By Ray Paulick Please click here to donate to Breeders’ Cup Charities benefiting the Permanently Disabled Jockeys Fund and V Foundation for Cancer Research. Give a minimum of one penny per mile and you will be eligible for a drawing to win one of 10 Breeders’ Cup caps to be signed by the winning jockeys of all 14 Breeders’ Cup races this Friday and Saturday.
Saturday was supposed to be strictly a driving day for the BREEDERS’ CUP OR BUST fundraising drive, but Brad Cummings and I never met a racetrack we didn’t like, so when we saw that Will Rogers Downs was just a couple miles from the Claremore, Okla., exit on I-64, we felt compelled to stop.
The fundraising drive, done in partnership with Breeders’ Cup Charities, will benefit the Permanently Disabled Jockeys Fund and the V Foundation for Cancer Research.
There was no live racing going on at WRD, but plenty of slot machines, simulcasting and a friendly staff. We even saw a patron arriving on horseback—not something you see every day.
The simulcast room was relatively full, and we talked with one of the regulars, a fellow who looked like a love child of Yosemite Sam and ZZ Top. He was a serious player, bringing a briefcase full of trip notes on tracks around the country, but said he was looking forward to the live meeting that begins at WRD in February. “The racing’s gotten pretty good here,” he said. “Some of the horses from the Fair Grounds and Oaklawn Park will show up.”
This is one of those racetracks that probably wouldn’t be in business were it not for slot machines, or in this case Indian gaming. Will Rogers Downs is owned by the Cherokee Nation, one of three Indian tribes that own racetracks in Oklahoma. The Choctaw Nation owns Blue Ribbon Downs in Sallisaw. That’s the track where jockey Mark Pace died earlier this month. Since that tragedy, the Choctaws announced they will be closing the track because of economic reasons related to the track’s location.
Tomorrow, we’ll be visiting Remington Park, which recently was purchased by Global Gaming Solutions, a subsidiary of the Chickasaw Nation. No track has taken ahold of the bit on raising funds for the BREEDERS’ CUP OR BUST drive like Remington Park has, and I think we’ve got an exciting and gratifying day ahead of us tomorrow. Scott Wells and his staff have gone above and beyond any of our wildest expectations, and we owe a special thanks to Joy Rose Murphy, the track’s promotions coordinator.
I’m not sure I’ll feel the same way after tomorrow’s “Hippity Hop” race, when Brad and I mount giant rubber balls and bounce our way down the track against members of the local jockey colony. But if you’re going to be humiliated, you might as well do it for a good cause.
On a serious note: If our experiences with Remington Park under its new ownership are any indication, horse racing is going to benefit from the Chickasaws’ involvement in the industry. It appears they understand the value of good corporate citizenship.
The visit with Michael Straight and his family at the Rehabilitation Institute of Chicago will be with us for a long time. Sadly, just in the last 24 hours we’ve learned of more spills and mishaps involving jockeys, beginning with an accident at Keeneland involving Julia Brimo, a Sovereign Award winner as leading apprentice in Canada. She was listed in critical condition at a Lexington hospital. Apprentice Amanda Casey, who earlier on Friday at Aqueduct celebrated her first win of the meeting, ended up at a New York hospital with a bruised liver after getting kicked in a paddock mishap. Earlier today, we learned that Omar Moreno was involved in a spill at Woodbine in Canada.
The beat goes on, and so does the industry’s need to help provide for jockeys who are permanently disabled from riding accidents. If you haven’t made a donation to Breeders’ Cup Charities to benefit the Permanently Disabled Jockeys Fund and the V Foundation for Cancer Research, please do so by clicking here.
After Friday’s visit with the Straight family, we headed south and encountered heavy rainfall alongo the way. We thought we’d stop in and catch some racing at Fairmount Park’s simulcast room late in the afternoon, but didn’t bring our waders to walk through the parking lot to the front door. Apparently we’d just missed a heavy storm that flooded the parking lot and other businesses in the St. Louis area.
Our Saturday began with a tasty breakfast at a Waffle House in Springfield, Mo., in the Ozarks. I thought I’d walked into a bizarre rehearsal for the Rocky Horror Picture Show, but Brad reminded me that it was Halloween morning, and the crew was just having a little fun. Too bad. I think the Rocky Horror Waffle House could be the next big thing in the franchise world.
