How do the Padres begin to mine enough value from one employee, Manny Machado, to justify a 10-year, $300 million contract? How do they leverage the four-time All-Star's revenue-swaying power to ensure the business side of the transaction makes sense?
The questions, simple and direct. The answers, complex.
In a normal multimillion-dollar business transaction, there would be line-by-line budgeting and accounting to not only recoup the investment, but spark profit. The world of major professional sports, however, operates differently.
If owners summon the financial will to win, heart can sometimes outmaneuver head _ squeaky clean math be damned.
"The No. 1 priority for us is to win and that's defined as winning a world championship," Padres managing partner Peter Seidler said. "The money side of it comes second. Manny's a giant, rarely-available piece of the winning equation.
"Financially, obviously having him in San Diego will improve our revenue. It will sell tickets. It will buy us sponsors. It'll increase ratings on our cable TV channel. To what extent? It's all gut feel and there's no precise way to forecast it like you might have in other businesses."
The Padres understand the arguments for and against tackling the largest free-agent contract in the history of American sports. But the franchise is not burning the books in a wildly unchecked spending spree.
When divorced from the competitive baseball portion of the discussion, the Padres formulated a patient and calculated approach to creating more and new revenue along the way.
Start with ticket sales.
"It's about $1 million, over and above what our projections were (before signing Machado)," Chairman Ron Fowler told the Union-Tribune. "The biggest element is attendance. You've got to put butts in seats and all that stuff will come together. It's a long-term investment and that's how we look at it."
The Padres, as detailed last month by the U-T's Kevin Acee, also restructured debilitating financial debt inherited from previous owner John Moores. Refinancing allowed the club to decrease interest payments by upwards of $8 million annually. They lowered their minimum payment on the principal. They repositioned their line of credit at a far lower interest rate.
All of it created a cocktail of flexibility, allowing more resources to shift to baseball payroll. It's $1 million here. It's $8 million there. It's all the millions worth of ripples Machado will spur if performance and winning follow.
And it's certainly an "if." The exhaustively researched "if" depends heavily, though, on the bankable production of their new third baseman. Machado's 637 games played the last four seasons leads baseball. So do his 2,808 plate appearances.
What the 26-year-old has delivered with that unflappable regularity is high-quality performance. The baseball metric known as WAR (Wins Above Replacement) that measures the overall value of players shows Machado's career total through his age-25 season surpassed Lou Gehrig, Joe DiMaggio, Stan Musial, Willie Mays and Barry Bonds.
In boardroom parlance, it's the ultimate high-risk, high-reward situation.
"If they expect to sell $300 million in foam fingers, it's not going to happen," said David Carter, a nationally recognized sports business expert who's the executive director of USC's Marshall Sports Business Institute. "But if they want to create avenues for businesses to connect with the team, there's certainly a lot of value."
