January 28, 2003

Prospectus Feature

Expanding the Playoffs

by Jeff Bower

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Major League Baseball's recent decision to base home-field advantage in the World Series on the outcome of the All-Star Game runs contrary to the way Commissioner Bud Selig normally operates. Spurred by last year's All-Star debacle in Milwaukee, the entire process - from concept to approval - took only six months, and failed to employ even one sub-committee of analysts to explore the issue. More typical of Selig's decision-making process is his announcement of the newly-formed special task force for "The Commissioner's Initiative: Major League Baseball in the 21st Century."

One of the issues the new task force will supposedly investigate is whether or not to expand the playoffs. It's not a particularly new idea - Selig himself quietly broached the subject last October. Although the specifics haven't been laid out for public consumption, it is widely assumed that four teams would be added to the post-season mix, raising the number of participants from eight to 12.

If approved, the accelerated pace at which MLB is adding playoff teams will continue. For 66 seasons (1903 through 1968), both leagues were division-less and the pennant winners advanced directly to the World Series. In 1969, professional baseball celebrated its 100th birthday by adding four expansion franchises. Each league was split into two divisions, with the four divisional winners playing into October. A quarter century later - perhaps encouraged by his Brewers' participation in MLB's unplanned eight-team bash in 1981 - Selig further subdivided the leagues into three divisions and presented baseball fans with the Wild Card. Just nine seasons after expanding the playoffs to include eight teams, and less than a year after deferring industry contraction, he is now considering a 12-team post-season format.

Those who want to include more teams in the post-season share a widespread belief that fans stop turning out at the ballpark when their local heroes aren't involved in a playoff race. Many organizations favor the notion of letting more teams into the playoffs for that reason alone. However, is their perception accurate?

Studying the effects of a single action on attendance is challenging simply because so many factors can influence a team's attendance: marketing, position in the community, performance, the comings and goings of players, popularity of the sport, and new playing facilities, to name a few. Furthermore, using previous MLB attendance data doesn't seem appropriate in this case, since by expanding the playoffs to 12 teams, baseball would be entering new territory for the sport. Though a significant number of fans despise the Wild Card, since its inception Wild Card teams have a 94-68 regular season record on average. Were the playoffs to expand further though, some of the beneficiaries would be little more than .500 ball clubs. The attendance effects of such mediocre teams consistently reaching the post-season won't show up in baseball's existing historical record.

To try and analyze the issue, I decided to see what happened to attendance in the National Basketball Association when it expanded its playoffs by four teams (from 12 to 16) prior to the 1983-84 season. In addition to adding the same number of playoff teams as baseball might, NBA attendance figures from that time have the added benefit of not being tainted by work stoppages or brief surges caused by a wave of newly extorted arenas. As a result, those effects don't have to be accounted for in the analysis. Though consumer choices and behavior have changed substantially in the past 20 years, we should still get some indication as to what MLB can expect from its fans if and when it chooses to allow more teams into its post-season dance.

The approach used to examine the impact of having more NBA franchises in playoff contention on the fan support of those teams was as follows:

• Limit the study to teams that finished in the new playoff spots - 7th or 8th in the conference - or within four games of making the playoffs ("contenders"). These are the teams whose attendance effects we are trying to gauge.

   

• Calculate the change in wins and attendance for each of these teams compared to the previous season. Look at teams for two time periods: 1) the three seasons before the playoffs were expanded (1980-81 through 1982-83) and 2) the three seasons after the playoffs were expanded (1983-84 thru 1985-86).

   

• Don't include seasons for teams that relocated that year, and don't include the Portland Trail Blazers at all, since they sold out Memorial Coliseum for 18 consecutive years, starting in 1977-78.

   

• Plot the two groups of points and draw a best-fit line through each of them. These lines show how more wins (or losses) affected attendance for the same caliber team, before and after the playoffs were expanded.

While parallel lines indicate similar demand elasticity for additional wins, demand is greater for the group represented by the top line. So, if the line for the post-playoff expansion group lies clearly above the pre-playoff expansion line, it could mean that teams that previously wouldn't have made the post-season do draw more fans due to playoff cachet even though the quality of play hasn't changed. I say "could" because there are other factors involved that will be investigated later.

And now, without further ado...

It certainly appears that enlarging the playoff pool caused a significant increase in regular season attendance for post-playoff expansion fringe teams compared to similar pre-expansion squads. If no other factors were involved, we could estimate the effect on attendance by the vertical separation of the two lines - about 1,450 fans per game.