Sponsors for the Chicago to Oklahoma City portion of this fundraising drive are: Global Gaming Solutions and Remington Park; Terry Finley and his West Point Thoroughbreds partners; Tommy Simon’s Vinery; and Rick Porter’s Fox Hill Farm.
Sponsors for our previous segments were
TVG; Bill Casner and WinStar Farm; Barry Irwin of Team Valor International; Kate Lantaff of Tahoma Stud; the William S. Farish’s Lane’s End, Sheikh Mohammed’s Darley, Brereton C. Jones’ Airdrie Stud and the Young family’s Overbrook Farm.
A special thanks to our media partner TVG and the TVG’s online community for playing such a big part in promoting the drive and raising awareness and money for these charities. All sponsorship dollars go directly to Breeders’ Cup Charities, to be divided evenly between the Permanently Disabled Jockeys Fund and the V Foundation for Cancer Research.
Our first day of the BC or Bust trip has started off with a bang. We were fortunate to have about ten jockeys attend an autograph signing including stars Kent Desormeaux, Jon Court, Robby Albarado and Julien Leparoux. We sold nearly 100 hats with all the proceeds of course are going to our two charities, the Permanently Disabled Jockeys Fund and The V Foundation for Cancer Research.
These proceeds are great and will add nicely to the over $20,000 we have already raised privately. A special thanks to our Keeneland to Chicago segment sponsors Lane’s End Farm, Darley, Airdrie Stud and Overbrook Farm for coming through with a generous donation to the charities. The outpouring of support has been remarkable but we still have more money to raise. If you are interested in sponsoring a leg of our trip, drop us an email at info@paulickreport.com. If you would like to give a smaller amount, you can always make secure credit card donation on the Breeders’ Cup Charities page linked here.
It only took two hours into our journey for Ray to cop out so this first blog falls on the shoulders of his humble correspondent, Brad Cummings. I’ve become accustomed to carrying his water so nothing new on my front!
According to Mike Wolken who works at the Equestrian Room, the best bet of the day is the grilled rueben sandwich here. That seems to be a safe bet as Tom Leach, voice of Kentucky Wildcats football and basketball lost his first bet on the opening race with a win bet on the four horse. Here’s to hoping that was our only stroke of bad luck today!
Please drop any suggestions you might have in the comments section below.
A few video clips from today. First is a quick look at the autograph lineup of jockeys. Some of the best in the world are here at Keeneland.
Second is a great interview with Kent Desormeaux who was gracious enough to give his time. (Due to user error, the first 20 seconds were chopped off. I promise this will be my first and last mistake over the next 10 days…)
Two races down and few more bets have failed. Our TVG Community friend Angelo missed on his first leg of the Pick 4, going with the 4 and 11 horses. No worries though, he’s got a couple more bets to go. Due to our association with TVG, we’ve been able to include a couple of their top community handicappers and look forward to much success on their bets.
Be sure to catch Tom Leach and Ray on TVG as they talk about the BC or Bust fundraising drive right after the third race at Keeneland.
Ray’s got his first bet of the day in the fourth race on the three horse. Looks like Tom is going for the ten. Both would be great for our charity drive. May the best man win! (Appropriate that Tom would pick a horse named flexthegoldenpipes since he’s a radio guy)
And another poor showing. We’re bleeding here folks. On a side note, Petecarol won the race. Ray’s wife’s name is Carol and a USC grad. For those of you who don’t know, Pete Carroll happens to be the name of the USC football head coach. I think Ray might be in the dog house for not catching on to the obvious sign here.
By Ray Paulick TO SAY THE WAGERING SELECTIONS HAVE BEEN COLD would be an understatement. My solo wager of the day, Doubles Partner, broke a bit slowly and then rushed up to engage for the lead around the turn. But the son of Rock Hard Ten paid for his early efforts and had nothing left when Petecarol cruised past at the top of the stretch.
