Does the Baltimore Orioles' Quiet Offseason Mean Owner Peter Angelos Is Being Cheap?

Executive Vice President of Baseball Operations Dan Duquette controls the purse-strings now, but how big is the purse? - Greg Fiume

How much do the Orioles make? It's a complicated question to which Mark wants to know the answer.

How much money do the Orioles make?

The question comes up every time someone in either the local or national media has a notion to explain the Orioles' lack of payroll increase as the result of owner Peter Angelos being cheap about spending on his baseball team. This may be the case. I am prompted to think about it today because of a recent article by ESPN/Grantland's Jonah Keri, who cited Angelos' cheap habits on Orioles spending while saying the Orioles should have gone for Josh Hamilton or Zach Greinke.

WHAT WE KNOW

We know that somewhere in the Angelos fortune, there is (or was, as recently as late 2010) sufficient liquid cash such that he can give two separate $5 million gifts to the University of Baltimore - his alma mater for law school, and mine as an undergraduate - to construct the new law school building at the corner of Charles and Mount Royal Streets. Public money given for the sake of vanity, the cynic might say, with the building being named after his parents. There is also Angelos' anonymous-at-the-time donation of $300,000 to keep open Baltimore's public pools, which were facing closure in the summer of 2010 due to the city having one of its budget crunches. These are not the actions of a complete money-hoarding man.

We know that some time between September of 2008 and March of 2009, he was removed from Forbes' magazine's list of world billionaires, with the magazine estimating that "his investments outside the team fell at least 30%" when the market dropped at that time. We know that he was not back on the list of world billionaires by September of 2012. We know that Forbes estimated in March of 2012 that the Orioles are worth $460 million; this appears to include the value of the team's stake in the Mid-Atlantic Sports Network.

We also know that in June of 2011, the Orioles appeared on a list of nine MLB teams in violation of baseball's debt-service rules, intended to keep debt below ten times its annual revenue. In the most recent CBA, this was amended to 8 times. Forbes estimated the team's debt at 33% of its value, which is about $152 million.

We know as well that the Orioles drew a paid attendance of 2,102,240 fans in 2012, an increase of 346,779 over the 2011 draw. That is an increase of about 20%.

WHAT WE THINK WE KNOW

We know that in the Forbes valuation from March 2012, gate receipts (presumably from 2011) were listed at $42 million, so if a 20% increase in attendance means a 20% increase in gate receipts, the Orioles made about $8 million more in the 2012 season compared to the year previous.

One estimate from Wendy Thurm at Fangraphs suggests the Orioles made about $7 million in postseason ticket revenue last season. That same amount projects to be the increase between 2012's payroll and 2013's payroll, with the Orioles, unless Jair Jurrjens is signed, having not signed a single player in free agency who was not with the team in 2012. That these two numbers are about the same is probably a coincidence.

Professional sports teams are notoriously closed-lipped about their financial situations. When the time rolls around for a new CBA, being able to release friendly numbers showing ways teams are losing money is part of the negotiating process. In addition, the teams are all in competition with one another. Any bit of money spent or money saved more intelligently than another team provides a potential competitive advantage that any given team would like to keep to itself.

As such, the best we can do is guess at revenues and expenses of the Orioles based on what little we do know.

REVENUE

* Gate Receipts - If we accept the Forbes numbers and extrapolate, the Orioles made $50 million from selling tickets in 2012.

* Local television rights fees - Though the Orioles own 86% of MASN, which will gradually decrease to 67%, they will still receive rights fees from MASN. The Washington Post, reporting on a dispute between the O's and Nationals over MASN, wrote that MASN proposed paying the Nationals $34 million in rights fees for 2012. The Nationals seek between $100 and $120 million per year. The Post also notes that in the current contract, the Orioles rights fees and the Nationals will be the same. They estimate $37 million in rights fees for 2013.

* Stake in MASN - The Post also reported that the Nationals received an $8 million equity stake payment for their 14% share of MASN in 2013. That would put the Orioles' 86% stake in the vicinity of $49 million. This may not be the case.

