Eli S. Jacobs, Orioles owner since plunking down $70 million in 1989, seems to be getting his money's worth.
Not only is his plucky baseball team among the leaders in the American League East Division; it also appears to be delivering on the bottom line.
Documents labeled "The Orioles, Inc., Budget, 1992" and dated Oct. 25, 1991, show the team projected its operating profit this year to more than double from last year to $18.4 million.
As the season unfolds, the figures could look even better, thanks to a run on the Camden Yards ticket office that exceeds what the budget documents predicted in October. If the season continues as it began, added ticket and concessions revenue could boost operating profit above $20 million. Operating profit is the difference between revenue and expenses associated with the business' regular, ongoing activity of a business. It does not include suchitems as interest or amortization costs.
The expected increase in operating profit, to $18.4 million, is about four times the profit from 1989, when Mr. Jacobs bought the team, according to the budget documents. People familiar with the business side of the sport say the latest projections would move the Orioles from the middle ranks to among the top teams in baseball.
Mr. Jacobs and Orioles President Larry Lucchino so far have declined to discuss any of the projections. Contacted Thursday, the Orioles requested that The Sun provide the budget documents to the club. Because it is the numbers -- and not the document itself -- that are the issue, The Sun declined to turn over the documents and instead offered to discuss the budget )) figures that would be used in this article.
The Orioles did not respond to that offer, but Mr. Lucchino issued a written statement yesterday that said: "The Baltimore Sun has in its possession an improperly obtained internal budget document of the Baltimore Orioles, and The Sun has inexplicably refused to show the Orioles a copy of that document. It is difficult, therefore, to comment or to determine whether or not the document is or is not authentic and accurate. The Orioles, as a privately held company, do not publicly discuss the details of their financial matters, much less the details of any proposed and possibly inaccurate internal document."
The projections, which might have been revised since the October documents were prepared, confirm Mr. Jacobs' reputation in financial circles as a shrewd deal maker who is adept at spotting bargains. There was no Camden Yards stadium when he bought the team, just a signed lease, architects' sketches and a predicted opening date of April 1992.
Mr. Jacobs apparently saw the financial possibilities of a ballpark loaded with profit-making amenities. Camden Yards is unmistakably long on luxury, from the 72 sky boxes with annual rents high as $95,000 to the members-only Camden Club, where the menu features such unusual ballpark dishes as herb-grilled, portabella mushroom steak.
It is the new stadium, of course, that is a major reason for the surge in projected revenue. If the aura of the new ballpark wears thin or if the team stumbles, it would be difficult to repeat the anticipated success of 1992.
Glimpses into the Orioles' finances, including the team's revenues and operating profit, have been rare since Mr. Jacobs bought the team from the family of the late Washington lawyer Edward Bennett Williams. For seven years before the sale, Baltimore city officials routinely disclosed this information, which the team provided during annual rent negotiations over use of city-owned Memorial Stadium. But Mr. Jacobs has guarded that information zealously and dissuaded city officials from disclosing The new stadium's landlord, the Maryland Stadium Authority, won't collect its first rent check for almost a year. Before the season began, state officials estimated they would collect about $4.5 million. After Opening Day, Herbert J. Belgrad, the authority chairman, revised that estimate to as much as $9 million.
With their sellouts and soaring revenues, Mr. Jacobs' Orioles are a vastly different franchise from the early teams. The first Orioles owners were a syndicate of local businessmen, including lawyers Clarence Miles and Zanvyl Krieger, who bought the lowly St. Louis Browns and moved them to Baltimore in 1954. The group paid $2.475 million for the Browns, about what the Orioles expect to earn this year from their radio contract alone.
That Opening Day, in 1954, was a sellout, but attendance soon fizzled. The early years were lean. In 1959, the team lost nearly $54,000. In 1963, team officials slashed the budget and managed to eke out a $99,262 profit.
A regional franchise
The Orioles were dramatically improved on the field from 1965 1979, when they were owned by a colorful brewery president, Jerold Hoffberger. But they failed to catch on with Baltimore fans or to make much money. After years of trying to find local investors to buy him out, Mr. Hoffberger sold the team to Mr. Williams for the bargain price of $12 million.
It was a good investment that Mr. Williams turned into a great one. Under the new owner, the Orioles reinvented themselves as a regional franchise able to attract customers from Pennsylvania to Virginia. The plan worked so well that Mr. Williams, who bought the team with the idea that it might be moved closer to Washington, changed his mind.
Mr. Williams did get his new stadium, courtesy of the state of Maryland. Some called it unfriendly persuasion, others blackmail. Although he publicly never demanded a new ballpark, he refused to sign more than a one-year lease at Memorial Stadium.
The message was clear, made even more so by the memory of the overnight departure of the Baltimore Colts in 1984. The state, fearful that the Orioles would leave, eventually agreed to build a new stadium. With that, Mr. Williams signed a lease committing the Orioles to play in the new ballpark for 15 years. He died three months later.
Mr. Jacobs, a New York investment banker who also owns a home in Baltimore County, has said that he bought the team because he is a baseball fan. He also seems to be astute at the business side. Stories of Mr. Jacobs' tight-fisted style run the gamut from directives that lights be turned off when workers leave their offices to a memo that circulated shortly after he bought the team warning that the team's photocopying bill was too high.
That frugal touch also shows up in the October budget documents, which give a detailed breakdown of where the team then projected its money to go.