Tom Leach, who was kind enough to take time from his busy schedule to go one-on-one with me in a handicapping challenge (he’s calling a Blue-White University of Kentucky basketball scrimmage later today on WLAP/630 and 98.1 FM The Bull) hasn’t had much luck, either, but we’ll both be swinging in the seventh race. Our TVG community partner, Angelo Lieto, has his big bet of the day in the eighth, on the Indian Charlie filly Silver Time.
In the seventh, Tom and I both are trying to beat the favorite, the Bernstein filly Orchestrator, and we’ve wound up on the same horse: Check the Label, a daughter of Stormin’ Fever owned by Brereton Jones and trained by Graham Motion. I’ll not only be playing a straight bet on Check the Label, but I’ll be pulling for the filly because Jones’ Airdrie Stud is one of the four sponsors for the first leg of this fundraising drive, along with Lane’s End, Darley and Overbrook Farm.
Julien Leparoux will be riding Check the Label. He was one of the many jockeys who took time out of their schedule earlier today to sign Breeders’ Cup caps in front of the Keeneland gift shop. Proceeds, as Brad Cummings mentioned, go the two charities.
At the end of the autograph line was Robby Albarado, who was showing the effects of a nasty spill at Keeneland the weekend before last when he went down and was kicked in the eye. This was one of those spills that could have been devastating, and Robby was lucky to escape with "only" an eye completely swollen shut.
Sitting next to Robby in the autograph line was Kent Desormeaux, who lost the hearing in his right ear from a spill 17 years ago. He’s come back and is riding at the top of his game, but both riders know the dangers of their profession and how important it is to have a safety net in the Permanently Disabled Jockeys Fund.
Just 10 minutes to post before our last bet of the day, and unless our TVG online community friend Angelo Lieto is correct, we could be shut out on the day, a tough way to start this portion of the fundraising drive. Silver Time, his pick, Silver Time, has been bet down from her 8-1 morning line to 9-2 with just a few minutes to post time. A win by Silver Time and Jesus Castanon for trainer Larry Jones and the Cottonwood Stables will give us a profit on the day. A loss puts us in a hole that we’ll have to dig out of tomorrow at Hawthorne.
Well, no complaints. Silver Time ran a good race, just not good enough to win. She got a good trip from the inside, bid for the lead turning into the stretch, and was simply outfinished by the late-running Diamond Song, an Unbridled’s Song filly owned and bred by diamond explorer Charles Fipke. Diamond Song was ridden by Kent Desormeaux and trained by Dallas Stewart.
No one said picking winners would be easy. We’ll take our swings tomorrow in Chicago. For Brad and me, it’s our kind of town, Chicago.
Thanks again to the management and staff of Keeneland for helping us launch the BREEDERS’ CUP OR BUST fundraising drive, and thanks to the jockeys who gave their time to meet fans and autograph Breeders’ Cup caps, TVG for helping promote the fundraiser and to Tom Leach and TVG online community member Angelo Lieto.
And a special thanks to the four sponsors of this segment of the journey: William S. Farish’s Lane’s End, Sheikh Mohammed’s Darley, Brereton C. Jones’ Airdrie Stud and the Young family’s Overbrook Farm for their generosity toward the two charities.
Please consider a donation of any amount to Breeders’ Cup Charities, to benefit the Permanently Disabled Jockeys Fund and the V Foundation for Cancer Research. Click here to donate.
By Ray Paulick
An industry that saw a $1-billion drop in wagering and a nearly $250 million decline in bloodstock sales in 2008 could use a little economic stimulus. Unfortunately, no such outside plan exists for the Thoroughbred racing and breeding industry in the United States – no federal bailout or earmarks in the massive stimulus plan just approved by Congress.
When I first moved to Kentucky in 1988, the breeding industry was in the midst of a serious economic slump, one that began in 1985 and didn’t end until 1992. The seven-year downturn was caused by a combination of overproduction (the number of North American foals born topped out at over 50,000 in the mid-1980s), overconfidence in the market, and federal tax reform that took away many of the incentives to own Thoroughbred breeding stock.
The big question at Thoroughbred auctions for several years in the late 1980s and early ‘90s was whether or not the market had hit bottom. It’s a question that really couldn’t be answered until the industry saw an uptick in business, and that didn’t happen until 1992. Then, as now, the first part of a down market was the toughest, because breeders were carrying production costs from a bull market into a sales environment that was anything but bullish.
