O's profits may slip a bit from 1992 Team, among most profitable, expects $25 million year

July 21, 1993|By Mark Hyman | Mark Hyman,Staff Writer

The Orioles had a dazzling debut year at Camden Yards in 1992, reaping an operating profit of about $28 million, but the team isn't expected to quite match that performance this year.

Because of rising expenses, including an increase of about $4 million in player salaries, the Orioles' operating profit could turn down slightly to roughly $25 million, according to three people with access to the team's financial records.

Most teams, including the Orioles, guard information about their budgets zealously. But details about the Orioles' finances have circulated widely in the last year, as team owner Eli S. Jacobs considered offers to buy the franchise and entered personal bankruptcy. The list of those who have examined the Baltimore team's records recently includes bankers, lawyers, accountants and potential purchasers.

The figures from the three sources varied slightly and may differ from numbers calculated by the Orioles, possibly because of different accounting methods.

Team President Larry Lucchino declined yesterday to comment on the numbers, saying, "It never has been our policy, and it's not now our policy, to comment publicly on stories about the internal financial affairs of the Orioles. Therefore, no comment."

The figures clearly show that the Orioles are a robust business. For that, the team can thank the downtown stadium, which has dramatically boosted revenues from tickets, food and stadium advertising.

In one year, from 1991 to 1992, the Orioles' operating profit nearly quadrupled, the sources say. (Operating profit is the difference between revenues end expenses associated with the regular activity of a business. It does not include financing expenses, income taxes or certain other expenses). The soaring operating profits have turned the team into one of baseball's most prosperous franchises, say sports consultants.

"Bottom-line wise, that certainly has to be one of the best," says Gene McHale, a former president of the New York Yankees and a consultant to the Maryland Stadium Authority.

"That places them in the ranks of the Yankees and Dodgers," says Larry Greenberg, a Minnesota accountant who specializes in sports finances and stadiums. "And you've got to remember those teams have enormous local TV and radio contracts that nobody else -- including Baltimore -- has."

The team is almost certain to attract a record price when it is sold. The Orioles are expected to command at least $150 million, far exceeding the $125 million sale of the Seattle Mariners last year.

Five investor groups have expressed interest in buying the team from Mr. Jacobs, who paid $70 million for the club in 1989. A bankruptcy judge is expected to hear final offers for the Orioles Aug. 2.

'A historical number'

One possible bidder, New York art dealer Jeffrey H. Loria, said he hopes the price of the team won't be driven up to unreasonable levels by the last year's financial success.

"That's history -- a historical number. It has absolutely nothing to do with the reality of tomorrow," said Mr. Loria, who is the owner of the Oklahoma City 89ers, a Triple-A minor-league team. "I hope people have not been sold a bill of goods that this goes on and on forever, because it doesn't," he said.

The sale of the Orioles comes at a time when the economics of baseball are changing. Indeed, one person familiar with the Orioles' finances said it is unlikely that the team's operating profit would exceed $18 million annually over the next five years.

Network revenues to drop

In part, that's because revenues from baseball's network

television deal, which rose steadily for decades, will decline steeply next year. The new contract will pay each team $7.1 million per season, down from this year's take of $15.4 million. Because of that drop, the Orioles' operating profit would appear almost certain to decline again in 1994.

Other threats to a continued climb in profits include labor talks between owners and players -- which in previous years have resulted in strikes and higher player salaries -- and calls for revenue-sharing among owners, a drain for the more prosperous clubs.

In documents dated October 1991, the team projected its

operating profit for the first year at Camden Yards at $18.4 million, almost $10 million shy of the final figures. Higher-than-expected ticket sales and concessions revenue led to the higher number.

This year, the team is expected to collect even higher revenues, from about $86 million in 1992 to slightly less than $91 million this year, according to the sources familiar with Orioles' finances.

Of that, $3 million is expected to come from higher net ticket receipts. (Net ticket receipts are what the Orioles receive after subtracting from the ticket price a 10 percent admission tax, and payments of 20 percent to the visiting team and roughly 3 percent to the American League).

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