O's, MLB get closer with `cordial' talks

D.C. compensation likely wide-ranging, lucrative

October 04, 2004|By Jon Morgan and Ed Waldman | Jon Morgan and Ed Waldman,SUN STAFF

Negotiators from Major League Baseball met with Orioles officials for about two hours yesterday as the sides continued to fine-tune details of an agreement that would protect the team financially from the effects of sharing the market with a team in Washington.

Bob DuPuy, who led the process that ended with MLB's announcing last week that the Montreal Expos would move to Washington for the 2005 season, said in an e-mail that yesterday's talks were "cordial and will continue." DuPuy returned to New York after the meeting.

Reached at his law offices yesterday, Orioles owner Peter G. Angelos declined to comment.

Though the agreement is still being tweaked, the broad outline of the deal has been in place since last week. Neither side has discussed the deal publicly, but sources familiar with the negotiations, who spoke on the condition of anonymity, said it calls for:

Baseball to guarantee the Orioles' locally derived revenue - that earned from ticket sales, concessions and items other than game broadcasts - won't fall below a benchmark of about $130 million. If the designated revenues decline below that in any given year while the team is owned by Angelos and his investment group, baseball will make up the difference.

Angelos had sought to have the guarantee continue beyond his ownership, something that would enhance its resale value, but baseball's negotiators refused.

Baseball to guarantee the club's resale value at roughly its current level as the lone occupant of the market, about $360 million. If Angelos and his partners, who paid $173 million for the Orioles in 1993, sell the team, baseball will make up any shortfall below that level, which will grow over time according to increases in the value of baseball franchises nationwide.

To protect baseball, the offer from a potential buyer must represent fair market value and be negotiated fairly. Angelos would not be able to sell the team at a fire-sale price to a friend or relative, for example.

A regional sports network to also be created by baseball to produce and market the local on-air and cable broadcasts of the two teams into their shared market of nearly 8 million people. Such regional networks, owned and operated by teams, are fast replacing the traditional model under which individual stations or cable systems pay a team a negotiated fee in exchange for the right to broadcast games to try to earn the money back by selling advertising and cable fees.

Both teams will receive equal profit distributions from the new network. If the network is turned over to a third-party operator - such as Comcast, the area's major cable system - the fees paid to the teams will also be equal.

This could be seen to benefit the Orioles because the Washington franchise will occupy the more populous and wealthy portion of their shared market.

Moreover, the Orioles will own 60 percent of the network's stock, to 40 percent for the Washington franchise. That could prove lucrative in the event all or part of the network is sold to a third party. This element of the deal will continue beyond Angelos' ownership, providing a lucrative enhancement for a potential buyer.

The Orioles had sought to keep a team out of Washington altogether, arguing nearly a quarter of their fans come from the D.C. region and the new team would siphon off a substantial number. The proposed stadium location, south of the Capitol on the northern bank of the Anacostia River, is 44 miles by car from Camden Yards.

The team was prepared to sue the league, possibly joined by the state of Maryland, which stands to lose some revenue because the team's rent is based on the money it makes each year.

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