San Diego Padres Baseball Club L.P.

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San Diego Padres Baseball Club L.P.

9449 Friars Road
San Diego, California 92108
U.S.A.
Telephone: (619) 881-6500
Fax: (619) 497-5339
Web site: http://www.padres.com

Private Company
Incorporated: 1968
Sales: $106 million (2005 est.)
NAIC: 711211 Sports Teams and Clubs

The San Diego Padres Baseball Club L.P., headed by software millionaire John Moores, owns the San Diego Padres of the National League of Major League Baseball. Since its start as an expansion team, no major league team has had a worse winning percentage. A perennial last place club, the Padres have won just two National League championships and never achieved a World Championship during its history. The team has also been a consistent money loser, due in some part to the unique geography of its market. With desert to the east, the Pacific Ocean to the west, Los Angeles to the north with its highly popular Dodgers and American League Angels, the Padres have been forced to look to the south to Mexico to win new fans and generate the revenues necessary to make it competitive—and one day, perhaps, profitable. A positive development for the club was the 2004 opening of a $450 million state-of-the art baseball park, Petco Park. The project was fraught with delays and in order to get the facility built, the Padres agreed to become participants in real estate development projects surrounding Petco.

EARLY 20TH-CENTURY ORIGINS

The first professional San Diego baseball team to don the Padres name was the Pacific Coast League franchise that moved to the city from Los Angeles, where it had played as the Hollywood Stars. A last place team in 1935, the Stars suffered from poor attendance, and their financial condition worsened when their landlord at Wrigley Field, another PCL team, the Los Angeles Angels, decided to double the rent. Instead the Stars owner took his club south, signing a deal with the City of San Diego in January 1936. The team went from being Stars to Padres but remained also-rans. About the only thing noteworthy about the Padres in its early years was the presence of a 17-year-old player named Ted Williams, who in December 1937 was sold to the Boston Red Sox and begin a hall-of-fame career.

San Diego, at the time, was far removed from Major League Baseball. The PCL had roots older than the American League, and on the West Coast around the turn of the century it was considered to be of major league caliber. That would all change when the established National League and upstart American League settled a war between themselves by signing the "National Agreement" and formed Major League Baseball. In effect, they declared every league but their own to be the minors, the players of which they were free to "draft"—or steal, from the perspective of leagues like the PCL. Eventually everyone was bullied into sign-ing on, but as a result the western part of the United States was denied major league baseball because. Until the 1950s there were no major league teams west of St. Louis, but that changed when the Boston Braves moved to Milwaukee in 1953 and enjoyed a tremendous surge in attendance. With the advent of reliable air travel, the travel restrictions that had prevented coast-to-coast major league baseball evaporated and club began to look to fast-growing West Coast cities to relocated their franchises. In the most significant moves, the Brooklyn Dodgers claimed Los Angeles and the New York Giants moved to San Francisco.

NEW OWNERSHIP IN 1955

While Major League baseball was moving west, the San Diego Padres were changing ownership. In 1955 the club was sold to Jim Lane, president of Westgate-California Tuna Packing, but he was really just a front for a wheeler-dealer named C. Arnholt Smith, the man who would one day bring Major League baseball to San Diego. Smith's life was a rags to riches to prison story. Born in Walla Walla, Washington, in 1899, Smith moved to San Diego as a child, where he dropped out of high school to work in a grocery store and later became a bank messenger. In 1933 he managed to scrape enough money together to acquire a controlling interest in the United States National Bank, and around it he would build a financial empire that would include Westgate, a conglomerate that at its height controlled 60 companies worth $2 billion, including a shipyard, real estate developments and Yellow Cab franchises. His wealth also brought him into the sphere of politicians, in particular Richard Nixon. In 1946 he supported Nixon's election to Congress, and 22 years later was a major fundraiser of Nixon in his bid for the presidency and so close a confidant that he watched the 1968 election results on television with Nixon in his New York suite.

When Smith wasn't hobnobbing with politicians, building his business empire, or promoting his beloved San Diego, he was trying to become a Major League baseball owner. In 1960 the National League and American League agreed to expand, each adding two teams. Smith tried to land the franchise slated for Los Angeles, which would become the Angels, but lost out to Cowboy crooner Gene Autry. Several years later, however, baseball was ready to expand further. With the help of former Dodger general manager Buzzie Bavasi, he succeeded in winning one of the four expansion teams slated to begin play in 1969. Part of San Diego's appeal was that it already had a large stadium. Local sports editor Jack Murphy had led the campaign for a new stadium to house the San Diego Chargers American League football team. The 50,000-seat facility opened in 1967 as San Diego Stadium and was available for the Padres when they began play in 1969. After Murphy died in 1980, the stadium would become known as Jack Murphy Stadium. In 1997 Qualcomm would buy the naming rights.

