Are betting exchanges a possible solution to the problems facing the U.S. Thoroughbred industry, which in 2008 saw its annual pari-mutuel handle fall for the fourth time in six years, dropping over 7% to a 10-year low? The Thoroughbred Owners of California thinks they may be, having recently signed a letter of agreement with betting exchange giant BetFair to have the UK-based company promote California racing abroad while TOC helps BetFair obtain statutory and regulatory approval to operate a betting exchange in California.
BetFair, which has been trying for several years to gain access to the U.S. market, is also believed to be a leading candidate to buy TVG, whose parent company, Macrovision, announced its intention to sell TVG last year. Though there are no confirmed suitors, others rumored to be potential buyers of the racing network and Advance Deposit Wagering platform include Churchill Downs Inc.; Marc Nathanson, a cable TV industry billionaire and father of TVG president David Nathanson; and an industry consortium that could include Keeneland, the New York Racing Association, former Hollywood Park chairman R.D. Hubbard, and Los Alamitos racetrack owner Edward Allred.
BetFair, a privately held company, was founded in June of 2000, using a technologically advanced platform permitting individuals to go online and bet against one another on a wide range of events, including horse racing, sports, politics and even reality television shows. By taking commissions of 2%-5% from winning bets, the company offers extremely low takeout and has built enormous volume: it claims to have over one million customers from 140 countries, with 100,000 or more active players in a given week. (UPDATE: BetFair said in October 2008 that it signed up its two millionth customer; see comments section, below) Its wagering platform handles over five million bets per day. In 2007, BetFair had 42 million English pounds in earnings before interest, depreciation, taxes and amortization on revenue of 240 million pounds. According to its annual report (which can be seen here), BetFair has 110 million pounds cash on hand.
CONCERNS ABOUT BETFAIR
The problem many see with BetFair is that the company pays a small percentage for the rights to races on which it handles wagers. In England, for example, it pays a bit over 10% of gross profits on racing wagers. In some cases, however, it pays no fees at all, as is currently the case with racing from the U.S. BetFair currently accepts bets on American racing, but only from customers outside of the U.S., and it does not have rights to any video signals. BetFair is acutely aware of concerns from racing interests in the U.S. who believe betting exchanges would cannibalize pari-mutuel betting and decrease revenue to tracks and purses. It addresses some of those fears in this pamphlet, which was designed to appease the racing industry in the United Kingdom.
Another concern raised about BetFair centers on wagers it accepts that a specific horse will lose, prompting worries about race-fixing. But BetFair has cooperated in several investigations involving horse racing and sports betting, giving authorities access to detailed betting information as part of its memorandum of understanding.
Drew Couto, the president of TOC, said the letter of agreement with BetFair was signed last month. He believes wagering will continue to suffer unless the industry distances itself from Albert Einstein’s definition of insanity: doing the same thing time after time and expecting a different result. “That really describes our industry’s approach to this sport and business over the last decade,” Couto said.
“Going forward,” he added, “we have to face two very important realities. “First, we have allowed the sport to basically disappear. It’s no longer a sport, but simply a justification to gamble and wager, and as a wagering proposition we know it’s not the most attractive. We have to go back and make it a sport. We have to give the sport some structure to have it make sense for the fans, make some very serious fundamental changes to focus on the sporting aspect of racing. We have left it largely to the tracks to be the stewards of the sport, and they only care about the financial side.
“Second,” Couto said, “we have to adopt new ways our fans can participate. New wagers, betting exchanges. We have to embrace these new ways of playing as ancillary to the way we currently operate, so it’s new and fresh. That includes tournament-style wagering that was approved by the RCI (Association of Racing Commissioners International) last summer. If we don’t begin to do things differently and find new ways to operate, we are bound to be the definitive example of what Einstein said.”
CAN RACING DEVELOP ITS OWN BETTING EXCHANGE?
Chris Scherf, executive vice president of the Thoroughbred Racing Associations of North America, a racetrack trade organization, for years has advocated that North American tracks consider developing their own betting exchange. He sees the trend in downward handle as a serious crisis.