If 2008 was a tough time for breeders, they’d better strap in for an even rougher ride in 2009. Yearlings were produced from 2007 stud fees, a breeding season that came on the heels of an all-time record year for the average price of weanlings, yearlings and 2-year-olds. In fact, the 2006 bloodstock market hit an all-time high for gross revenue, with more than $1.23 billion in North American sales.
Last year’s economic crisis didn’t really hit until September, though Wall Street had been jittery for months beforehand. Prices for 2-year-olds of 2008 were actually up slightly, and yearling average declined by just 6.9% (though median dipped more sharply, by 16.7%). The weanling and broodmare markets were hit harder, falling by 15.7% and 17.2%, respectively. Most breeders I’ve spoken with are bracing for declines in the yearling market of at least 20%, and some feel it could drop by as much as 40%.
With such dire predictions in the marketplace, it may sound foolish to suggest that 2009 could prove to be a very good year for people to breed their mares. Stud fees are down significantly, and terms for those fees have seldom been as flexible as they are today.
To quote Warren Buffett, the oracle of Omaha: “Be fearful when others are greedy, and be greedy when others are fearful.” I think it’s fair to say that many Thoroughbred breeders are fearful right now.
To that end, the best economic stimulus the breeding industry could have in 2009 is confidence among mare owners that the yearling market of 2011 will have rebounded from the anticipated slump of the upcoming year and, perhaps, 2010. The wild card, of course, is the overall state of the American economy, which even the most optimistic among us does not feel will turn around in the next 12 months.
Not breeding mares that have commercial value is not going to improve anyone’s economic standing, and will not help stimulate the industry to get out of this slump. Stallion farms have reduced fees and are working with breeders to get mares bred and stallion books filled. The breeding sheds are now open: sending your mares to be bred supports the industry in so many ways, from the vanning companies, feed companies, veterinary community, boarding farms and stallion farms, among others.
By Ray Paulick
It’s now been 15 years since James E. (Ted) Bassett III, then the president of Keenelend, declared before a legislative committee in Kentucky’s state capitol that the commonwealth’s signature industry, Thoroughbred racing and breeding, was “not going to cave in to the hypothetical threat of a mythical armada cruising down the Ohio from Ashland to Paducah under the disguise of a legislative act that has yet to be passed in most of our neighboring states.”
Bassett was talking about the emergence of what then were just a few floating casinos in Illinois and the possibility of additional boats in Indiana; 1994 was only the beginning of an era that has seen an unprecedented explosion in gambling in states from New Mexico to New York, from Florida to Louisiana, from Mississippi to West Virginia, and from Michigan to Pennsylvania.
So much has changed in 15 years that even Bassett’s wise, old head must be spinning. In fact, his successor at Keeneland, Nick Nicholson, is now one of the main proponents to get Kentucky’s gambling playing fields level with those of other states. The mythical armada surrounding Kentucky has grown to include a massive floating arsenal of riverboats carrying blackjack and craps tables, and hundreds of thousands of slot machines at land-based compounds.
I understand completely what Bassett was saying. He hated the thought Kentucky’s racing industry would have to cave in to the pressures created by the dominos falling around him in other states. Betting on a horse and throwing money into slot machines are two forms of gambling, to be sure, but one involves an intellectual challenge, an agriculture based business, and a beautiful sport that at times can capture the interest and imagination of an entire nation. The other is a mindless activity that is virtually guaranteed to separate the player from his money: gradually, tantalizingly, but, ultimately, relentlessly.
Sadly, I hate to admit, the former – pari-mutuel wagering on horses – must depend to some degree on the latter – Video Lottery Terminals or slot machines – to survive.
The debate has gone on long enough in Kentucky. Fifteen years! There probably isn’t a resident in Kentucky who can’t jump in his car and within two hours be feeding a slot machine in a neighboring state. Thousands of Kentuckians are doing just that, every day, and it’s costing the state hundreds of millions of dollars each year in lost revenue. Worse, it’s threatening the very future of Kentucky’s largest and most important industry: the Thoroughbred.