The Padres were not as popular with local baseball fans as Smith and Bavasi had hoped, however. Perhaps some of that disinterest was caused by the team's brown and tan uniforms, which Smith insisted were colors he liked and not an attempt to emulate the look of a real padre. Years later when Steve Garvey signed as a free agent and first tried on the uniform, he commented, "I look like a taco." A more likely reason for poor attendance was the club's dismal play. The established major league teams were only willing to part with older players and marginal talent in stocking the expansion teams, and so it was no surprise that the Padres and the other new National League team, the Montreal Expos, finished with 52 wins and 110 losses in 1969. Whatever the reasons, Padres' attendance was little more than 500,000, the worst in both leagues and a far cry from the million mark the club needed to reach to break even.

KEY DATES

1936:: Pacific Coast League's San Diego Padres begin play.
1955:: C. Arnholt Smith buys Padres.
1968:: Smith wins National League expansion franchise for San Diego.
1969:: San Diego Padres begin play in National League.
1973:: Ray Kroc acquires Padres.
1983:: Kroc dies and ownership passes to wife.
1990:: Tom Werner-led group acquires team.
1995:: John Moores buys Padres.
2004:: Petco Park opens.

During each of the first five years of its existence, the San Diego Padres won the fewest games in the National League and drew the fewest fans in all the majors. The team's futility, however, would soon be overshadowed by the cloud of scandal that enveloped the team's owner. Once named Mr. San Diego by a grateful community, C. Arnholt Smith saw his financial empire crumble in 1973. In reality it was a house of cards, with Westgate-California propped up by United States National Bank. Smith's shady dealings came to light when the bank, saddled with an outstanding debt of $400 million, failed in 1973. At the time, it was the largest bank failure in the history of the United States. Smith soon faced charges of grand theft, fraud, and income tax evasion. He was eventually convicted of income tax fraud, grand theft, and embezzlement, and sentenced in 1979. After five years of legal maneuvering he managed to have his sentence reduced to one year because he was not expected to live much longer. And so at the age of 85 he was sent to a Federal honor farm where he served about seven months, spending the time mostly tending roses. Once again Smith's accounting proved elusive: He did not die until June 1996 at the age of 97.

As Smith's difficulties were unfolding in 1973 he attempted to cut his losses with the Padres by selling the team for $12 million to a buyer who planned to move the franchise to Washington, D.C. Although the city of San Diego threatened to sue, the deal appeared so certain to go through that in December 1973 team files and equipment were packed, new Washington uniforms were made, and even baseball cards of Padre players in their new Washington Stars' uniform were printed. At the eleventh hour Ray Kroc, the man behind the McDonald's fast food chain, stepped in to buy the club and keep it in San Diego.

Kroc inherited an inept baseball team, but he was not a man to blithely accept failure. At his first home game as owner, Kroc, frustrated by the Padres poor play, seized the public address microphone and exclaimed "I've never seen such stupid ball playing in my life." The players were angered by the outburst, Major League baseball insisted that Kroc apologize, but the fans loved the candor of the new owner, who was committed to give them a better entertainment product. That product did not, however, include more wins, as the team again finished last in its division, but it did feature novelty. The day of Kroc's outburst was also the debut of a new mascot, the KGB Chicken, later known as the San Diego chicken, and eventually just The Chicken. He was highly entertaining and the forefather to scores of mascots that cropped up in professional sports over the years to come. In 1974, for the first time, the San Diego Padres drew more than one million in attendance.

Under Kroc's ownership, the Padres added better players and finally rose above last place, and in 1978 posted its first winning record. However, the team returned to the bottom of the standings in 1980 and1981 before once again gaining respectability. The Padres were on the verge of success when Kroc died in January 1984. His wife Joan became owner of the Padres. Later that year, the team won the National League West and defeated the Chicago Cubs for the National League pennant before losing to the Detroit Tigers in the World Series. Nearly two million fans came to Jack Murphy Stadium to watch the Padres that year, and another 2.2 million came out the following season, but the Padres were once again descending into mediocrity. In 1987 they returned to last place.

