Shaikin: Are the free-spending Padres a wise investment? We asked one of their investors

“We don’t pursue the bling.”

These are not lyrics. This is a mission statement from an interview with a man whose investment company owns a small stake in six Major League Baseball teams.

Christopher Zook’s company isn’t about giving investors a chance to win and wear a World Series ring, or the opportunity to shake hands with the sport’s best players, or the royalty to help a city through sport .

“Our goal is very, very simple: we want to make money,” said Zook.

No need to boo. MLB owners have welcomed private equity into the sport, and private equity doesn’t invest without the expectation of making money.

The San Diego Padres is baseball’s most fascinating history. The Padres have enthralled their city, blessing a championship-starved population with a star-studded roster. If you wish to purchase a season pass, the Padres will kindly put you on the waiting list.

The response from the gentlemen of sport was discouraging. The Padres are trying to win, and competing owners have criticized them for their spending. Even Rob Manfred, the commissioner, publicly questioned whether the Padres could maintain their approach.

No team outside of New York has a higher payroll this year. Manfred predicted the Padres would lose money this year, even before Bally Sports’ bankruptcy threatened the team’s roughly $50 million in local television rights royalties this season. Forbes appreciated the team Lost $53 million last year.

Zook’s company owns part of the Padres. His interest is purely financial, and yet he says the numbers don’t scare him.

“That doesn’t bother us at all,” he said, “as long as the capital is invested in something that adds long-term value.” If they just do a lousy business and burn money for the sake of burning money, that would bother us a lot.

“But if instead they invest in their future, excite their fanbase, expand their facilities to make it a world-class experience for their fans, to be able to have a roster that’s going to be successful and wins on.” the scoreboard, these are all things that add long-term value to the company.”

The Padres, with Manny Machado And Juan Soto Among the top attractions, expect to set a franchise attendance record this season. Petco Park will feature 15 concerts this year. The Padres plan to build one baseball village in an adjacent parking lot.

Zook’s Houston-based company, CAZ investments, has $4 billion in assets under management. So too Seidler Equity Partnersthe holding company of Padres owner Peter Seidler.

“This is a gentleman who knows what he is doing, who has had great success building businesses in the past, so we are very confident that he will be able to continue to grow this franchise and make it more valuable” , said Zook, “which will serve us very well.”

Bally Sports’ bankruptcy accelerated the urgency of determining how to watch your team on TV, given that the 14 teams — including the Angels — have about $1 billion in annual revenue at stake playing games on Bally channels. Still, Zook is bullish on his baseball investments.

“The main reason we’re involved is cable cutting,” he said.

wait what

San Diego Padres third baseman Manny Machado poses with owner Peter Seidler after a news conference to discuss his 11-year contract extension February 28 at the team’s spring training baseball facility in Peoria, Ariz.

(Charlie Riedel/Associated Press)

The baseball boom was funded by cable and satellite companies that charge subscribers for a regional sports network, even if most subscribers don’t watch that channel. The cable cutting means only those who want to watch baseball pay for it, and Manfred said the league can’t make up for the resulting loss of revenue.

“Not in the short term,” Manfred said last month.


“The RSN blast that happened is going to be a little bumpy,” Zook said. “But when you think about what it’s going to do, it’s actually going to accelerate the trend of having a lot more content being provided directly by Major League Baseball.

“We expect (the league’s streaming service) to be the primary beneficiary of this. We anticipate significant additional pricing power to be available to the league and teams.”

On Wednesday, for example, the New York Yankees’ YES channel announced that fans would be able to stream games — without subscribing to YES via cable or satellite — for $24.99 per monthor $239.99 per year.

“We really believe,” Zook said, “when this whole reset is complete, it will result in more profitability for the companies and the teams over the next three to five years. The next three to five months will be a bit bumpy.”

Zook invests through Arcto’s sports partner, and in its holdings in the Padres, Dodgers, San Francisco Giants, Boston Red Sox, Chicago Cubs, and Houston Astros. He would not discuss specific wins or losses for any team, but said baseball teams in general are doing well financially.

“These companies are way more profitable than people give them credit for,” Zook said.

From 2002 to 2021, the value of MLB teams rose an average of 669%, according to data presented at the Sloan Sports Business Conference, while the S&P stock index gained 458% over the same period.

“Like many other businesses, you can make them as profitable as you like or as unprofitable as you like,” Zook said. “When you invest heavily in new stadiums and new real estate and new platforms and teams in different leagues, you might not generate a lot of cash returns, but you add very dramatically to the overall shareholder value.

“That’s really what most of these owners want. If you think about it, most of these owners aren’t in it for cash flow. you have a lot. What they are there for is long-term capital gains.”

Honestly, so does Zook. Opening day is coming. He likes what the Padres did. He also likes what the Dodgers did.

“From a business growth perspective, they really seem to be firing on all cylinders,” he said. “You have done us good.”

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