Why Would Any Padres Fan Defend Their Current Ownership?

I don't post in the SignOnSanDiego Forums mostly because they're mean and kinda bitter and, well, I kinda have my own blog where people are already mean and bitter so I don't need to double down.

Still, I'll rebut NateDoggSD's latest rebuttal of me (full text in this thread and copied after the jump).

First off, I'll say that before even reading his post, all I could think is that there are people who truly believe that there's a vast conspiracy here. As I understand the conspiracy:

  • Jeff Moorad has conned several multi-millionaires, in to fronting the collateral to buy the Padres
  • As part of this elaborate con, he's convinced John Moores, all of the other owners in the MLB, the City of San Diego and everyone's respective lawyers and accountants that he actually has hundreds of millions of dollars that he does not have.
  • His main plan is to buy the team and then quickly turn it around and sell it again for a tidy profit (because as everybody knows in this economic climate, the value of things unimproved only goes up and up and up)
  • While he owns the team, he's also kicking back to friends and former clients, jobs and favors, not because they're competent players or baseball minds, but only for the simple fact that he knows of these people and presumably, they will pay him back in the future (somehow...)
  • The Padres are currently one of the most profitable teams in baseball and Jeff Moorad, despite being in the process of financing to purchase the team, is not allowed to use that money for anything, but in fact he is using the money to buy an island on hookers to facilitate the transfer of ownership within a leveraged buyout. (A practice that mom didn't use when she bought her house, and therefore must be evil black magic VOODOOOOO)
Have I got that right?

So first off, jbox hates when I do this, but let me just say that it peeves me when people say I don't know anything about the business of sports. Mostly this peeves me because I studied sports business, have a Sports MBA, have consulted with sports teams, and generally taken an interest in understanding the business of sports.

Sure, this doesn't always come off in my posts when I sarcastically make a joke about trashcan liners in an effort to point out that the cost of doing business with a sports team is not only realized on the field.

Also, I find it laughable that people criticize me for not understanding business and yet insist that the Padres not spending more money is a bad thing.

Look over the rebuttal (again after the jump), but pay attention to this (emphasis mine):

But what about that $200 million in team revenues over six seasons that’s being used to complete the purchase? That’s over $33 million a year not being used to improve the team on the field. That’s $33 million that could put the Padres well over $70 million in payroll, and with the new TV deal, over $80 million. It still wouldn’t have been smart baseball to hold onto the Adrian Gonzalez for over $20 million a year. It still wouldn’t have been sound strategy to give Heath Bell $9 million a year over 3 years. However, right now the Padres are hoping to move either Jason Bartlett or Orlando Hudson, because their $5.5 million salaries are too rich for the current payroll. The 2010 Padres won 90 games with a $43 million payroll. Imagine what they could have done with a $75 million payroll.

Sorry NateDoggSD, but I'm not buying it.

In the same paragraph that you accuse the Padres of not spending $33 million a year to improve the team on the field, you say that it would be dumb to have tried to hang onto the two guys that would most obviously have justified the $33 million. Two of the more productive players the Padres have seen in the last decade as well as arguably the two most popular players the Padres had. These are the guys, in a perfect world where nobody else is trying to unreasonably outbid us, that we should have hung onto.

And then you criticize the Padres for trying to move Jason Bartlett or Orlando Hudson, claiming the only reason that the Padres have to get rid of those guys is because we can't afford them.

And the kicker is the last sentence. If we did this with $43 million. What could we have done with $75 million. Or even a billion, it seems to say. Heck if we had a billion dollars, we could win 324 games in a 162 game season.

Imagine that!

But the rest of the post and this paragraph in particular is what annoys me. It all boils down to the fact that Padres Conspiracy Theorists truly believe that dollars spent on major league roster translates directly to wins on the field. Like perfectly. It also boils down to the idea that a player is not going to be worth watching if he hasn't proven his value in the form of a multi-million dollar contract already.

Think about that logic. I want to see good players and good players make a lot of money therefore pay players a lot of money because that means they are good. It's inane logic.

Personally, I'll defend the current ownership because logic like that is indefensible. I wanted to see Adrian Gonzalez here not only for his bright smile and winning personality, but because he's a great player. Heath Bell is a great player.

But ownership says they're too expensive, and I look at stuff like WAR and the Boston Red Sox and I figure, OK. Probably right.

To then make the leap that we can't find a better second baseman than Orlando Hudson for less than $5 million and then tell me that I don't know what I'm talking about?

Ummm....

And for the Padres Conspiracy Theorists out there. I don't think you realize, but the way baseball works is different from the other sports. Players signed out of college and into the pros for the first time are NOT getting their fair wage. That's what I mean by "work the system".

Remember when Jake Peavy was 24 and won 15 games for us? The Padres paid him $750k that year. $750k for production that the Dodgers could not match with Jeff Weaver (13 W, $6.25M), or Odalis Perez (7 W, $5M) or anybody else.

JUST BECAUSE YOU SPEND MONEY DOESN'T MEAN WHAT YOU BOUGHT IS WORTH IT.

I mean, Mom's house (in NateDoggSD's example) was bought for $100k and is worth $350k, BUT MOM DID NOT MAKE $250k. Equity is not profit. Money spent is not money earned. Wins are not bought dollar for dollar.

I can't think of any more different ways to say this and still not have the feeling that SignOnSanDiego Forum will be like, "INCOMPREHENSIBLE!" or "What's this retard talking about?" or "Dude, I bought an issue of Thor for a buck once and turned it around and sold it for $2 so Dex obvi doesn't knw business." Not you, NateDoggSD, but maybe you. ;)

Anyways, whatever. Be conspiracy theorists if that's what floats your boat. Coast to Coast is still on the air late at night from what jbox tells me.

