Diamond Sports declined to make its latest rights payment to the San Diego Padres last Tuesday, ending the relationship and leaving the team in a treacherous position. “It could get bad, it could get ugly,” said John Moores, who owned the team from 1995 to 2011. “Some people could get wiped out.”
Not immediately. Commissioner Rob Manfred said Wednesday that Major League Baseball will cover up to 80% of the Padres outstanding rights fee this year, about $32 million. Added to the $20 million the team already received from Diamond, it comes close enough to the $60 million the team expected to avert disaster for now.
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“We arrived at that number as something that would prevent financial distress at the club level, the ability to pay players and those sorts of things,” Manfred said during a bankruptcy hearing in Houston.
After that, the accounting gets muddled. The final seven years of the 20-year, $1.2 billion contract with Diamond are gone, leaving behind a loss in excess of $420 million.
With the missed payment, the local TV rights reverted to the team, and MLB arranged distribution through Cox and DirecTV for this season. MLB intends to make up for the loss of future television rights fees by selling the team’s ballgames directly to local pay TV providers, a source with knowledge of the situation said Friday. Revenues from the monthly cable/satellite/telco-TV subscriptions would be paid directly to the club. Cash derived from future direct-to-consumer streaming packages will also go to the team.
Meanwhile, the team is locked into long-term, backloaded contracts with three players—Manny Machado, Fernando Tatis Jr. and Xander Bogaerts—worth a total of $970 million through the 2035 season. Tatis, for one, has a base contract that pays him $7 million this season but $36 million a year from 2029-34. Add another $288 million is due to Yu Darvish, Joe Musgrove and Jake Cronenworth through the 2031 season.
“I always thought this was higher math,” Moores said. “It just didn’t make any sense. You pay more money to old players than you pay young players. “
Moores and then-team president Jeff Moorad negotiated the TV contract in 2010, about a year before Moores sold the club to a group headed by Peter and Tom Seidler and minority partner Ron Fowler for $800 million. The closing price included a $200 million premium because of the TV deal, Moores confirmed.
The television contract was also backloaded, with more money per year owed in the waning seasons than in the early going, he recalled, which may have led the current owners to structure player contracts the way they have. Seidler and Padres president Erik Greupner didn’t return messages seeking comment.
Moores, who will be inducted into the Padres Hall of Fame in July, knows better than anyone how difficult it could be to replace those lost television dollars.
During his reign, the Padres consistently relied on cash calls of at least $20 million a season to make ends meet. Slashing player salaries might also be part of the solution, which the Padres did through fire sales in 1993, 1999 and 2008. The latter two occurred on Moores’ watch. Otherwise, the Padres would have to raise prices for individual advertisers, or on tickets, food concessions and merchandise.
Sportico estimates put the Padres at 16th best in baseball with $383 million in revenue last season, up from $315 million in 2022, including the average $60 million in local television money. Overall, Sportico values the Padres at $1.87 billion.
However, they’ve nearly maxed out on sales at Petco Park, where attendance is fifth in MLB, with an average of 38,815 tickets sold per game in the 42,445-seat facility. They cut off season ticket sales at a club-record 21,000 this offseason and are already one of seven teams that have drawn over 1 million fans. Of the first 27 home games, 17 were sold out.
The fan support has held up despite an underwhelming start on the field. The 27-31 Padres are in fourth place, 7 1/2 games out in the National League West and on the fringes of earning a Wild Card berth. But management expects to get a bang for all those bucks.
“We felt if we spent money, the fans in San Diego would spend in bigger numbers, tickets, apparel, sponsorships, and show what’s possible,” Seidler said at the end of last season. “We have massively increased our controllable revenue. It’s off-the-charts good.”
Whether that will compensate for the loss of television revenue remains to be seen.
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