Gambling for October: How Expanding the Playoffs Could Aid Parity

Since Commissioner Selig suggested the possibility of expanding the playoffs to ten teams, the reaction from serious baseball bloggers and journalists has been swift and decidedly negative.

This is unsurprising, considering the Commissioner's inane justification that ten teams is "more fair than eight." Ignoring both the arbitrary difference between eight and ten, and the unfairness inherent in substituting additional randomness for talent in determining the champion, there may be some truth to Mr. Selig's claim.

Baseball lags the other three major American sports in two important metrics of parity: payroll disparity and year-to-year team mobility. There are several reasons for this, including 1) the "soft" nature of the MLB salary cap, 2) the absence of a salary floor, 3) the revenue sharing structure, 4) the relative length of the season, and so on. But one factor that often gets overlooked is the relative difficulty of reaching the playoffs.

Why does this matter in terms of parity? Because making a run at the postseason is a gamble. And like all gambles, the worthiness of the bet depends on the value of the payoff, the generic probability of winning, and the resources available to the bettor. As you can see by the table below, the generic probability of reaching the playoffs, i.e. winning, is lower in the MLB than in the other major sports. Holding payoff and resources constant, investing in a chance to reach the postseason is a relatively unworthy bet in baseball.

The uneven distribution of resources across teams further complicates the issue. The revenue sharing structure in the NFL keeps the distribution of wealth relatively even, whereas the lack of shared capital results in a fundamental wealth disparity among MLB squads. In other words, there's a class of teams in baseball for whom investing in a mere shot at making it to October is a serious outlay.

Proportion of Teams Reaching Postseason
League MLB NFL NBA NHL
Percentage 26.7% 37.5% 53.3% 53.3%

 

To summarize, in baseball it's doubly difficult to reach the playoffs for a certain subset of teams due to their relative lack of resources and the paucity of playoff spots. Considering this, it's no surprise that the teams that generated the least revenue since the initiation of the reigning collective bargaining agreement also turned in some of the biggest profits.* There's simply not that much of an incentive for perennial basement dwellers to invest in their on-field product with the goal of making postseason play a reality.

*From 2002-2008 the list of the bottom 15 revenue generators also includes nine of the most profitable teams by margin. For those scoring at home, that list includes Tampa Bay, Washington/Montreal, Cincinnati, Florida, Milwaukee, Pittsburgh, Oakland, San Diego and Colorado. Source: http://www.forbes.com/lists.

Certainly some of those low-revenue teams have enjoyed some success in the postseason, but that's hardly the point. The fact is that there's little incentive for low revenue teams to make a run at the postseason when the chances are relatively distant and the cost is comparatively high. As a result, we do enjoy some rags-to-riches stories in baseball every few years, but not nearly as often as in the NBA and NHL, and certainly not the NFL. And that's what we're talking about when we're talking about competitive balance/parity/whatever you want to call it, right? It's the degree to which it's possible for several teams to remain in contention every year and the degree to which others are consistently ruled out.

One way we can attempt to rectify this issue in baseball—without engineering a massive overhaul of the revenue sharing and luxury tax systems that would require the consent of a supermajority of the owners and the MLBPA—is simply to sweeten the pot. Add a couple extra playoff spots, offer a few more teams a chance at going deep into October in the crap-shoot that is playoff baseball, and we'll see more teams putting their chips on the table.

Look, I'm not saying that adding more playoff teams is a good idea on balance. I have read many a cogent argument in opposition, and I agree to some extent with most of them. What I'm saying is that this is a dimension we need to consider regarding the postseason expansion cost-benefit analysis. It's also an aspect we have to pay more attention to when pondering the differences in payroll distribution, team mobility, and other aspects of competitive balance among the four major leagues.

Whether we're talking postseason expansion, realignment or retooling the revenue distribution system, the lack of upward mobility in the game makes it clear: Selig and the MLBPA need to make the gamble for October a more attractive bet.

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