* National television fees shared - Each team shares the money paid by ESPN, Fox, and TBS. The contracts that will go into effect in 2014 should pay out $51.7 million - which is reported as more than double what teams presently get. Let's estimate $25 million for this past year and the upcoming year as well, which could be a little high. There is probably an additional amount shared for mlb.tv subscription fees.

* Radio rights fees - WBAL owns the Orioles radio rights as the flagship station of the network. When their most recent deal was signed in 2011, no one reported on the cost of these rights. The best we can do is a 1999 Baltimore Sun report that the Orioles were seeking $4 million per year beginning in 2000. If this amount has increased at the same rate as inflation - if anything, it's probably increased more - that amount today is $5.3 million annually.

* Concessions - A 2009 Baltimore Business Journal report cites that the average fan at an MLB game spends between $10 and $20 on concessions. That means this figure could be anywhere between about $21 million and $42 million. The Maryland Stadium Authority receives approximately 7.5% of this as part of its rent.

* Revenue sharing - Baltimore is not one of the 12 largest markets that will be gradually disqualified from revenue sharing in the current CBA. Old data from 2005, written about previously on Camden Chat, had the Orioles receiving $2 million per year, which has probably not gone down and could have increased substantially by now.

* Parking - As far as I can tell, the MSA operates the Camden Yards parking lots, and when there is a game, the Orioles get 50% of the revenue. The MSA gets the other 50% as part of its rent. There were originally 5,000 parking spaces, but when the football stadium now known as M&T Bank was built, this was reduced to 2,800. At $10 to park, if every spot filled every game (it doesn't), this is at most $1.1 million for the Orioles. Small potatoes.

* Merchandising - Jerseys, hats, hoodies, shirts, and probably anything else you could think of with the Orioles logo on it. Your guess is as good as mine what kind of profit margin the team gets on all of these things, but I bet they made a lot more of it in 2012 than in 2011.

* Ballpark advertising - Because the Orioles don't put up the Esskay out-of-town scoreboard out of the goodness of their hearts. The MSA receives 25% of this revenue as part of its rent, except for behind home plate advertising, for which they receive 12.5%.

EXPENSES

* Major league player payroll - The most obvious, and easiest to figure out. Cot's Contracts says in 2012 this was $84,102,233.

* Minor league player payroll - Players for the Norfolk Tides, Bowie Baysox, Frederick Keys, Delmarva Shorebirds, Aberdeen Ironbirds, GCL Orioles, and DSL Orioles all get paid. I have no idea how much.

* Amateur draft spending - The bonus pool for the team's top ten draft picks was about $6.8 million. First-round pick Kevin Gausman signed for 5% over his slot value. If every pick did this, the Orioles spent about $7.1 million on players and paid $225,000 in tax. Not everyone signed for 5% over, but the Orioles signed late-round picks too, so I'll just go with $7.3 million in total cost.

* International amateur spending - The Orioles had an international bonus pool of $2.9 million, which I don't believe they spent in 2012. In 2011, they spent about $1 million on international amateur players, according to Baseball America, and they spent a similar amount in 2010 - among the lowest in baseball. That was under the Andy MacPhail regime, but Dan Duquette hasn't been in play for the big names either.

* Miscellaneous player expenses - Forbes listed total player expenses as $104 million for 2011, when the team had a payroll of about $87 million. Forbes notes this "includes benefits and bonuses". With a similar payroll in 2012, I will guess at the same $17 million in expenses beyond base salary. I am not sure what this includes in the category of benefits.

* Major league coaching staff - Cot's Contracts puts manager Buck Showalter's annual salary at $1.5 million. Then there's the first base coach, third base coach, hitting coach, bench coach, pitching coach, and bullpen coach. I will guess they make Showalter's salary between all of them, though they may make more, or less. Guess: $3 million.

* Minor league coaching staff - All of those named minor league teams have a coaching staff, too, and there are roving instructors as well. Again, these guys aren't in the glamorous jobs or getting the big bucks, but it is an expense to the organization.

* Front office staff - There are a lot of names on this list. Duquette probably has a comparable salary to Showalter, but all those other people are also getting salaries and benefits, with the team responsible for payroll taxes and 401k contributions.

