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Washington baseball creates pitchmen duel

If the Montreal Expos relocate to the Washington area, it would be the beginning of the end for the Baltimore Orioles. The Orioles' revenue would plummet, cutting the money for player payroll and development.

The Orioles and the franchise down the road would be - at best - mediocre teams.

Or ...

If the Expos relocate to the Washington area, it would not hurt the Baltimore Orioles - in fact, it would make them better. Majority owner Peter G. Angelos would be forced to spend more to field a better team, and his employees in the B&O warehouse would be forced to improve marketing.

The competition would drive both the Orioles and the Expos toward the top tier.

So, there you have it.

The truth, as usual, lies somewhere in between. And how Major League Baseball perceives the truth will determine whether the Expos' new home will be Washington or Northern Virginia or a more distant destination.

Marc Ganis, president of Sportscorp Ltd., a Chicago-based sports consulting firm, said the Orioles would suffer if a team moved nearby.

"Anyone who asserts otherwise has an agenda and is not looking at it in an unbiased manner," he said.

"There will be a significant segment of the baseball ticket-buying market that lives in Washington, Northern Virginia and in Maryland that .... will become ticket buyers of the Washington baseball club over the Orioles. It has an impact."

But Andrew Zimbalist, a professor of economics at Smith College and the author of Baseball and Billions, said that putting a team in the Washington area would have "a small impact ... very small."

He predicted that the Orioles' TV market would shrink and income from television might drop slightly. That might mean that the team would have less to spend for players, causing it to become less competitive - at least temporarily.

"I think that the Orioles, over time, they will recycle and have a few years of going to the postseason," he said.

There is broad agreement that if there were no Baltimore Orioles, the Expos would already be in Washington or Northern Virginia. A stadium financing plan meets Major League Baseball's specifications. And the region has by far the largest population, television market and per capita income among the contenders, which also include Las Vegas; Norfolk, Va.; Portland, Ore.; Monterrey, Mexico; and San Juan, Puerto Rico.

The search for a new home for the Expos, which began in 2002, could culminate in a selection by baseball commissioner Bud Selig next month. The decision, which must be approved by three-fourths of the owners, could come around the All-Star Game, on July 13.

The dire scenario

Orioles' attendance peaked at 3.71 million in 1997 - the year the team last won the American League East - and has declined every year since then. Attendance last year was down nearly 34 percent from 1997.

A 1995 study by the consulting firm of Deloitte & Touche, paid for by the team and updated in 2000, concluded that up to 25 percent of the Orioles' fans come from Washington and its suburbs.

In 2003, the Orioles took in nearly $50 million in ticket revenue, based on an average ticket price of $20.15 - according to the trade publication Team Marketing Report - and attendance of 2.45 million. This year, after raising ticket prices to an average of $22.56 and improving the team (at least on paper), the Orioles expect to take in more.

But if Washington-area fans were to stay home to support a new team, the Orioles might generate millions of dollars less in ticket revenue.

Ticket sales are among the Orioles' top four revenue streams. The others, according to the team, are broadcast rights, corporate sales and sponsorships, and concessions.

Washingtonian Elise Perram, 35, attended a recent Sunday game at Camden Yards with her parents and sister. Perram said she attends three or four games a year. But a new team would change that.

"As long as the Orioles are going the way they are going right now, I would probably go to D.C. or Virginia," she said.

"If you do put a team in Washington," said Angelos, "all you're going to have is two teams, each of which will be incapable of drawing the revenues it needs to be competitive. So what sense does that make?"

If he is right, the Orioles would have to look at cutting costs.

The team says its top three expenses are player payroll - this year pegged at $55 million - baseball operations (including travel, coaches' salaries and benefits) and the minor-league system.

Some expenses, such as travel costs, are essentially fixed. Cuts could be made in player payroll, scouting, minor-league operations and bonus money for amateur draft picks. But penny-pinching would be tough in a division that includes the New York Yankees, with a $184 million payroll, and the Boston Red Sox, with a $127 million payroll.

Angelos concedes that if the Expos were to wind up in Northern Virginia, in a new stadium near Washington Dulles International Airport, it would be a smaller competitive burden than a team in the District of Columbia. But that doesn't mean he is receptive to the idea.

"If you put a ballpark at Dulles and you put a team there, you have immediately reduced the cable and television revenues of the Orioles by 60 percent," he said.