In the late 1980s the Padres improved, finishing second in the National League West in 1989, and Joan Kroc decided now was the time to sell the team. There was no shortage of suitors, including Sid and Jenny Craig, owner of Jenny Craig Weight Loss Centers; an investment group head by former player Steve Garvey; and Los Angeles Lakers owner Jerry Buss. The successful bidder in April 1990 was a group of 15 investors headed by Tom Werner, a television producer of such popular television situation comedies as The Crosby Show and Roseanne.

New ownership took over at a difficult time for baseball. Player salaries were escalating rapidly, and it was becoming increasingly difficult for small- and medium-sized market teams like the Padres to compete against the likes of the New York Yankees, New York Mets, and Los Angeles Dodgers, which received far more money in their radio and television contracts. San Diego tried to generate extra revenue by selling 50 home games on Cox Cable as a pay-per-view, but the team was limited in its choices given its location, surrounded by desert, water, and Dodger fans. The team began looking to Mexico for a much-needed source of revenues, but fans of the team south of border found it difficult to take in a game. Tickets were too expensive for the market, there were delays at the border, and group transportation was not available. The Padres would not make significant inroads into the Hispanic market until a new ownership team took charge.

1994 BRINGS ANOTHER OWNERSHIP CHANGE

The Werner group did not have the deep pockets necessary to subsidize the perennial money-losing Padres. In the summer of 1993 the club conducted what many called a fire sale, unloading all of its stars, with the exception of hometown hero Tony Gwynn. When it was over the Padres had slashed its payroll to $10.3 million, the lowest in the majors. The Padres also finished once again in last place, 43 games behind first place Atlanta. In December 1994 a group headed by Larry Lucchino and John Moores, the former supplying the baseball savvy and the latter the cash. bought the Padres. Moores was worth an estimated $400 million, a fortune he derived from BMC Software, which he founded in Houston in 1980. He would need that largesse to keep the Padres in business. In his first year as owner, the team lost $17 million, but a large portion of that money was the result of free agent spending, which at least gave the Padre's longsuffering fans some hope. They were soon given something even more tangible when in 1996 the team surprised everyone by eclipsing the Dodgers on the last day of the season to win the National League West title. They were soon dispatched by the St. Louis Cardinals in the playoffs, however.

In tandem with improvement on the field, the Padres made strides at the gate, especially with Hispanic fans. The team hired a director of Hispanic Marketing and began addressing the problems Mexicans faced in attending Padres' games. In conjunction with Mexican Beer company Tecate, the Padres created the "Domingos Padres Con Tecata" program, which provided Mexican fans with a ticket and bus transportation to Sunday home games at a cost that was less than the regular price of a ticket. Moreover, the buses passed through the border at a special bus lane, eliminating the delays that had previously troubled fans. As a result of this program and better play on the field, the Padres saw their attendance double from 1.1 million in 1995 to 2.2 million in 1996.

But even two million in attendance was not sufficient to prevent the Padres from continuing to lose money. What the team needed in order to survive in San Diego were the revenue streams that came with a new ballpark. Moores publicly expressed that view in 1996 and a year later Mayor Susan Golding's task force charged with looking into the matter agreed with him. The city and the ball club now began to work together to develop a new baseball-only ballpark in downtown. In 1998 San Diego voters approved the creation of a 26-block redevelopment area to build a $400 million ballpark. It certainly didn't hurt that the Padres enjoyed their finest season, winning 98 regular season games, then beating the Houston Astros and Atlanta Braves before falling to the New York Yankees in the World Series. Nevertheless, the club still lost around $7 million, providing a further rationale for a new ballpark.

Construction on the new facility was begun in 1999 but soon halted because the city had not completed an environmental study. It would be just one of a number of delays caused by lawsuits. In order to see the project to completion the Padres, along the way, would have to invest more money in the redevelopment of the area, but finally in 2004 the Padres new home, called Petco Park (the result of a $60 million naming fee paid by the San Diego-based Petco pet supply company) opened. In addition the Padres and Cox Cable joined forces to launch a new digital cable channel devoted exclusively to the Padres.

In its inaugural season at Petco, the Padres sold 20,000 season tickets, far better than the previous high of 12,800 in 1983. It was also continuing to succeed at courting Hispanic fans. Moreover, the Padres were fielding a playoff-caliber team. For the first time in its history, it appeared the team had a chance to become a profitable franchise.