Forecasting the Long-Term Viability of an Enterprise: The Case of a Minor League Baseball Franchise

Abstract

We are interested in forecasting or predicting the long-term viability of a minor league baseball team. The research question is whether this minor league team will be successful in attracting attendance over an extended period of time. An important financial issue is if the team is predicted to fail, then exactly how long will it last? A variety of methods are used in a step-by-step procedure to evaluate this viability. We first test whether attendance is evolving or stable through a unit root test, a test of market persistence. We then use the Bass model to assess whether the projected product life cycle is turning up or down. The Gompertz and logistic (Pearl) diffusion curves are next applied to home stand data of various lengths in order to make forecasts of an eventual dissolution point at which the team would financially collapse. Market saturation is not estimated, but set at the stadium capacity. Forecasting principles involving diffusion models are implemented. Analogies are used as a complementary forecasting technique to assess whether there is long-term potential for survival. Finally, logistic regression on cross-sectional data is used to supplement the forecasts. The results of the triangulation of diffusion curves, analogies, and logistic regression predict a decline in the minor league team’s ability to capture attendance.

Sustainable Sport Scheduling Approach Considering Team Equity for the Korean Professional Baseball League

“…We perform the scheduling through the optimization technique based on mathematical modeling, which is one of the well-known quantitative analysis methods. Such approaches have been used widely in sports management fields, such as the decision of ticket pricing, viability evaluation of professional sports teams, and the development of revenue-sharing policies between players [15][16][17][18]. By reflecting the needs of the fans and the teams, this sustainable sport scheduling approach can maintain its reputation for fairness, as well as the popularity of the KBL [19,20].…”

Evaluations of minor league baseball stadiums

“…The goal of their research was to forecast or predict the long term viability of a Minor League Baseball team (Yokum, Gonzalez, & Badgett, 2006). The first thing the authors tested was whether or not attendance is stable or not through a test of market persistence (Yokum, Gonzalez, & Badgett, 2006). The authors then used a Bass model to determine whether the product life cycle is either up or down.…”

“…Both the Gompertz and logistic curves are then used to forecast the long term viability of the baseball franchise in the community. The final step is to use a logistic regression equation on the cross-sectional data (Yokum, Gonzalez, & Badgett, 2006). The authors argued that these simple methods should be used unless there is substantial evidence "that greater complexity is required" (Yokum, Gonzalez, & Badgett, 2006).…”

“…A Minor League franchise was found to be most viable during the first five or six years (Yokum, Gonzalez, & Badgett, 2006). If attendance fell below 1,000 spectators a game or 40,000 a year, it would be difficult to justify continuing to schedule games (Yokum, Gonzalez, & Badgett, 2006).…”

“…Attendance and competition are mentioned, but largely overlooked as part of the equation. The aspect of attendance is focused on in other articles related to Minor League Baseball (Yokum, Gonzalez, & Badgett, 2006). While Major League franchises are able to bring in additional revenue to compensate for low attendance, a…”