For example, the ocuments show the Orioles had calculated their 1991 Memorial Stadium rent, based on profit-sharing, to be $3.68 million. But a few months earlier, the team had suggested putting aside its lease, offering instead to pay the city a lump sum of $3 million. The rent was due by April 1, but the team asked for an extension because of the "disruption and demands" of moving to the new ballpark.
Holding down payroll
The same drive to hold down expenses applies to players. For 1992, the Orioles expected to pay players on their major-league roster $19.5 million, the October budget shows. Although that is 26 percent more than last year's level, it still puts the Orioles in the basement of player payrolls. Only three of the other 25 major-league teams pay less to their players this season than the Orioles do, according to figures published Friday by USA Today.
That could change next year if the Orioles are successful in re-signing superstar shortstop Cal Ripken Jr. Earlier this month, the Washington Post reported the Orioles have offered Mr. Ripken $30 million for a five-year deal. No agreement has been reached.
Both at Memorial Stadium and at the new stadium, Mr. Jacobs appears to enjoy his role. When the Orioles played at Memorial Stadium, he hired a private caterer to keep his guests and himself well-stocked with gourmet-grade hamburgers and crab cakes. At the new ballpark, his private office, entertainment area and assorted other rooms on the fifth floor of the B&O; Warehouse stretch over about 2,500 square feet. The state picked up the bill for that, but the owner wasn't satisfied with some aspects of the job and ordered changes at the team's expense.
Mr. Jacobs also seems willing to spend freely when he is paying, in effect, himself. Every year since he bought the Orioles, his New York investment company, E. S. Jacobs & Co., has charged the team a management fee, the documents show.
In 1989, when Mr. Jacobs owned the team for about six months, that fee (plus unidentified expenses billed to the team) was $762,880, according to team financial records. It has increased every year since, and the team's October budget for the 1992 season projected it at $1.325 million.
People familiar with major-league baseball say arrangements such as this aren't uncommon. In any case, Mr. Jacobs reportedly has done this before. He has held stakes in companies that make everything from kitchen cabinets to computer products. Some of those companies have paid fees to his investment company.
Memorex Telex and Triangle Pacific, for example, paid a total of $1.3 million in consulting fees each year, and a third company, Flagship Express Inc., paid $750,000, Business Week reported in a November 1991 article about Mr. Jacobs.
When the Orioles were playing at Memorial Stadium, the issue of the consulting fees was a sore point. The team's ballpark rent was determined by its profits, which shrunk with each dollar the Orioles paid to Mr. Jacobs' investment company.
Moving to the top
Under a new, more flexible lease at Camden Yards, the effects are less certain.
That agreement with the Maryland Stadium Authority gives the Orioles a choice of paying rent by a profit-sharing formula or by an arrangement that would entitle the state to a percentage of team revenues such as ticket sales and parking. Under the second option, the team's operating profit would be diminished by the management fee, but the rent wouldn't.
Management fees are just one of the ways owners can increase income from their teams. When Mr. Williams owned the Orioles, he hired one of the country's leading law firms -- his own. In 1988, for example, the Williams & Connolly firm billed the Orioles $243,000.
If the October budget projections prove accurate, the Orioles will be among the top money-generating teams in baseball.
"It moves them a long way from where they've been. If not into the top five, then getting close," said Sam Katz of Public Financial Management, a Philadelphia-based firm that helped to create the financial plan of bonds and lottery tickets that is paying for Camden Yards.
The top teams tend to be franchises in major cities -- New York, Chicago and Los Angeles -- where they can command lucrative local television contracts. That has created huge disparities. The New York Yankees signed a 12-year local television deal reportedly worth $500 million. On a yearly basis, that's about five times what the Orioles expect to get from WMAR and Home Team Sports, the documents show.
"Baltimore has almost no broadcast revenues -- they're near the bottom of the pack," Mr. Katz said.
Where the Orioles can compete with the bigger-city teams is in tickets and concessions.
The Orioles expected those revenues to increase by more than $10 million, according to the October budget. Even those lofty projections, based on the sale of 3 million tickets, now appear to be conservative. Riding a string of 13 consecutive sellouts (through Friday night's game), the Orioles seem headed for ticket sales closer to 3.56 million. That could bring in yet another $4 million to $5 million.
The Orioles projected higher ticket revenues, even though there are4,000 fewer seats at the new stadium than at Memorial Stadium. The team would make up the difference by selling more tickets and, in most cases, charging higher prices, the budget prepared in October shows.
Last year, the average cost of a purchased ticket was $7.07. This year, it's projected to be $9.78, according to the document.
The high attendance also could boost revenue from ballpark food and novelties an additional $1.4 million. No chance is missed to get people eating at Camden Yards. There are food stands serving up the old stadium standbys, air-conditioned deli bars that offer freshly carved sandwiches and mixed drinks, and even waitress service on the club level for fans who don't mind paying extra for delivery to their seats.
The Orioles get a cut of virtually every dollar spent on food, drinks and novelty items. The share is 45 percent for hot dogs, beer and other goodies bought in the grandstands and from vendors. On the club level, where tickets cost as much as $25, the Orioles' share drops to 30 percent for many items. And when fans in the stadium's 72 sky boxes order a shrimp cocktail, 25 percent of the bill goes to the team.
If that sounds like a deal too good to pass up, Mr. Jacobs reportedly has said he might be interested in selling the team if the offer was right. His asking price: $200 million.