Now may be perfect time to sell the Orioles


'TC Forget the Orioles' young players, the allure of the new stadium, and the possible end of the region's economic slump. The profitability of baseball -- especially baseball in Baltimore -- has entered a season of uncertainty that may very well make this the perfect time to sell.

Oriole owner Eli S. Jacobs has hired an investment banker to consider some offers for the team he bought in 1988. He says he was unprepared for the demands of owning a major-league team, and the spotlight it focuses on him.

But Jacobs is also a savvy businessman, and some experts in baseball economics think the spectacular growth in baseball's popularity during the 1980s may have reached a plateau. Rising costs -- driven by player salaries that have broken the $5 million barrier -- and uneasiness about television revenue are producing questions about future profits.

In fact, baseball commissioner Fay Vincent said about a third of the 26 major-league teams lost money last year. He and the players union have formed a special committee to look into the sport's finances.

"I tell you without any question that there are financial problems in baseball," Vincent recently told reporters.

And Baltimore eventually faces the threat of a competing team in Washington.

Meanwhile, the value of the Orioles may be at an all-time high. The team is scheduled to move into a new stadium next year that could be one of the best in baseball, loaded with high-profit skyboxes and gourmet food stands.

And if a potential buyer needed an extra incentive to close the deal, Jacobs has one: the All-Star Game will be played at the new park in 1993.

Some educated estimates put the value of the Orioles at $100 million to $120 million, up about 50 percent from the $70 million Jacobs and other investors paid for it three years ago. Not a bad return for a man who, after all, makes his living in business.

"It might be the perfect time to unload it," said Gerald W. Scully, a professor of economics at the University of Texas at Dallas and author of "The Business of Baseball."

Some are still bullish on the future of baseball. But Scully said the growth of revenue and popularity has slowed, and the costs of fielding a 25-man team are consuming a larger and larger portion of revenues.

The average salary is now about $800,000, up from $325,000 in 1984, and one in three players now earns more than $1 million. Revenues have risen from about $625 million to $1.5 billion since 1984.

Scully thinks the limit is near on television contracts. The whopping, $1.06 billion, four-year deal CBS signed last year has brought a $100 million deficit. Unlike football, viewer interest in baseball has become increasingly limited to the local team or postseason championships, Scully said.

And whereas baseball teams traditionally took in most of their cash at the box office, local, cable and network television is now more important.

The future for baseball could lie in pay-per-view, where fans will have to pay to see a particular game. That would require at least the tacit approval of Congress to keep from running afoul of the 1961 Sports Broadcasting Act, Scully said.

The need to curry favor with politicians, along with a growth of population and wealth in Washington, D.C., means baseball is probably in the capital's long-term future, he said. It is the biggest city in America without baseball.

"Eventually Washington is going to have a franchise," Scully said. He agrees with the popular wisdom that Denver and Miami will get the next two franchises, but he thinks there will eventually be 32 major-league teams.

"I think it would doom Baltimore to a status of being a Cleveland or Seattle or Kansas City in terms of the size of the population you are drawing from," Scully said. The Orioles claim 25 percent of their fans come from the D.C. area.

Scully thinks the Orioles are probably making money -- like most teams, the Orioles don't reveal their financial results -- in part because Jacobs and his predecessor, Edward Bennett Williams, have religiously fought the escalation of player salaries. The team's average player pay is the second-lowest in the majors.

Gene McHale, former president of the New York Yankees and now head of the sport's marketing and consulting group American Sports Associates, said Baltimore's new stadium has boosted the team's worth.

"A lot of a team's value is based on the facilities they are in," said McHale, who has performed some consulting work for the Maryland Stadium Authority.

The city also has a strong tradition of supporting the team, which prospective owners look for.

"All of those things give the Orioles a very bright outlook," he said. "What may or may not happen in Washington is speculative."

Even if Washington wins a team, it may not necessarily hurt Baltimore. It could spark a regional rivalry that would help both teams, he said.

Furthermore, he said, "I'm very up on baseball. I think the outlook is very bright."

Mutual interest eventually will drive the players and owners to some understanding about limiting salaries, he said. And even if television revenues don't go up much more, they are at a pretty rich level now, he said.

What are the Orioles worth? Estimates range as high as $120 million, although Scully thinks Jacobs would be lucky to get $100 million.

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