I wrote earlier this week that slots revenue may in the long run be fool’s gold in many states, and I stand by that statement. Any non-essential industry that relies on subsidies to exist is skating on thin ice, because those subsidies can very well be taken away with the slash of a legislator’s pen. The racing and breeding industries in most American states would have to be put into that “non-essential” category. But Kentucky is different. Take away the horse farms and the nearly 100,000 jobs they have created, and you will have a state plunged into a deep, deep economic recession. No other state is so dependent on this major agribusiness. Furthermore, Kentucky’s identity to the rest of the world is so tied to horses that it would forever be changed.
It’s therefore essential that legislators, from Ashland to Hopkinsville, from Paducah to Williamsburg, understand that the armada is no longer mythical, that the assault is ongoing, and that the battle is in serious danger of being lost.
This subject has been debated, not just in the halls of Frankfort and the breeding sheds of Central Kentucky, but on the national airwaves. On Wednesday of this week and next week, Steve Byk’s At the Races radio show on Sirius channel 126 (4-7 p.m. Eastern) is devoting the entire three hours to the issue, “Kentucky in Crisis.” Byk’s guests this week were John Sikura of Hill ‘n’ Dale farm, Kentucky state Sen. Damon Thayer, Eclipse Award-winning writer Billy Read and trainer Chuck Simon.
Click here to listen to Wednesday’s enlightening “Kentucky in Crisis” program.
I’ll be on next Wednesday’s program, following scheduled appearances by Greg Stumbo, the Kentucky House Speaker whose VLT legislation cleared a House committee yesterday, lobbyist Gene McLean and former Kentucky Gov. Brereton Jones, the owner of Airdrie Stud.
VLTs or slot machines cannot be racing’s salvation. The sport is failing, not just in Kentucky but throughout the United States, because it has failed to adequately address a number of serious challenges. The racing product needs attention, and its business model is broken both on a local and national level, and simply putting additional money into purses is not going to fix the product on its own. It will, however, give the industry an opportunity to invest in its own future, something it has not been able to do since the mythical armada transformed into a very real threat to the survival of Kentucky’s most important industry.
By Ray Paulick President Barack Obama, on his first full day in office, called for higher standards in transparency and accountability for his administration. While there already have been some bumps on that road, our new president’s demands are in line with a broader movement toward greater transparency, accountability and openness, not only in government but in private enterprise as well.
A recent scandal in Lexington, Ky., involving the executive director of Blue Grass Airport and several of his key staff was uncovered only after the local newspaper, the Herald-Leader, filed an open records request and examined travel and expense reports of airport executives. What the paper found was shocking: thousands of dollars of taxpayer’s money spent on a night of partying at a Texas strip club, airport credit card purchases of a shotgun, audio systems, DVDs and other items seemingly unrelated to the operation, including scalped tickets to a Hannah Montana concert at Rupp Arena.
The airport’s oversight board at first dismissed the newspaper’s charges that the executive director’s travel and entertainment expenses were exorbitant, but after conducting an internal audit discovered numerous irregularities and suspended him. Shortly thereafter he resigned.
The episode teaches us several valuable lessons, including the importance of a free press, open records law, and vigilance by members of oversight boards. Without transparency or sunshine laws, it’s likely the airport scandal never would have been uncovered and taxpayers would continue to be abused by officials entrusted to serve them.
While I am by no means suggesting similar transgressions are taking place, a call for greater transparency and accountability is also at the heart of Thoroughbred owner and breeder Peter Blum’s recent criticisms of the Breeders’ Cup – a non-profit company funded in part through stallion and foal nominations by thousands of breeders. Following a guest commentary he wrote for the Jan. 10 edition of the Thoroughbred Times and a follow-up letter to the editor published in both the Jan. 31 Thoroughbred Times and Feb. 2 Paulick Report, Blum has heard from a number of fellow horsemen who are in philosophical agreement.