“We’ve got to look into pricing (the takeout charge on pari-mutuel bets), the product that’s being provided and the convenience factor for wagering,” Scherf said. “We need to make the same kind of concerted effort on handle that is currently being made to improve the safety and welfare issues. Track by track, you can get swamped in a million problems, but this has to be at the top of the pile. We are losing bettors. What do we have to do to change that aspect of the business, the part that provides us revenue? Of course, the entire debacle of cutting off signals in the last year (due to contractual disagreements between tracks and horsemen over ADW splits) was extremely detrimental to any kind of sustained gambling business.
“The problem,” Scherf said, “is we’ve got tracks and horsemen both saying they need more money in this economy. But the first thing we need is an engaged gambling public, and they should be at the top of the list.”
Scherf said he is “somewhere in between fear and welcoming” BetFair into the industry. “We had no master plan for how ADW would fit in and now we are trying to retrofit it, which is causing a lot of angst and problems. We need to spend more time developing a strategy (for exchange betting), though it’s difficult to do that when you have a wide disparity throughout the industry in resources and markets.”
Lonny Powell, an industry consultant based in Lexington, Ky., who previously served in executive positions with racetracks (including head of Santa Anita Park), the ADW company Youbet.com and as president of the Association of Racing Commissioners International, said BetFair has done a good job of “mainstreaming themselves” in recent years by sharing more of its profits with the racing industry in Europe.
“It’s here to stay,” Powell said of BetFair and exchange betting. “When I was in the ADW world, I wished they would just go away, but I don’t feel that way anymore. We’re like an ice cream store that only sells vanilla, but you can go over to Baskin Robbins and get 33 flavors. We need variety.”
Powell, who said he is optimistic the industry will find a solution to its present challenges, believes racing interests should look at developing their own betting exchange. “If the industry could somehow take this wagering crisis a little more seriously and rather than find ways to kill something, find ways to make it work, we can grow the gambling dollar,” he said. “A BetFair type of platform can be operated by U.S. racing interests. The economic model that BetFair offers is flawed, but we all agree our current model is flawed, too. I’ve got to believe a BetFair type of platform would work. Our product is stale, and our wagering levels are stale.”
INTEGRITY ISSUES REMAIN A CONCERN
The reason for declines in handle go beyond a limited product line, said Mike Maloney, a professional gambler in Kentucky who has become an outspoken advocate for horseplayers at industry conferences and who served as an ad hoc member of a Kentucky Horse Racing Commission Task Force. “We are at a very significant crossroads in racing,” Maloney said, “probably the biggest one in my lifetime. The financial crisis is magnifying our problems, but the problems have to be dealt with before racing can recover. The economy may improve, but racing’s problems will still be there.
“Our customer base is aging, and they’ve lost a lot of their faith in the integrity of racing,” he said. “As they age, they aren’t being replaced. The second problem is the takeout is too high. We can’t attract new players and are having a hard time holding on to existing ones. It’s exacerbated because the takeout keeps going up. With competition from other gambling opportunities, you can’t get away with that any more. It’s roughly 5% in other forms of gambling – sports, table games, trading options – but it’s 20% for us. New York just raised takeouts; trifectas are 26% now, and I just refuse to play it. Kentucky wants to raise takeout. What other business in this economic climate would consider racing prices?
“Third,” Maloney said, “racing integrity problems are real, and they are not exaggerated. If anything, they probably are underplayed. Trainers who use drugs to cheat; unsecured wagering pools with outdated technology; unregulated participants allowed access into those pools. People are just beginning to learn about some of the problems in these areas. In the last couple of years the light is being shined on them. These are serious problems that need to be dealt with. Big players realize they can’t trust the pools they are playing money into.”
Finally, Maloney said, the corporate mentality of many racetracks has hurt the game. “There is a disconnect with customers with some of these racetrack holding companies. They don’t really understand their business, and there’s too much short-term bottom line thinking; cutting costs, worrying about the next quarterly report, and too little thought about long-term improvement of the product.”
