Stop Talking About "Small Markets"

Moneybox
A blog about business and economics.
Dec. 5 2011 3:20 PM

There Are No Small Markets, There Are Only Small Payrolls

Something that's driving me crazy about discussions of the options available to NBA teams under the new Collective Bargaining Agreement are repeated references I'm seeing to the fate of "small-market" teams versus other squads that can afford higher payrolls. There's no doubt that different NBA teams carry different payrolls and have different revenue bases, but this has very little to do with market size. Indeed, if you look at the Hoops Hype salary data it's hard not to notice the fact that the highest-payroll team in the association, the Lakers at $91 million, play in the exact same place as the lowly Clippers with their $45 million in salary. Rounding out the top five are Orlando, San Antonio, Boston, and Portland which are the 19th, 36th, 7th, and 22nd largest television markets in America (PDF).

I would further add, however, that the underlying concept of the "market" served by a sports team is pretty undefined. I see Red Sox paraphenalia from New Haven to Bangor, ME which is one reason the Red Sox seem to have no problem carrying a giant payroll. But that's not just a piece of good luck the team stumbled into, it's a marketing success. By the same token, the Green Bay Packers have fans throughout the region they play in. Do the Washington Wizards have the eighth largest TV market in America with 2.36 million TV households, or should we also credit them with the 1.1 million TV households in Baltimore? Or how about the 560,000 TV households in Richmond? Without denying the obvious point that being located in a big population center is an advantage, it's still the case that how good an individual team is at getting people to be interested in it is in large part a measure of skill. The Nets aren't popular because they're not good at attracting fans, not because New Jersey is a "small" market.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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