“As a result of my willingness to speak out, many people have contacted me and have expressed their concerns and serious reservations about Breeders’ Cup management,” Blum told the Paulick Report. “One theme that continually comes up when people share their thoughts with me is, ‘What are they trying to cover up?’ Have there been any bonuses recently paid, particularly in this troubling economy when (President Obama) in the last few days referred to bonuses paid to bankers as shameful, outrageous and the height of irresponsibility? If there have been any bonuses, who got them, when they did get them, and how much did they get? And if they were given, why were they given, especially in light of the Breeders’ Cup announcement to cut off supplemental funding for 121 races throughout the year? (That decision was quickly reversed.) Furthermore, have there been any recent senior management contract extensions. If so, who got them, and when and why were they given?”
Blum sees things only getting worse unless there are changes in how the Breeders’ Cup operates. “There is very little transparency and it is apparent that is the core of all major issues,” he said. “Does the Breeders’ Cup management not understand how angry its members are? Unless transparency soon occurs, the Breeders’ Cup cannot succeed in its present form. And has there been any disclosure to membership of an agenda of board member meetings, votes, and minutes? If not, why not?”
The Breeders’ Cup moved toward a democratically elected board in 2006 after complaints from some breeders that it had been run for too long by a handful of people selected by a self-perpetuating board of directors. But as Blum pointed out in his letter to the editor, there are flaws in the revised bylaws that appear to stack the election process in favor of the status quo.
Thirty-nine individuals are elected to the board of members and trustees by stallion and foal nominators (each year, 13 of the 39 seats are up for election to three-year terms). Those members and trustees are responsible for electing the 13-member operating board of directors. However, in addition to the 39 elected members and trustees who vote for the smaller board, also given votes in the small board election are six “founding fathers” of the Breeders’ Cup: Brownell Combs, formerly of Spendthrift Farm; William S. Farish of Lane’s End; Seth Hancock of Claiborne Farm (whose proxy has been permanently bestowed upon farm executive Jim Friess); Brereton Jones of Airdrie Stud, John T. L. Jones, director emeritus of Walmac Farm; and James Philpott, an attorney who has served as Breeders’ Cup secretary. Two former Breeders’ Cup presidents, James E. (Ted) Bassett III and D.G. Van Clief Jr., also are entitled to vote in the small board election, as are four current officers of the Breeders’ Cup, including CEO Greg Avioli.
It strikes me as unfair to “grandfather” any founding fathers onto the board of members and trustees. When the U.S. Constitution was written, individuals who signed the Declaration of Independence were not given a lifetime seat in Congress. Representatives of farms like Coolmore, Darley and Three Chimneys, among many others that have been major financial contributors to the Breeders’ Cup, are forced to actively run for a board seat while those farms associated with founding members get an automatic seat. Furthermore, at least two of the founding Breeders’ Cup members are no longer actively engaged in the business. Doesn’t seem right.
It also seems downright scandalous to allow paid staff, including CEO Avioli, to vote for who their bosses will be on the operating board of directors. Human nature suggests they will always favor those who butter their bread.
Blum also takes issue with how votes are allocated to those farms with stallions (stallion owners are entitled to one vote for each $500 of a stallion’s stud fee).
“It appears that large farms standing stallions may control the outcome of the election of inner and outer board members,” Blum said. “For example, if Gainesway stands a syndicated stallion like Tapit or Mr. Greeley, the farm is given all of the votes, not the actual owners or shareholders of the stallion. If this is true, won’t this inequity come as a surprise to most breeders?” (Editor’s note: It is believed that some stallion syndicate agreements may convey Breeders’ Cup votes to majority shareholders.)
As a result of the inequities he sees in the bylaws, Blum calls for widespread change in the election process.
“In view of the existing controversy, will management agree to submit to membership the right to hold a new election for board members under a more democratic process sooner rather than later?” he asked. “When will the BC provide an accounting of all the nomination fees paid in, and why have we not received them to date?”
Breeders’ Cup board member Satish Sanan wrote a rebuttal to Blum’s commentary that was published in the Thoroughbred Times of Jan. 24. Sanan later spoke with the Paulick Report about some of the issues raised by Blum, along with his own role as chairman of a Breeders’ Cup strategic planning committee.
“Mr. Sanan appears to be a constructive voice at the Breeders’ Cup and I hope his efforts bring much needed changes in transparency and benefits to breeders,” said Blum.
