As several leagues eye expansion, is there such a thing as too many teams?

As leagues are increasingly run and evaluated as businesses, there is a constant quest for future growth. Adding teams has been a reliable tactic in the past to generate that growth. Team expansion is likely to create more fans, resulting in increased ticket sales, more viewers for media rights, and additional sponsorship opportunities. Maybe that’s why the NBA is talking about Las Vegas and Seattle, MLB is considering Salt Lake City and Nashville, the NFL is pushing Europe, and rumors abound about the NHL in several cities.

The US already leads the world in the size of its professional leagues. Looking at the top 15 teams (by revenue), every North American league has more teams than any other market. This is driven by an ideal combination of sporting passion and a large population with a high disposable income. Let’s first take a look at the factors limiting expansion.

Talent Dilution

Some purists question whether leagues can draw on enough professional-level talent to sustain a higher number of teams. There are numerous examples of expansion teams that struggled to find their way for several years. But that’s more an issue of individual team records than overall league strength. It’s led to relocations, but has never led to a long-term problem for a league. The truth is that most fans are drawn to professional sports for many reasons and aren’t generally astute judges of overall talent levels. Fans are more attracted by excitement than quality. As long as there are stars, compelling stories, and dramatic games, fans will stick around.

Revenue Dilution

While existing owners get a short-term benefit from expansion fees, letting new teams in means splitting the long-term revenue pie among more owners. At this point, there are fewer gaps in the top metro regions where a team is not already in place

As you move further down this list, there’s a question of whether a new team would be able to generate enough incremental fans to justify more splits in the pie.

Season Logistics

Scheduling and travel get more complicated as the league geography expands. Playoff logistics get more complicated as well. Each of the leagues has widened playoff eligibility over the years to put a higher percentage of teams in the playoffs. This was intended to generate more fan interest and revenue as there are more teams in the playoff hunt during the regular season, and the playoff series include more games. If the leagues get even larger, they’d have to face one of two scenarios: either accept that a lower percentage of teams would make the playoffs or expand the playoffs even more. The first scenario creates a more lame duck regular season for teams with no postseason hopes, the second scenario would lengthen seasons that already seem stretched to their limit (e.g., World Series in November, NBA Championships in June).

Does that mean that league sizes are near their maximum? Not necessarily. Against these constraining forces is a greater force: the drive for more revenues. After the few remaining US gaps get filled in on the table above, the most likely long-term outcome is international expansion. Markets outside the US hold the largest untapped source of fans to make the economics work. 

There is also justification for letting overseas teams in on less than a full share of the US-based revenues, at least initially. It will take years of fan development and a lot of organizational creativity, but that is where strategic expansion can bring the highest reward. The NBA is arguably the nearest global opportunity with a strong infrastructure of established leagues in almost every region of the world, and a growing talent pool and fanbase. It’s a “build or buy” situation for the NBA to determine whether to partner or compete with the existing leagues. Adam Silver has already signaled early negotiations with the EuroLeague on that front. It is possible to imagine a 70+ team league extending over North America, Europe, and Asia. If that seems fantastical, remember that there are over 300 Division 1 teams in college basketball. The NCAA’s combination of league championships, autobids, and invitations keeps teams in the hunt for a long part of their seasons and owns the US sports viewership in the month of March. Figuring out the logistics will take work and new models, but money has a way of inspiring both those things.