Maloney, who called betting exchanges a “two-edged sword” because of how they would cannibalize pari-mutuel betting, said the industry has had a wake-up call after being “rocked by betting and drug scandals and threatened” by the federal government. “This crossroad we’re at, what we do from here, will determine the fate of racing.”
(Do you have an opinion on how the industry reverses the trend in declining handle? We’re interested in your comments below and in your thoughts about betting exchanges, the subject of the Daily Paulick Poll, which can be found on the left-hand column of the Paulick Report home page.)
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.)
Under questioning by an attorney representing Rodney Stewart, the veterinarian appealing a five-year suspension for his possession of cobra venom and other banned substances at Keeneland in June 2007, John Veitch, chief steward for the Kentucky Horse Racing Commission and a retired Hall of Fame trainer, admitted that his racing star Alydar was treated with cobra venom after suffering an injury in September of his 3-year-old season.Attorney Mike Meuser asked Veitch about the use of the now-banned substance during an appeal of Stewart’s suspension before racing commission hearing officer Bob Layton on Wednesday in Lexington, Ky. “Did Dr. Charles Allen give cobra venom to Alydar during the time you trained him?” Meuser asked.
“On one occasion,” Veitch confirmed, saying it came after Alydar had fractured the coffin bone in a foot while training up to the 1978 Marlboro Cup Handicap. “It wasn’t effective,” Veitch said. “We would not have run him again if it had worked. We treated him at the time. He was not in training. We experimented with Dr. Chuck Allen, who was an expert on venom. At the time, cobra venom was legal for use in the United States for treating Lou Gehrig’s disease (ALS). We tried it and it didn’t work. We didn’t use it as therapy so he could race, but only to see if we could relieve some pain.”
Technically, cobra venom, a powerful blocking agent, is not an illegal substance. It is not approved for use in humans or animals by the FDA and is prohibited in most racing jurisdictions, including Kentucky, which classifies it as a "Class A" drug, one that can be abused as an illegal performance enhancing substance.
Three vials of venom and other prohibited substances were found during a search of three barns on Keeneland property used by trainer Patrick Biancone and in a vehicle registered to Stewart. Most of the substances were found in a soft-sided cooler kept in a refrigerator in Barn 74, located in the barn area known as the Keeneland training center off Keeneland’s main property across Rice Road. Stewart admitted to officials the substances were his and that he was only using a refrigerator in Biancone’s barn because he and his wife were in the process of moving from Kentucky to New York. Stewart said his wife had packed the bag with medications usually kept in a refrigerator at their rented home, but that he had been living in temporary quarters. He said he wasn’t aware of everything that was in the bag. Biancone was suspended for six months and agreed not to seek reinstatement for another six months. Stewart received a five-year ban. As chief steward of the Kentucky Horse Racing Commission, Veitch was in charge of the investigation involving the banned substances and the hearing that led to the suspensions.
Bob Watt, an attorney representing the racing commission, called several witnesses in addition to Veitch, including one of the investigators who conducted the search, commission veterinarian Mary Scollay and Keeneland executive Harvie Wilkinson.
Scollay called cobra venom an "exceedingly dangerous" substance that could cause a loss of sensation in a horse’s foot and block pain. She said there is no known test to detect cobra venom in urine or blood.
During cross-examination of Wilkinson, who among other things oversees security at Keeneland, Meuser asked whether Keeneland officials ever sought approval from the racing commission to have the Rice Road training facility recognized as part of Keeneland’s racetrack grounds. Wilkinson said he was not aware that they had sought approval.
The purpose of that question came to light later in the day when Stewart himself was testifying and Meuser asked if he believed Barn 74 was part of the racetrack property. "I thought it was a private barn," Stewart replied.
"I thought it was Patrick’s private barn. He’d always referred to it that way."
Records showed that Stewart had purchased four vials of the cobra venom in July 2006 from BioToxins, a Saint Cloud, Fla., company. The veterinarian testified that he had used one of the vials on a former racehorse that had been rescued from a farm and was being used as a stable pony. The other vials remained in their shrinkwrap packaging. The vials contain a powder which is then mixed in a salilne solution before injection.