When the Orioles' deal with Comcast ends after the 2006 season, a new cable television contract could bring in $35 million to $40 million a year, Angelos said. That is based on retaining a territory that stretches to North Carolina. The Orioles and Comcast declined to say how much the team is paid now.

"If you slice those in half, you have caused a serious financial deficiency for the Orioles team," Angelos said.

Another concern is what some see as an oversupply of the posh seating that corporations often use to entertain clients.

The more than 580 suites and 30,000 club seats at area stadiums and arenas places the inventory among the highest in the nation, according to John A. Moag Jr., head of a Baltimore-based investment firm that specializes in sports. He described the regional market as "totally saturated."

"I don't think [a team in Washington] has an effect just on the Orioles, I think it has an effect on the entire market," he said. "Does it have less of an impact in Virginia than D.C.? Probably, but it is a sizable impact in either case."

Camden Yards has 72 suites, which rent for $89,000 to $285,000 a year, and 6,239 club seats. Neither are sold out.

The rosy scenario

The D.C. Sports and Entertainment Commission and the preferred D.C. ownership group, the Washington Baseball Club, say the Orioles get 22 percent of their attendance from the Washington area.

But a study commissioned by the groups said the Orioles would lose just 7 percent of their fans - about 3,100 per game - and that they could be replaced if the team were to increase its market penetration by 10 percent.

Another study said the Orioles would lose 932 fans a game if the Expos were moved to Northern Virginia. (The study, paid for by the Virginia Baseball Stadium Authority, says the Orioles would lose 1,090 fans if the Expos move to Washington.)

The study says that fans from Northern Virginia, Washington, and Montgomery and Prince George's counties make up 13 percent of the Orioles' fan base.

Mitch Singer, 52, the media relations manager for the Nuclear Energy Institute in Washington, lives in Springfield, Va., and attends games at Camden Yards once or twice a year.

He was in Baltimore with his wife, Cynde, 10-year-old daughter Robyn, and one of her friends, using his lobbying firm's season tickets to a recent Orioles-Devil Rays game.

"If there was a team in Washington, I'd come to both," he said. "I grew up on the American League and still like the American League, but I wouldn't mind seeing a National League team also."

Pete Sackleh, 41, a legal administrator for a D.C. firm who grew up and still lives in Falls Church, Va., said he would still come as well.

"I love Camden Yards. I've been an Orioles fan all my life," said Sackleh, who was using his firm's four season tickets. "I'd certainly come a lot more often if they continue winning. They've got to win."

Roger Caplan, president of the Columbia-based Caplan Group, an advertising and public relations firm, said "there is not a doubt in my mind" that the region can support two teams. "You would never lose a Baltimore person to go to Washington - ever."

And what of the fans who stay home and watch the games on television? What about broadcast-rights fees?

In the Northern Virginia study, Great Falls, Va.-based Kagan World Media concluded that instead of being sliced in half, cable rights fees for the Orioles would increase.

A second major-league team would open the door for a second regional sports network to compete with Comcast SportsNet, Kagan said.

Lee Berke, whose Scarsdale, N.Y.-based LHB Sports, Entertainment and Media helps teams put together their own regional networks, said the Orioles "are looking at potentially a substantial boost in their cable TV revenue if they are going ahead with plans to create their own network."

In 2002, the Orioles began producing the games that appear on over-the-air stations, such as Channels 13 and 54. The club purchases the air time from the stations and sells the advertising, keeping all the ad revenue. The move was seen as a first step in creating their own network.

"What I've seen time after time is that the teams that do that do extremely well with it," Berke said.

On to Plan B?

An area marketing executive, who spoke on condition of anonymity, said the Orioles would be hit hard only if they are complacent, a scenario he sees as highly unlikely.

"I've got to believe that they've got a plan so that if Washington or Northern Virginia is awarded a team, that they move into Plan B immediately," he said.

"Are they going to stay doing business as usual, which really hasn't been working that well for the last five or six years? Or are they going to ... realize they need to change the way they do business, they need to be more aggressive marketers, they need to spend more money to make money, they need to hire more salespeople, they need to put more money into their baseball scouting so that they have a better team to market, so they have a better chance of selling suites, club seats and tickets?"

Sun staff writer Bill Atkinson contributed to this article.

Copyright © 2015, The Baltimore Sun
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