teams (Blue Jackets and Crew) are dwarfed by the popularity of OSU football and basketball. The study doesn’t take into account that much more of that city’s TPI is going toward college sports than pro. The fact that there is no local college to challenge the Cleveland sports teams should also be taken into account (yes OSU, but on a smaller level that Columbus).

  • http://www.waitingfornextyear.com DP

    @Mike – I was going to say the same thing. Plus, there are plenty of people in Columbus–such as myself–that still spend money on the Browns and Tribe.

  • Ethan

    Hope it never has to come that. But if I had to choose, bye-bye Cavs. Then Dan Gilbert buys the Indians?

  • MrCleaveland

    “Heck, already the Indians play to criminally tiny crowds . . .”

    The 1960s, 70s, 80s, and half the 90s would beg to differ.

  • Scott

    As a Columbus resident i think Cleveland teams need to put some effort into attracting fans from Columbus. Right now i would say Cinci has the most fans in Columbus followed by Cleveland and Pittsburgh. I cant think of any marketing down here at the moment accept for 105.7 during browns games. I hate that i see more cars here sporting steelers stuff then browns.

  • 216in614

    @2 Agreed

    Don’t tale away my Browns or Indians. Id prefer all three but if one has to go, basketball (especially the culture surrounding it, leaves the most to be desired.)

  • 216in614

    Scott,

    Did you realize that the Clippers have the best attendance out of all of the 3A teams? The Indians did a great job as an organization getting the clippers here. They are aware of the market.

    I think the reason for all the Reds fans is that Cincy is 1 hour closer.

  • christopher

    finally an article that justifies doing away with the Browns. ;)

  • paul

    I agree that’s a questionable methodology. heck, I’m in Durham, NC and still have Browns season tickets.

  • ABestgen

    So, I guess this means we aren’t getting an NHL franchise?

  • bobby

    “I can’t say I was completely shocked. I’ve been pondering for the past couple years whether the rapidly declining population of Cleveland is eventually going to make it unsuitable to have 3 sports teams. ”

    Be cognizant that while the city of Cleveland has lost population our region has remained fairly static.

    In addition to that the City of Cleveland is laughably tiny in area when compared to most other cities.

    Buffalo is 42 sq Miles.
    Pittsburgh is 55
    Cleveland is 77.6
    Detroit is 139
    Denver is 154.9
    Columbus is 212
    Chicago is 234
    Houston is 579
    Jacksonville is 885 square miles.

    The following info is based on 2000 census data but is close enough for our purposes…remember most people moving out of Cleveland move to Fariview, Lyndhurst, or Solon.

    Cuyahoga county contains 1,393,978 people.

    Within 25 miles of the 44113 (downtown) zip code there are 1,989,434 people

    County Total Pop
    Cuyahoga OH 1,393,978
    Geauga OH 50,285
    Lake OH 140,596
    Lorain OH 197,318
    Medina OH 68,301
    Portage OH 21,397
    Summit OH 117,559
    radius 1,989,434

    Within 50 miles there are 3,397,543 people

    Ashland OH 11,043
    Ashtabula OH 31,563
    Erie OH 33,842
    Geauga OH 40,610
    Huron OH 22,522
    Lake OH 86,915
    Lorain OH 87,346
    Mahoning OH 5,813
    Medina OH 82,794
    Portage OH 130,664
    Stark OH 277,880
    Summit OH 425,340
    Trumbull OH 86,750
    Wayne OH 85,027
    radius 1,408,109

    within 100 miles there are 5,382,940 people… This list is too long but it does NOT include Columbus.

    http://mcdc2.missouri.edu/cgi-bin/broker?_PROGRAM=websas.caps.sas&_SERVICE=appdev&latitude=44113&longitude=&sitename=&radii=25%2C50%2C100&state=39&units=+&tablelist=1&cntypops=on&_debug=

  • bobby

    Put another way.

