Tatis Deal Highlights Big-Market Ambition of Padres’ Owner Seidler
Peter Seidler is a recent two-time survivor of non-Hodgkin lymphoma, and at 61 years old, the San Diego Padres owner knows there’s no time like the present. The challenge is to win the club’s first World Series sooner rather than later. It helps explain Seidler’s decision to continue to challenge the defending-champion Los Angeles Dodgers by signing young shortstop Fernando Tatis Jr. to a 14-year, $340 million contract.
“We’re not a small-market franchise,” Seidler said in a press conference this week. “We represent the eighth largest city in America, and that’s the kind of trust we have with our great city, our fans and the people that support us. We ping-pong back and forth with the city, meaning we hold up our end of the bargain. They’ve proven for years their support for this franchise. You talk about trust; that’s how I view it right now and for a long, long time to come.”
Let’s peel that back a little bit. With a population of 1.4 million, the city of San Diego proper is the eighth largest in the country and the second in California behind Los Angeles, at 4 million. As a media market, San Diego is ranked 27th in the nation and 21st among Major League Baseball’s 30 teams, while L.A. ranks No. 2 in both categories.
There’s no room to expand there. Though San Diego County, at 4 million, is the fifth largest in the country, it has these restrictions: the Pacific Ocean to the west, the mountains to the east, Mexico to the south and Camp Pendleton, the U.S. Marine Corps Base, to the north.
All attempts to mine avid baseball fans from Mexico have been futile because of the vast differences in economies. One U.S. dollar is currently worth 20.55 Mexican pesos. The average daily wage for working Mexicans along the northern border is $9.51, while the average ticket for a Padres game in 2019 was $48.
Business-wise, there are only two Fortune 500 companies in San Diego: Qualcomm, the communications giant at 119, and Sempra Energy at 280.
Consequently, there’s not a lot of big business dollars to be spent at Petco Park, and accordingly it opened in 2004 with only 58 luxury suites and 5,000 club seats among its capacity of 42,445. That was by design.
The club’s revenue of $299 million for 2019, the last season before COVID banished fans from MLB ballparks, was its highest to date, going all the way back to the franchise’s inception in 1969. Gate receipts of $63 million were a good chunk of that, based on a strong attendance of 2.4 million and 29,585 a game, 14th in MLB.
Needless to say, the Padres have never been a money-maker, which may explain why there hasn’t been a San Diego-based businessman to own the club since founding owner C. Arnholt Smith. Smith, a banker who was involved in everything from tax fraud to embezzlement, eventually went to jail years after trying to sell the club to Washington interests in 1974.
At the time, the Padres were saved for San Diego by McDonald’s hamburger magnate Ray Kroc and his wife, Joan, who both hailed from the Midwest. What followed was a group headed by Hollywood television producer Tom Werner, Texas software magnate John Moores, and now the formerly Los Angeles-based Seidler brothers—Peter and Tom—the grandsons of Walter O’Malley and the nephews of his son, Peter. The elder O’Malley moved the Dodgers from Brooklyn to Los Angeles in 1958, and Peter inherited the franchise upon his death in 1979.
Now Seidler is trying to compete for a championship with the Dodgers of Guggenheim Baseball Management, owned by a hedge fund that controls $500 billion. Since last July, the Dodgers have spent $518.5 million on four players: Mookie Betts, Trevor Bauer, Justin Turner and Blake Treinen. They have won the National League West eight years in a row.
Even though Seidler owns a Los Angeles equity firm with a net worth of $3 billion, he doesn’t have that kind of wherewithal, considering the fact that the club has lost in excess of $100 million since COVID shut down the sport last March 12 and limited each team to 30 home games sans fans last season.
“Yeah, it’s a pandemic, and the industry lost $2.9 billion last year,” Seidler said. “We never thought we’d be talking about a pandemic, and hopefully we’ll never have another one. We were built to be flexible, so we have the opportunity to be opportunistic when it makes sense. We make decisions with 10 years in mind, not year-to-year-to-year, although we’re cognizant of the current year.”
And this season, which will begin on April 1 with limited or no fans still in the stands, the Dodgers, with a league-leading $255.5 million tab, are $45.5 million above MLB’s luxury-tax threshold of $210 million.
The Padres are trying to keep pace. With the signing of the 21-year-old Tatis they are tagged with $86.1 million for luxury-tax purposes this season for four players, including Manny Machado, Will Myers and Eric Hosmer. Their luxury-tax hit for those four players alone is more than the entire payrolls of 12 MLB teams going into the season, and their 40-man roster luxury-tax payroll is $183.2 million.
On a cash basis, Tatis will earn $1.72 million, giving the Padres some room to maneuver this season. The contract has a tax value of $24.3 million for 2021, but is eventually scheduled to pay him $36 million a season in cash and tax value over the last six years of the deal.
To be sure, the Tatis contract is a huge public relations boon for the Padres, the only major pro team in town after the 2017 departure of the NFL’s Chargers to Los Angeles. But on a performance basis it doesn’t improve the team one iota, because Tatis was locked in for at least another four seasons.
The Padres were purchased in 2012 for $800 million and now have committed $784 million over the long-term to three players since signing Hosmer in 2018. The franchise was valued pre-COVID at $1.45 billion, meaning financially these line items don’t necessarily add up.
Seidler said he’s excited about the direction of the franchise. He’s healthy now, and “all is good,” he said.
“I believe in the game. I believe in our national pastime,” Seidler added. “I could not be happier with where we are business-wise, and baseball-wise. I think the game is only going to get better and stronger over the years, and the pie is going to grow. That’s a big part of how we view things. Is 340 the right number in the case of our young superstar? [No matter], we’re going to continue to build this franchise.
“And yes, I’m well aware of the things immediately in front of us, the pandemic and other things. We’re going to find a way to work through those things. I’ll speak for the people of San Diego. There’s nothing we can’t do.”
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