Here is the full rebuttal:

I feel like I’m turning into a conspiracy theorist. Hell, MLB.com Padres writer Corey Brock basically called me one on Twitter recently. This is what Jeff Moorad has turned me into. I believe that Oswald acted alone. I find the TV show Ancient Aliens to be trashier than any reality show on MTV. I don't believe in ghosts. I don’t think the government imploded the World Trade Center towers on 9/11. I'm not a conspiracy theorist. Then Moorad and his ownership group bought the Padres on a ridiculous payment plan, let his brightest front office minds walk in order to promote his Arizona cronies, and started signing players he used to represent in his former career as a player agent. Now I've become so bitter and cynical about the Padres current ownership group that when Jacque Jones was hired to be the hitting coach for the Padres' Low A affiliate in Fort Wayne, I just assumed he was another one of Moorad's boys (he wasn’t, but can you blame me?).

So when Dex over at Gaslamp Ball wrote his "Rambling Defense of the San Diego Padres Ownership Group," it’s safe to say I was destined to write the counterargument and do something I rarely ever do, put effort into stringing more than 2-3 sentences together at any given time.

I’ll start by defending Dex. His post is definitely rambling and off the cuff. Maybe after further thought, he’s realizing that the ownership group of any company generally isn’t paying money out of their own pockets to buy hotdogs or trash can liners, or even to pay employees. Maybe he’s realizing he doesn’t really understand how sports ownership works, how much revenue baseball teams make, and that owners make their millions selling the team for huge appreciation profits and not by taking annual dividends. That’s how Moorad’s ownership group plans to make its money; paying $300 million for a team that’s valued at $500 million, masking it as a $500 million purchase, allowing the team to sustain itself through its own revenues, and then eventually selling the team for hundreds of millions of dollars in pure profit.

Now let’s break it down. Instead of comparing ownership to the lottery, let’s compare it to realty. My parents bought their home in North County San Diego in 1987 for a little over $100,000. Even after the real estate market crash and the lack of recovery that followed, my parents’ house is currently worth around $350,000. That’s almost $250,000 in profit, not including mortgage interest payments. That’s a pretty good investment. Baseball franchises tend to appreciate in a similar way, so purchasing them and holding onto them should net a tidy profit one day. Now let’s go through Jeff Moorad’s Padres purchase, with actual bullet points:

• Jeff Moorad and his investors bought the Padres in early 2009 with an initial investment of $150 million, or a 30% ownership stake in the franchise. • They agreed to buy the team on a 5 year plan, interest free, having until 2014 to complete the purchase and finally own 100% of the team. • Since then, the Moorad ownership group has reportedly increased their ownership stake to 49%. If you set the Padres purchase price at $500 million, then that increase from 30% to 49% amounts to $95 million. • It has been reported that Jeff Moorad is currently initiating a $150 million capital call, in order to gain majority ownership of the team before the January owner’s meetings, ironically being held in Arizona, so that the owners feel like the Padres have stable ownership and will approve their new TV deal with Fox Sports. • If you combine that $150 million investment with the $150 million initially invested by the group, the Moorad group will have invested $300 million, or a 60% ownership stake in the franchise. But if Moorad’s group plans to end up with 100% of the team, where does the other 40% come from? Well, where did that 19% ownership stake come from to get the ownership group to 49%? • Forbes does an annual franchise value ranking for baseball franchises. Though not an exact science, they are the only ones who do this and their report is considered newsworthy every year. • Forbes reported in 2009 that the Padres had an operating income (see: profit) of $32.1 million. Forbes reported in 2010 that the Padres had an operating income of $37.2 million. • If those numbers are true, and the Padres had an operating income of at least $25.7 million in 2011, Moorad’s group could afford to use that operating income over the past 3 seasons in order to increase their ownership stake to 49%. • If they keep up that pace from 2012-2014, when the group is scheduled to complete the purchase of the franchise, they would be able to complete the 100% purchase of the team using a $300 million investment and $200 million of team revenues.

So what does this mean? That if the Moorad group values the Padres at $500 million and are only actually investing $300 million of their own money, they have $200 million in instant equity upon the completion of the purchase, and they did it all, unlike my parents, without having to pay any interest. It’s a savvy business strategy. They took a distress sale, purchased it on a zero interest loan for 60% of its value, and at the end of their purchase will be able to sell a healthy franchise for a tidy profit, or hold onto the team and hope the franchise’s value appreciates, like teams have done historically.

But what about that $200 million in team revenues over six seasons that’s being used to complete the purchase? That’s over $33 million a year not being used to improve the team on the field. That’s $33 million that could put the Padres well over $70 million in payroll, and with the new TV deal, over $80 million. It still wouldn’t have been smart baseball to hold onto the Adrian Gonzalez for over $20 million a year. It still wouldn’t have been sound strategy to give Heath Bell $9 million a year over 3 years. However, right now the Padres are hoping to move either Jason Bartlett or Orlando Hudson, because their $5.5 million salaries are too rich for the current payroll. The 2010 Padres won 90 games with a $43 million payroll. Imagine what they could have done with a $75 million payroll.

Padres fans shouldn’t be defending any of this. They should be outraged. At Moores for putting the team in this position. At Moorad and his group for taking advantage of the situation. At MLB and the other team owners for allowing it to happen. The team on the field, and in turn the Padres fan experience, is suffering because team revenues are being used to purchase the team, and not only is nobody of any significance doing or saying anything about it, people like Dex at Gaslamp Ball are defending the practice.

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