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Padres Ticket Sales Must Hit 2.1 Million for Break-Even Year

March 18, 1986|BILL RITTER | San Diego County Business Editor

There is a price to success. Just ask the San Diego Padres--not the players, but the front office.

While the team adjusts to off-season controversy, a new manager, and a disappointing 83-79 record and a tied-for-third-place finish in 1985, the executives who run the club face an equivalent financial challenge.

To break even, the team must sell 2.1 million tickets this season. That's a tough goal because, until last season--which followed a first-ever World Series appearance and the subsequent fan euphoria--the team never drew 2 million people.

The key to generating profit is for the team to be a contender, according to Richard Freeman, Padres vice president and chief financial officer.

The 17-year-old club has operated in the black only two years--1985, when it made slightly less than $1 million in pretax income, and 1984, when pretax earnings reached $2.5 million, thanks nearly entirely to revenues generated in the National League Playoffs and the World Series.

The Best Season

Still, "from any business standpoint, 1985 was the best season in team history," Freeman said.

(The team is a Sub-S corporation, meaning that its profits are pretax, with taxes assumed by the owner, Joan Kroc.)

It will be a tougher road in 1986, when operating costs will hit all-time highs.

Salaries will total $12 million, up from $9.75 million last year and $7.5 million in 1984. The increase is mostly because of escalator clauses in existing players' contracts, Freeman said.

Revenues in 1986 are projected to reach $30 million, a record, up over the more than $26 million of last year.

About half the revenue increase is directly tied to a $1 per-seat ticket increase for seats in the field, plaza and loge levels, Freeman said.

About half of the team's revenues is linked to attendance, so fielding a winning team becomes all-important, he said.

Broadcast Revenues

A larger chunk of 1986 revenues will be generated from radio and television broadcasts of Padres games, Freeman said. About $3.3 million will be garnered from the broadcasts, a substantial increase from last year's $2.5 million.

Virtually all of the increase will stem from a new four-year contract with KFMB AM radio. Under terms of the agreement, the Padres will now sell their own radio advertising. Previously the radio station simply paid the team for the broadcast rights and sold advertising with its existing sales staff and pocketed the proceeds.

The change is an attempt to "maximize our revenues . . . and gain control that we wouldn't otherwise have," Freeman said.

Several other teams--the Dodgers, Braves, Reds, Astros and Brewers--employ this in-house sales method, and Freeman said the team "did a lot of analysis and work" before deciding on the change.

Jim Winters, Padres director of broadcasting who coordinated the Cincinnati Reds' in-house radio sales effort for 12 years, will be a one-person sales staff.

Because of the complexities of selling television air time and producing the ads, only the Dodgers currently sell a portion of their television advertising.

4-Year Contract

No decision has yet been made whether to use a similar sales technique for television advertising, team officials said. The club is in the last year of a four-year contract with Channel 39 television.

The Padres may be feeling the effects of a less-than-successful season last year as well as the controversy involving departed manager Dick Williams. Season ticket sales total less than 17,000 so far, down more than 6,000 from this time last year, Freeman said.

Most of the drop-off represents fans who bought season ticket plans in mid-1984 to become eligible for playoff and World Series seats.

The Padres will garner an undisclosed but apparently modest amount of money from its contract with Cox Cable San Diego, which televises half of the team's home games on a pay-per-view basis.

About 18,000 homes subscribe to the games, an impressive number but far below the figures that were touted five years ago.

"Cable isn't the economic savior of baseball," Freeman said. "People were predicting an economic windfall five years ago, but it didn't happen."

Nonetheless, Freeman maintains, pay-per-view is a "good concept" and several other teams--including the Dodgers, Giants, Reds and Cards--now offer pay-per-view.

Although dealing with numbers isn't new to Freeman dealing with baseball is.

The 42-year-old Iowa-raised accountant was "always a fan, but never a baseball nut" before he joined the Padres in 1981. A former treasurer of Central Savings & Loan Assn., it was Freeman who helped write the club's first-ever financial plan for then-owner Ray Kroc.

"But now I'm into baseball; it's never difficult for me to go to a game," he said.

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