    If Cuyahoga count was a country it would be about the size of
    152 Estonia 1,340,122

    The 25 mile radius would be just behind Slovenia

    146 Slovenia 2,052,890

    The 50 mile radius is

    134 Uruguay 3,356,584

    The 100 is

    114 Finland 5,389,660

    draw a circle with (only in Ohio) with Cleveland as its center point and we have more people than the following countries

    116 Singapore 5,076,700
    118 Norway 4,964,700
    119 Ireland 4,581,269
    120 Costa Rica 4,563,538
    122 Georgia 4,436,400
    123 New Zealand 4,414,600
    124 Croatia 4,290,612

  • tylor

    For what it’s worth, I strongly disagree with the statement that there are more Cincinnati fans than Cleveland fans in C-Bus. Maybe it’s the crowd that I run with, but off the top of my head I can think of numerous Browns Bars but no Bengals bars…

  • http://www.heavymetalgamers.com matt

    if one had to go…see ya, cavs. even if we still had lebron.

  • Alex

    The Cavs aren’t going anywhere. Gilbert’s already invested way too much money into his “master plan” of having 20,000 people within walking distance of his casino 40+ nights a year.

    The Browns obviously aren’t going anywhere.

    So if I had to pick of the three, which one team HAD TO go, unfortunately it makes the most sense that it would be the Tribe, with their attendance issues and the financial imbalances in baseball.

  • http://www.waitingfornextyear.com Andrew

    @bobby: Cuyahoga County’s population change from 2000 to 2010 was -8.2%. The whole region is rapidly losing people. Yes, right now, a lot of people still live in NE Ohio. But to say that the population of Cuyahoga County is holding steady is just not true. Losing almost 10% of your people in just a decade is a very serious problem.

  • BuckeyeDawg

    Yes, seriously flawed numbers there. How can you not include Akron/Canton?

  • christopher

    @18…man, i was really hoping for an NHL AND MLS frachise next year!!! :(

  • Shamrock

    Bring back the Crunch!

    This caps it I’m taking my talents to South beach…

  • Bobby

    @Anderew “The whole region is rapidly losing people”

    Nope. They moved to Avon and Hudson and Medina and Willowkick and Hinkley and Brunswick and Richfield.

    The city of Cleveland is rapidly losing people.

    The county is slowly losing people

    25 mile radius
    Population for Jan. 1, 2007 estimated to be 1,952,016 persons.
    Population for Jan. 1, 2012 projected to be 1,921,123 persons.

    50 mile
    Population for Jan. 1, 2007 estimated to be 3,377,874 persons.
    Population for Jan. 1, 2012 projected to be 3,366,030 persons.

    100 mile
    Population for Jan. 1, 2007 estimated to be 5,360,860 persons.
    Population for Jan. 1, 2012 projected to be 5,366,364 persons.

    The region is static to slightly down

    I said the region is holding steady (relatively speaking) not the city or the county.

    here is the web site….Data is fun. OMG North Eastern Ohio is collapsing, not so much. I don’t even blame you, our politicians and Media especially our media suxors at informing people of what is really going on.

    http://mcdc.missouri.edu/websas/caps.html

    Soon the 2010 census data will be more readily available and we can have fun with the numbers.

    here is Denver

    25 mile
    Population for Jan. 1, 2007 estimated to be 2,451,078 persons.
    Population for Jan. 1, 2012 projected to be 2,610,860 persons.

    50 mile
    Population for Jan. 1, 2007 estimated to be 3,005,302 persons.
    Population for Jan. 1, 2012 projected to be 3,223,530 persons.

    100 mile
    Population for Jan. 1, 2007 estimated to be 4,048,498 persons.
    Population for Jan. 1, 2012 projected to be 4,334,720 persons.

    So our 25 mile is a bit under, 50 a bit higher, 100 is quite a bit higher.

    Hey don’t get me wrong losing population in any of the entities is not good, nor am I saying every thing is rosy, But the world ain’t ending either.

  • Bobby

    Another fun fact
    Lakewood has twice the population density as Cleveland

    10,208.5 per square mile, Cleveland is 5,113

    New york City 56,012.0
    Chicago 12,750.3

  • Shamrock

    Some of you have clearly to much free time!

  • http://serandez.blogspot.com Ezzie

    Some great points above and in the post.