Blum said he hopes his decision to speak out on the management and direction of the Breeders’ Cup is not misinterpreted
“My remarks were intended as constructive criticism of Breeders’ Cup management and recommendations for change,” he said. “In no way were they made to be personal in nature or an attack on the Breeders’ Cup concept or festival of racing. On the contrary, my remarks were intended to encourage needed change and redirection of management.”
Thursday’s announcement by Walmac Farm of a “breeders stimulus plan” that allows breeders to pay 2009 stud fees from the proceeds of the sale of weanlings or yearlings is further proof that an increasing number of Kentucky’s stallion farms are recognizing mare owners as partners in their business. The steep declines in bloodstock prices in 2008 and the very real threat that many breeders could go out of business if the economics do not change has led virtually every major stallion station to reduce 2009 stud fees and relax deadlines for when the payments are due.
In the most simple terms, without mare owners, stallion farms would have no customers. If stud fees were not reduced and payment schedules relaxed, there would be fewer breeders around for the 2009 breeding season. The changes were fueled by a survival instinct.
There are only a handful of stallion farms continuing what in recent years was the widely accepted policy of stud fees due in September or November of the year of conception. Even some of those holdout farms are showing flexibility on payment schedules. Most stallion operations have changed to a payable when foal stands and nurses program; some in that category offer discounts for breeders who are willing to pay stud fees early. Although the stands and nurses policy has been in place for years at some farms, a number of breeders pointed to the decision by Lane’s End to adopt that policy for 2009 as a bellwether move. Others quickly followed suit.
Two relatively new stallion stations, Darley and Stonewall Farm, have created unique incentive programs for many of their stallions. Some farms that reduced 2009 stud fees in September during the Keeneland yearling sale have come back with a second round of fee reductions because bookings were coming in at an alarmingly slow pace.
“Changing from payable on Sept. 1 to out of proceeds is a huge difference,” one breeder told the Paulick Report. “It gives a breeder two years of the use of his money. It should be the universal policy. It gives breeders the chance to stay in business. And let’s face it, the stallion farms need us. I guess you’ve got to really worry when stallion farms are hit; they’ve been in total control.”
“All the stallion managers announcing reduced fees want to be seen as benefactors,” said breeder Garrett Redmond. “In fact, they are trying to preserve their own business. Mare owners will be short of money next year because their 2008 sales were for less than needed or horses were not sold at all. They need help to pay fees due when foals stand and nurse in 2009. Reduction in fees due in spring 2010 will not help.”
“There’s a tendency to think the stallion guys took it to us for a long, long time and we overpaid, and we get even now,” said breeder Craig Bandoroff of Denali Stud. “That’s not totally fair. It’s a market economy ruled by supply and demand. I love the idea of stands and nurses, but if you want to pay on Nov. 1 you get a discount. That’s the best deal going. Payable Sept. 1 was terrible; you hadn’t sold your yearlings yet.”
“The pendulum is definitely swinging back from stallion farms to the mare owner,” said Olin Gentry of Gaines-Gentry Thoroughbreds. “Popularity and demand has allowed some farms to get away with Sept. 1, but there’s more and more pressure to give stands and nurses. There aren’t many holdouts.”
One farm staying with a Sept. 1 policy on some of its stallions is Airdrie Stud. “We believe that everybody has the right and should have the opportunity to set their stud fees according to the way they are the fairest relative to the product they are selling,” said owner Brereton Jones. “We raised Indian Charlie’s fee 50% and he’s already booked full; his fee is due Sept. 1.”
Jones said some other fees will be due at time of foaling. “We work with each breeder who calls in here, and it depends on the stallion they want to breed to; it’s the free enterprise system at its best. We’ll discuss packages with anybody; if someone wants to breed three mares to a stallion, we will work out an arrangement. I think the general attitude of breeders is that Airdrie’s fees have always been extremely fair, and consequently they’ve been successful.”
The key to Airdrie’s fees and schedule, Jones said, is flexibility. “Our policy is geared to the success of both the owners of the stallion and the owners of the mares.”
Darley set all stallion contracts for stands and nurses when it was established at the former Jonabell Farm Sheikh Mohammed purchased in 2001. In 2007, the farm introduced pay from proceeds fees that stallion nominations manager Charlie Boden said is actually a “pay when you sell with forgiveness” policy. “We try to assess the risk on the front end,” Boden said, “but if we’re wrong and the resulting offspring brings half the stud fee, we don’t bill them for the difference.” The policy was introduced a few years earlier at Darley’s stallion operation in England.
