FIRST TIME EVER TEAM CAPS SEASON TICKET SALES AT 24,000.
Big-spending Padres have made themselves into one of MLB's 'haves'
GUEST BLOG / By Kevin Acee, reporter, San Diego Union-Tribune— The unthinkable is happening. The San Diego Padres, who play in Major League Baseball's fifth-smallest media market, are taking in so much money that they expect to for the first time ever be a payor into the league's revenue sharing program.
"I think it's a validation of the approach that if you invest in the team on the field and you create a compelling and winning product, the fans will respond," Padres CEO Erik Greupner said last week. "I think that was always in the forefront of Peter's mind when he initiated that strategy."
Padres Chairman Peter Seidler declined to comment this week. His thinking is that no one wants to hear him talk about money. Seidler instead is putting his money where his mouth is.
The Padres will begin spring training this week in Peoria, Ariz.- the first of four report dates is Monday - with a payroll that ranks third in Major League Baseball behind only the two New York teams, the Mets and Yankees.
The Padres' payroll ranked last in 2011, 27th in 2017 and 29th in 2019. While teams do not make their finances public, multiple sources confirmed that based on projected 2023 revenue, the Padres anticipate contributing in '24 to the fund that helps subsidize teams in smaller markets (clubs that due to their location ostensibly don't generate as much revenue).
The Padres have long been a revenue sharing payee along with the Marlins, Rays, Pirates, A's and other "small-market" teams. The year before the ownership group led by Ron Fowler and Seidler bought the team in 2012, the Padres were the largest revenue sharing recipient.
It was believed by many that there was no way a team like the Padres could ever join the ranks of payors. The team, under Fowler's stewardship, spent much of 2016 to '19 trimming its sizable debt, which did help the organization spend more freely and borrow at better rates for a time.
Seidler took over in November 2020, and the team immediately embarked on a remake of the roster that launched them into several new frontiers. The Padres' increased revenue stems largely from ticket and sponsorship sales, for which demand and price have increased as the team has advanced to the postseason two of the past three seasons and continued to add star players.
Coming off last year's appearance in the National League Championship Series, the Padres capped season ticket sales at around 24,000 for this season and are projecting a record attendance of more than 3 million fans at Petco Park in 2023. "The ultimate validation involves winning a World Series championship," Greupner said. "So (increasing revenue to this level) is validation insofar as the investment in the team and the investment in the ballpark and the ballpark experience is yielding increased revenue - really record increases in revenue. But we're not doing it to increase revenue. It's all a means to an end."
Around baseball, the Padres' spending has caused consternation among many team owners. Seidler does not possess anywhere near the personal wealth held by Mets owner Steve Cohen, whose estimated net worth is by far the largest of the any MLB owner. Additionally, in contrast to New York's ranking as the nation's largest media market, San Diego ranks 27th.
There are 20 MLB teams playing in larger population centers than greater San Diego. "What the Padres are doing, I don't 100 percent agree with," Rockies owner Dick Monfort said recently. He went on to contend the Padres' roster has significant holes and intimated they will need to spend even more.
The overall tone of Monfort's comments to the Denver Post last month seemed to essentially be "Why bother?" That is in contrast to Seidler's "art of the possible" assessment the day after the Padres traded for Juan Soto last August.
A frequent question posed to Padres executives by others in the game goes something like this: "How the hell are you doing this?" Seidler is fond of touting that the "business of baseball is good." He is optimistic about the direction of MLB as a whole and where his franchise is headed. While the anecdotal evidence produced by the Padres to date indicates it is possible for a small-market team to compete financially with most of the big-market clubs, the naysayers are not entirely lacking foundation.
"I think it's important to note that the strategy is not without risk," Greupner acknowledged. "If it were knowable before pursuing the strategy how it would turn out, then it really wouldn't be a risk. It just would be something that everybody - if they if they have access to the resources - would just do it."
The reality is that a lot of money is coming in but that the Padres are at this point paying out even more. It isn't too far off to say that while the Padres have a business plan and are justifying their spending based on their projections regarding revenue, they are also not quite sure where this course will take them.
"Of course, you've got to get to profitability," Greupner said. "And I think we're in that transitional phase right now of really learning and understanding how much we can grow revenue." What is unknown is how high the payroll could go if the Padres win 110 games and/or a World Series title and even more fans and sponsors want in.
What everyone in the know inside the organization agrees on is that some level of success is necessary to sustain spending at anything near this level. "We have to play winning baseball, and I would say that we need to be year in and year out in the mix for the playoffs," Greupner said. "Not to say that we absolutely have to make the playoffs every year. You know, there's years that any number of things can go against you.
Whether it's injuries are other things that are unforeseen. But more often than not, we expect to be putting a team out there that's capable of making the playoffs and pursuing a World Series championship." Greupner repeatedly stressed the notion that the Padres' roster has to at some point transform into something different than it has become in the past couple years- with five players making at least $20 million (tied with the Yankees for most in MLB), 10 players making at least $10 million (two fewer than the league-leading Mets) and 13 players making at least $6.5 million (one fewer than the Mets).
"To get to that optimal state in our market, it is going to require a greater contribution coming from our farm system," Greupner said. "We're going to need to have a payroll, have a team that is year in and year out supportable in our market without having to continue to increase spending on payroll."
Padres President of Baseball Operations A.J. Preller, who used the organization's abundance of prospect capital to swing significant trades for veterans and used ownership's money to pay those players, contends this just happens to be the moment the Padres are in based on how those deals came together.
"Just because right now we're carrying a top-three payroll in the game, that doesn't mean that for the next three years, four years, five years it's gonna be exactly that level," Preller said.
"You go off your talent, your team and what we think is the best mix for us to win." The Padres are likely three years away from their current top prospects - such as Jackson Merrill, Dylan Lesko and Ethan Salas - contributing to winning and payroll paring.
But the club does have some flexibility in the coming years with big contracts coming off the books. "We're in the process of making hay while the sun is out to get the very most out of the team that we're going to have on the field this year and the excitement around it," Greupner said.
"Is it a two-year plan? Is it a three-year plan? Is it a five-year plan? As far as I can see ahead of us, the plan is to try to remain competitive, to try to put that team on the field every year that has a realistic chance of making the playoffs and competing for a World Series championship.
"We've been building payroll over a number of years and also invested in the ballpark experience. And all aspects of the ballpark experience. You're just starting to see now the intersection and culmination of those investments translating into increased attendance, increased revenue."