    Furthermore, Browns Backers and people like me who live far away still support Cleveland teams despite us not living anywhere close. I am a Browns season ticket holder despite living in NYC, and I’m sure I’m not the only one.

    The major factors missed in the study:

    * Cost of living differences
    * Strength of fan interest
    * Cost of team upkeep
    * Lack of competing college sports
    * Lack of other competing entertainment costs – honestly, what else do Clevelanders do for fun on a typical evening or Sunday? I would say that going to a game is a more typical night out in Cleveland than in NYC.
    * Metro area designated is much smaller than actual metro area of support. Outside of NYC nobody is coming in normally to a Yankees and certainly not a Mets game… but people within 100 miles will come to a Browns game, and within 50 miles for an Indians game.

    All that said, even if it shouldn’t be able to support three teams, I think that Cleveland has been relatively interesting in that its teams are never really good at the same time, but each are able to pick up sellout-level support when they are competitive. The Indians sold out 5 straight years in the late 90s, and the Cavs basically did the same for a few this decade. The Browns typically basically sell out (even if people aren’t always going) no matter what’s happening.

  • Chucky Brown

    C ya Browns, Ive already lived with it once and i could just root for my fantasy team

    and after living in Cbus for more then a decade id have to say this town is definitively Browns/Reds

  • Gene Fackelman

    Just keep the Indians and Browns!!!!! I would love to see the Cavaliers go. I would rather have an NHL hockey team. I would rather watch the Lake Erie Monsters!

  • Ryan

    I’ve wondered about it before as well. But, I grew up a bit southeast of Canton. They should have counted the Akron/Canton MSA and probably prorated the Youngstown-Warren MSA as well You have to get to about the middle of Columbiana County, and Carrollton before you get a majority of Steeler fans, and to find more than a few odd Pirates fans, you pretty much have to cross into PA or get right along the river.

    As for Columbus, I’ve lived there twice, in the mid-late 90′s and again in 08-10. Every so often, there is a Dispatch article about the pro following. It was/is overwhelmingly Browns country. In the mid 90′s it was slightly more Reds, but the last time I saw it done, in the mid 2000′s, Indians fans were a safe majority. Even around campus, watching what students wear gives an idea, and the Browns and Indians have always outnumbered Cinci and Steelers, although the Steelers are a pretty sizable minority in all the polls (partly due to OSU drawing students from out of state metro areas, Chicago, DC and PIT, in that order of numbers). Of all the roommates I’ve ever had in Columbus, all natives of Columbus, not one of them, or their friends, none have ever been Cinci fans. Not even one. Someone I know doubted Columbus’ loyalties, but like I told them, if the Browns ever get good again, the town will be really orange and people will come out of the woodwork, really quick. During the 90′s and the Indians run, Indians gear was absolutely everywhere, not just on campus, either.

    I live in Chicago, and I still have Browns tickets, although it has been harder to go and justify the expense on games, and even harder to unload tickets. Used to be hard to sell one or two games late in the year, but it is getting harder in October and September, too. I’ve met a few others, and we’re all wondering the same, how much longer do we keep the tickets, especially not being local or in Ohio. After today, patience is getting REALLY, really thin.

  • robertinorlando

    Face it the price of tickets rise as the price to run a team does. I have no problem with some ball players receiving 10 mil a season. hey if they can get it good for them, but on the flipside the price of tickets increase to make payroll. The higher the tickets, less people can afford them. Basically the price of tickets has hit the ceiling, that’s why teams have cut prices to make them affordable. Players salaries and operational cost have not reduce, but fans salaries have shrunk and cost of living has increased. Look at Texas Stadium it cost millions to operate that facility. Some will say a larger market is the answer, well L.A had a football team (2 teams at one time) and fail to keep it when the economy was good.

  • http://www.facebook.com/people/Julien-Benney/215600393 Julien Benney

    Emjay and Andrew, two very good and important points which the study hardly considers.

    The cost of supporting teams in the cool and land-short Northeast and the lack fo devotion of fans in the religious and conservative Deep South are factors that in reality decimate the number of potential new markets for troubled teams.