“We’re trying to help breeders make a prudent decision in not overbreeding a mare,” Boden said. “It makes more sense to people these days. I think the days of overbreeding mares should be screeching to a halt unless the stallion is overpriced.”
Darley’s policy lets breeders decide whether to pay from proceeds of a weanling or yearling sale. Not all stallions are eligible for the program; Boden said he tries to limit it to stallions standing for $20,000 or less.
Boden also said Darley has offered what he calls a “Grade 1 club” on certain stallions, giving a free season to mares that were Grade 1 winners or Grade 1 producers.
In light of Sheikh Mohammed’s enormous wealth, Boden was asked if these policies were designed to put the squeeze on competing stallion farms. “Sheikh Mohammed wants breeders to make money,” Boden said. “He wants the business to thrive. He’s a fan of the sport and the industry as a whole. He’s not trying to put anyone else out of business. He’s trying to help a breeder raise a top horse at a competitive price. His goal is to perpetuate an industry that he loves.”
Stonewall Farm’s first breeding season was 2006, and in order to make a splash in the industry it adopted several creative incentive plans for breeders. One offered free seasons (for stallions the farm owns wholly) to graded stakes-winning or graded stakes-producing mares. Another provides a free return season to stallions for mares that produced a stakes winner from that stallion. A third policy permits a breeder to come back for a free mating for a mare if it produced a top three weanling price for that sire.
In an effort to reach out to some of the lucrative state incentive programs, Stonewall is now offering a complimentary no-guarantee season for approved mares that will foal in Louisiana, New York or Pennsylvania, in exchange for being named co-breeder (the mare owner would remain the full owner of the foal). By so doing, Stonewall would be eligible for half of the breeders awards in those states.
The programs evolved from Stonewall’s owner, Audrey Haisfield, and her husband, Richard, according to Clark Shepherd, a Stonewall manager and pedigree analyst. “They looked at how things were done in the business and decided it didn’t have to be that way,” he said. “We’ve since seen a lot of other outfits begin to follow suit.”
Will the innovative policies, fee reductions and relaxed payment schedules be enough to help breeders return to profitability?
There seems to be no consensus on that question.
“In the face of the financial crisis, a lot of syndicate managers might be a little too dramatic in fee reductions,” said Olin Gentry, “particularly some of the ones that announced a second round of cuts. People are going to breed their mares; they’re just coming in slower because they are tentative, waiting to see if there are going to be more reductions.
“It’s all a cycle. If you put pressure on stallion values, what people are willing to pay for yearlings is affected. You need a happy medium where it’s fair. You don’t want the stallion owners to make all the money and you don’t want it too easy for the breeder. “
Garrett Redmond disagreed. “Owners can avoid a problem in 2010 by not breeding in 2009,” he said. “If stallion managers are serious about helping, they should retroactively reduce the fees contracted in 2008. The least they can do is change the fees coming due to the fees they are advertising for 2009. They might also convert contracts to foal shares or pay when you sell.”
“The one thing you are seeing is no matter what the advertised stud fee is, your client wants to know, ‘Can we do better?’” said Bandoroff.
Another breeder boiled it down to a simple good news/bad news scenario.
"The good news is prices are down for stallions," he said. "The bad news is it shows what deep shit we are in." (Note to readers: Take our poll on how stallion farms have reacted in the face of the economic crisis and falling bloodstock prices. The Daily Paulick Poll can be found on the left-hand column of the Paulick Report home page.)
There was no live racing going on at WRD, but plenty of slot machines, simulcasting and a friendly staff. We even saw a patron arriving on horseback—not something you see every day.
After Friday’s visit with the Straight family, we headed south and encountered heavy rainfall alongo the way. We thought we’d stop in and catch some racing at Fairmount Park’s simulcast room late in the afternoon, but didn’t bring our waders to walk through the parking lot to the front door. Apparently we’d just missed a heavy storm that flooded the parking lot and other businesses in the St. Louis area.