Wednesday, August 29, 2012

The $200-million take

I asked new Padres boss Ron Fowler if it's true: Did $200 million in Padres TV money go out the door when John Moores finally sold the team?

"Yes, it's true," Fowler said.

And, regarding Padres TV money being diverted from the club, what if Jeff Moorad's group had bought the Padres from Moores last January?

"We didn't anticipate that being the case if the Moorad group had been allowed to close," said Fowler. "But that decision was made well above my pay grade."

The Padres today announced Fowler as their control owner, the role Moores had filled since 1994. Fowler, the former San Diego Sockers owner, teamed up with the O'Malley family and others as part of the $800 million purchase approved by MLB owners two weeks ago and celebrated today at Petco Park.

Previously, Fowler was part of Moorad's group, which, per its agreement reached with Moores in 2009, expected to complete its $500 million purchase last winter.

The Moorad bid drew strong opposition from a few owners, most notably White Sox chairman Jerry Reinsdorf, a heavyweight in ownership circles.

Moorad, who needed approval from 75 percent of the other owners, withdrew his bid in March, also stepping down as CEO.

Say what you will about Moorad's stewardship potential, having an additional $200 million in TV money probably would be a good thing for a ballclub, especially a ballclub located in a bottom-five TV market.

"We are reacting to it," Fowler said.

After Moorad exited, Fowler could've chosen to cash out his stake, at a potential big gain. Moores had raised the sales price to $600 million, the amount he first targeted in negotiations with Moorad in 2008. With TV money pouring into the baseball industry, franchise values were soaring.

Fowler decided to align with the O'Malleys, even if it meant putting more of his own money into the bid.

 "We feel comfortable we have what we need to run this ballclub and run this ballclub in a competitive manner," he said.

When Moores also claimed a chunk of the $1.2 billion money due the Padres from  their 20-year deal with Fox Sports San Diego, the would-be owners didn't panic.

"It was not a surprise," Fowler said. "The focus was, 'OK, what do we have, can it work? Can it work effectively?'

"We made the informed decision that, yes, we can make it work."

Moorad, giving ammo to his foes, initially had targeted the club's TV windfall to fortify his purchase. This infuriated other owners such as the Angels' Arte Moreno. Months later, in December, when his group sent $152 million into escrow, the final payment to buy the team, Moorad warranted that he'd not taint his bid with any TV money or use TV money to pay back any of his partners. Whether his initial mis-step was fatal is unclear.

Not long after the for-sale sign went back up, so did the franchise's market value. (As for Moorad, if he had a number of shares in the club, his consolation prize may be a large stack of cash.)

The actual quality of the product seemed irrelevant to the Padres' rise in franchise value. The Padres hadn't sniffed a playoff berth in three of the last four years. The farm system moved up the rankings,  thanks in part to the team trading off its best player, Adrian Gonzalez, holding extra draft picks and picking high in the draft because of poor win-loss records.

In Moorad's two full calendar years as Padres CEO and Vice Chairman, the team spent less money on ballplayers -- major league payroll combined with the amateur markets -- than any of the other 29 clubs, according to a study by one front office.

The Padres started out 19-40 this season and halfway through had their worst yearly TV ratings on record.

Compensated at more than $20 million per year, Bud Selig, the commissioner of baseball, can point to the $800 million sale of the small-market Padres as proof that his industry is booming. Only three years ago, the big-market Cubs sold for $845 million. Selig's bosses, the owners, may hyperventilate at the prospect of putting their clubs up for auction.

As for the $200 million in TV money leaving the Padres, perhaps it's best thought of as only one piece in a complicated puzzle. At least, that's what I gleaned after asking a few questions, on the record, to an MLB official at today's introductory press conference for the new Padres owners.

"I understand that scenario A had this, and scenario B  has this, and it seems scenario A has $200 million more dollars, so I understand what you are asking," said Laurel Prieb, V-P of MLB's western operations and special projects. "But I would think that MLB would tell you to look at each case on its own merits, and scenario A, it wasn't a signed purchase back in January for a variety of reasons, and that one went by the wayside.

"This one is looked at it on its own merits. Ownership is looked at on its own merits. It's looked at as the foundation being very solid, and one that will take the franchise forward. You really look at it at that basis."

3 comments:

  1. Hrm...

    'I asked new Padres boss Ron Fowler if it's true: Did $200 million in Padres TV money go out the door when John Moores finally sold the team?

    "Yes, it's true," Fowler said.'

    Sure. Went out the door. To Moores? No. To the owners, proportionally according to their percentage owned. Or, rather, to all the owners who sold their share of Padres, except for those who held on, at least some of whom increased their positions, as Fowler said they too wrote checks.

    The fact that several of the Moorad group remained on board means that their portion -- of the full $800MM -- did not go out the door. But, in some abstract sense (this whole subject is a massive case of abstract), yes, it all went "out the door". Some came right back in. Those are my personal favorite dollars.

    If the price was $700MM, it would've meant even less went out, even with the same "it all goes out, but some really stayed in" dynamic.

    I had a friend in high school who, at one point owed me $10 while I had some had managed to simultaneously owe him $5.

    I said "Give me $5 and we're even."

    "No," he said, "Give me $5, then I'll give you $10."

    Yeah, it's like that.

    I have no problem with Moores declaring that the $200MM up-front money raised the value of the club by exactly that, and that was the price. Which is what everyone is saying. To say that Moores got %50.xx of $600MM plus $200MM is ludicrous. Doesn't mean it didn't happen, but I don't see any evidence that it did.

    Now THIS is a work of art:

    "I understand that scenario A had this, and scenario B has this, and it seems scenario A has $200 million more dollars, so I understand what you are asking, but I would think that MLB would tell you to look at each case on its own merits, and scenario A, it wasn't a signed purchase back in January for a variety of reasons, and that one went by the wayside. This one is looked at it on its own merits. Ownership is looked at on its own merits. It's looked at as the foundation being very solid, and one that will take the franchise forward. You really look at it at that basis."

    Content-free communication. Awesome. How do you even respond? You don't, you report it verbatim (thanks) and wait for the moment of stunned silence just before the slow-build crescendo to a standing ovation.

    ReplyDelete
  2. $98 million of the $200 million in TV money went to Moorad and his partners, including Fowler. Either way, money that was supposed to make the Padres become more competitive was siphoned off - in a mafia-like slick move. The Padres can never seem to win...even when the team sells for the 5th most for a sports franchise ever.

    ReplyDelete
  3. But Fowler didn't sell; he retained his share (and, apparently, bought some more as well). Same with the others who stuck around. So some of the money stayed in. I just wonder how much.

    ReplyDelete