$173 million isn't too much, economists say THE SALE OF THE ORIOLES

August 03, 1993|By Jon Morgan | Jon Morgan,Staff Writer

The Orioles' $173 million price tag is the highest ever paid for an American sports team, but it is reasonable given the profitability of the team and its lucrative stadium arrangement, analysts said.

Now, Major League Baseball just has to get its act together.

"This seems like a very large number to pay for a business that is in disarray and a team that is in a honeymoon with a new stadium," said Paul Much, a consultant to sports teams and senior managing director of Houlihan Lokey Howard & Zukin in Chicago.

"If Major League Baseball cures its problems, then that number is fine," he said.

The new owners could regret paying so much if club owners and players cannot devise a way to split profits and if television revenues fall short of projections, Mr. Much said. The sport is preparing for negotiations with its players and is without a commissioner.

The bidders apparently focused on the Orioles' operating profit of $28 million last year, the highest in baseball that year, according to former commissioner Fay Vincent.

"The Baltimore Orioles are one of the most profitable teams in Major League Baseball," Mr. Much said. "But at some point the novelty of the new stadium will wear off, and they will have to put a winning team on the field."

Structured properly, however, the price should not hamper the club's ability to hire high-priced players and win games, said Stu Rog, a sports financial consultant with Deloit Touch in New York. "They have a lot of partners. They probably have some deep pockets to tap," he said.

The price is not out of line, given the limited number of teams in baseball, said Gerald Scully, author of "The Business of Baseball." "It's like a Picasso painting. There are relatively few of them," he said. With the addition of the Colorado Rockies and Florida Marlins this year, there are 28 major-league teams.

A major factor in the large increase in value of the Orioles is the new ballpark, he said, suggesting that outgoing owner Eli S. Jacobs -- or his creditors, who will split the proceeds -- is receiving a one-time windfall for owning the team when it moved into its new home.

"The good taxpayers of Maryland gave him $50 million. Not bad," Mr. Scully said, referring to a lesser amount the club probably would have fetched if it still played in Memorial Stadium.

He doubted, however, that the price would necessarily lift the value of all baseball teams. The previous sales record was set by the Seattle Mariners, which went for $106 million last year. The San Francisco Giants sold for $100 million last year.

"How many Baltimores are there out there?" he said.


Other than buying the Orioles, here's what you could do with $173 million:

* Operate the Pratt Library for 9 1/2 years at its current $18.2 million budget.

* Acquire 4,942 Lincoln Town Cars at the advertised rate of $35,000 each.

* Purchase 1,384 homes (at a median cost of $125,000) in the Baltimore area.

* Hire 5,766 police and firefighters at the average salary of $30,000 per year.

* Buy 26,615 cases of National Premium beer.

* Employ 4,168 master teachers at their average salary of $41,500.

* Operate the city fire department for 22 months at its current budget of $94 million.

* Finance the entire expansion of the Baltimore Convention Center, with $12 million to spare.

* Pay all tuition and fees for 28,360 students at the University of Baltimore Law School.

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