However, there is at least one other major factor to consider. For the three years before the playoffs expanded, overall NBA per game attendance dropped by an average of 2.5% per year. Beginning with the 1983-84 campaign (the first year of the expanded playoffs), the league's popularity exploded, increasing for seven consecutive seasons. It grew at an average annual rate of 5.2% for the three post-playoff expansion years studied. This increase in the game's popularity is generally attributed to the engaging rivalry between the Los Angeles Lakers and Boston Celtics and their stars, Magic Johnson and Larry Bird. And, oh by the way, Michael Jordan joined the festivities in the autumn of 1984, as well. If we make the giant assumption that only the attendance of teams in the previous chart was affected by the expanded playoffs, we can isolate the "popularity effect" by creating a similar chart for the team-seasons from 1980-81 through 1985-86 that weren't looked at before.

The difference between the lines where the change in wins equals zero is something we will dub the "popularity effect." From the chart, we see that it is about 550 fans a game. Subtracting this number from the earlier 1,450 figure means that the teams most impacted by the NBA enlarging the post-season family saw their attendance rise by almost 900 bodies a game during the regular season. And since these teams averaged about 10,000 fans a game from 1980-81 through 1982-83, the enlarged playoffs were responsible for a 9% jump in attendance.

Assuming Major League Baseball has similar fan behavior, half a dozen ball clubs could expect their attendance to swell by an average of nearly 200,000 a year if baseball implements a 12-team playoff system. Although you might think the attendance of the better teams in the league will be negatively affected by not having to fight to make the playoffs, that effect wasn't apparent in the NBA data (charts not shown).

Having more playoff games also provides the ancillary benefits of added post-season attendance and television revenue. If baseball adopted a best-of-three first round matchup, it could expect roughly 10 more October games played to capacity crowds. And while the demand for early-round playoff action is less than overwhelming (more ABC Family Channel, anyone?), MLB would still rake in approximately $25 million more annually on their next television package. Not coincidentally, the timing of the task force's study on expanding the playoffs dovetails nicely with MLB's TV deals, which are due to expire after the 2005 season with ESPN, and after 2006 with FOX.

If it wasn't before, it should now be obvious there are definite financial gains to be made during the regular season and post-season by both the owners and players (whose approval is required) if baseball were to expand its playoffs. However, doing so opens up many cans of worms, issues worthy of rigorous scrutiny that I won't attempt to address in this article. However, one thing should be made clear: The NBA and MLB playoffs have completely different dynamics, primarily due to two factors:

• NBA teams have a much wider variation in quality than MLB teams. The top NBA teams generally have around a .750 winning percentage compared to .625 for the best clubs in baseball.

   

• The home team in the NBA wins about 60% of the time, versus 54% in MLB.

(Note: In the passages below, average regular season records in parentheses below are taken from seasons since the NBA and MLB playoffs were last expanded. Probabilities don't attempt to account for variables such as pitching matchups, etc.)

As a result, the teams on the lower rungs of the NBA playoff ladder do little more than enhance post-season revenue. For example, the No. 8 seed (40-42) will upset the No. 1 seed (61-21) in a best-of-five series only 9% of the time. Basketball's bottom feeders have but a slim chance of making it past the first round, let alone winning the four series needed to haul home the hardware. In the 19 years since the NBA expanded its playoffs, only twice has a non-No. 1 or No. 2 seed won the championship. Even with over half the teams taking part in the post-season, the NBA playoffs retain the integrity of having the best regular season teams winning the title.

That won't be true if MLB decides to add four teams to its post-season roster. Should the No. 6 team (85-77) reach the second round, it has a 30% chance of upsetting the team with the best record (101-61) in the league. And No. 6 will get past the divisional winner with the worst record (91-71) in 42% of its first round series. Any notion that the MLB playoffs are a system designed to determine the best team in the game will be a sham (if it's not already). And the idea that teams are rewarded for their performance over a 162-game marathon? Fuggedaboutit!

While expanding the MLB playoffs will indeed keep fans in more cities spinning the turnstiles, is the gain in revenue worth the price of both the regular season and post-season losing more of their meaning? Only one person can make that decision, really. It's just unfortunate that his track record is so discouraging.

Thanks to John Hollinger and various BP cohorts who helped me with this article.

Jeff Bower is an author of Baseball Prospectus. You can contact him by clicking here.