* Travel - Possibly included in player expenses are costs like team charter planes, buses and trains, hotel rooms for players, coaches, and any traveling staff on the road, and so on. Maybe that is not included in the $17 million miscellaneous above. In any case, there's also travel expenses for amateur and international scouting. Amount unknown.

* Rent - Most of this is subtracted from revenue above. Steve Kilar of the Capital News Service wrote that the average rent paid by the team from 1992 to 2009 was $4.5 million. Additionally, I believe they owe rent for offices in the B&O Warehouse. The MSA says it gets $3.4 million in rent annually for the Warehouse. The Orioles occupy some, but not all, of the Warehouse. I will estimate they pay $2 million for office space. I am not sure if this is included in the $4.5 million mentioned already.

* Game day staff - Ushers and janitors; also, private security because there were too many streakers last year. None of these probably get much more than minimum wage, but it adds up. They may also be responsible for paying some or all of the amount going to police who are on duty at the game.

* Equipment and utilities - All of the front office people need computers with internet access, lights, heat and air conditioning, copiers, printers, paper, water for sinks and toilets, and so on. Count in the electric bill for each game at Camden Yards as well: lights, scoreboards, grills, the works.

* Debts - If the Orioles have $152 million in debt, they will have to pay that off. Who the debt is owed to, what for, and what the payment schedule is like, we do not know. When the Orioles were named in the report for not following MLB's debt guidelines, an article in the Baltimore Sun suggested there are different kinds of debt that are more concerning; some debt may just be debt that the Orioles owe to Peter Angelos, which is a vastly different proposition than what afflicted the Dodgers in the Frank McCourt era.

THE NET PROFIT

Of the items where I've been able to hazard a guess for having dollar amounts, the sum is around $190 million in revenue, which does not include merchandising, advertising, or anything I forgot. This number is different in reality, but probably not substantially lower.

Expenses are almost totally unknown beyond the Forbes figure of $104 million in total player expenses, which is from two years ago. Many of the items on my list have no dollar figure attached, and there may be things I forgot. One thing that is not an expense for the Orioles is the maintenance of Camden Yards. Last season's $1.8 million upgrade of the Legends plaza, center field bar and flag court were paid for by the MSA.

Additionally, MASN revenue may be seen as in doubt due to ongoing disputes with the Nationals, who seem to want to renege on the agreement that MLB and Angelos negotiated when the Expos moved into town and carved up what was previously exclusive Orioles territory. What percentage of MASN revenue comes from the Nationals is not known either, but it's probably more than 14%, so if any arbiter or court rules against the prevailing contract, that extra money comes out of the Orioles' (or at least Angelos') current revenue stream.

Back to what we know: the Orioles have at least $25 million more in national TV money coming online for the 2014 season. That pays for a top-tier free agent on its own, though not for this season. Every other team has this money becoming available as well, so this will have an effect on all levels of the market.

All of which is a lot of words to say that we have no idea what the Orioles' financial situation is. They may be asset-rich but cash-poor. They may be hoarding piles of hundred-dollar bills upon which Peter Angelos and his sons slumber restfully each night, which are changed on a nightly basis. They may - though I doubt this - be legitimately just scraping by for this season.

I will admit I give Angelos the benefit of the doubt about his spending habits. I think he was watching when Baltimore Ravens owner Steve Bisciotti was cheered as he hoisted the Lombardi Trophy. I believe Angelos wants to win one for Baltimore. More importantly, he wants to be remembered as a guy who won one for Baltimore, not a guy who wrecked a Baltimore institution. He thought he knew better than baseball people for a long time and now he's leaving it in Dan and Buck's hands. I think he would spend, if they tell him spending is wise. I could be wrong, as I have never met the man.

The 2013 free agent market may not have been the time or place to spend, and the 2014 free agent market may not be either. There are other avenues in which to invest to improve the team in the long term. An Adam Jones extension was one, a Matt Wieters extension would be another. It seems the team is investing in these places, some of which will not bear fruit overnight, or even in one year.

What do you think? Considering all of the above, do you believe the Orioles had money to spend this offseason, and if so, should they have spent it?

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