Among the other substances seized was a container of Carbidopa-Levodopa, a human medication used to treat Parkinson’s disease. Scollay testified that the drug could act as a stimulant and reduce fatigue in humans. In later testimony, Stewart said he did not use the drug on any horses but did not recall why he had it. Another bottle with an unknown honey-like substance inside was labeled "For Mythical Elmo," according to the testimony, but it was more likely meant for the Biancone-trained filly Mythical Echo. Its contents remain unknown.
Another bottle found was labeled with the lettering "R.T.H.." When asked about the "R.T.H." substance, Stewart said "a fellow from South Africa had given it to me. It was used there to treat bleeding." When pressed he said he had no idea what pharmacological agents were contained in the liquid. .Stewart said he has had his license to practice on "competition animals" (including horses, greyhounds and camels) suspended in Australia, where he earned his veterinary degree in 1997. He is banned from racetracks but is allowed to continue his veterinary practice in the United States.
The hearing will continue Dec. 9. Among the issues to be covered area the contents of Stewart’s personal computer, which has been sent to a business that conducts forensic searches on computer hard drives to extract any information related to his veterinary practice for a period of time prior to his suspension.
Attorneys for Rodney Stewart, the veterinarian suspended for five years by Kentucky racing authorities in the 2007 “cobra venom” case that also implicated trainer Patrick Biancone, said in opening statements in an appellate hearing on Wednesday morning the suspension against their client was excessive and should be lifted.
Mike Meuser and Karen Murphy are representing Stewart, who received a four-year ban for possession of prohibited substances and a one-year suspension for failure to cooperate in the investigation. The appeal is being heard by Bob Layton, a hearing officer for the Kentucky Horse Racing Commission, which is represented by attorney Bob Watt.
In his opening statements, Meuser said Stewart had no intention of using the prohibited substances found in a refrigerator and packed in a soft-sided cooler in one of three barns Biancone occupied and that they had been packed by Stewart’s wife in preparation for the couple’s move to New York. In fact, Meuser contended, Stewart wasn’t even aware of the cooler’s contents, which the attorney said were placed in the refrigerator because it was a “hot June day.”
Meuser said, the three vials of prohibited cobra toxin found in the bag were still shrink-wrapped. Another prohibited substance found, Carbidopa-Levodopa (a human drug to treat Parkinson’s disease), was still in its original container, Meuser said, and its usage date had expired. “There is no evidence there was any attempted use of any of these substances,” said Meuser, who added that the cooler also contained rabies vaccines for dogs and cats.
Watt, in his statement, said the cobra venom, a powerful painkiller, had been purchased from BioToxins, a Florida-based company that specialized in snake venom. Watt referred to other substances discovered in the June 22, 2007, barn searches conducted by investigators with the racing commission (then known as the Kentucky Horse Racing Authority) and Keeneland security, including Ketoconazole, “something called Throat RX, and one injectable honey colored solution marked ‘For Mythical Elmo.’”
Meuser did not address the latter substances in his opening statement.
Watt said Stewart and his attorneys failed to properly respond to requests that were made to Stewart for billing and computer records, which resulted in the one-year suspension for failure to cooperate. Murphy countered that the ban should be lifted because the commission failed to give Stewart a hearing within 48 hours of a request for a stay of the suspension. She also complained that the request for a home computer was unreasonable and that the commission “was fishing for further violations,” even going so far, she said, as conducting tests in Hong Kong.
Biancone, who recently returned to training in California, was out of racing about one year, accepting a six-month suspension and agreeing not to apply for his trainer’s license for another six months.
A number of witnesses are being called in the case. Layton is expected to make a ruling within 60 days of the completion of the hearing.
To read about some of the testimony in the hearing, click here.
There are so many charitable organizations in racing, some benefiting Thoroughbreds to enjoy a second career after their racing days are over, and others focusing on the people involved in the game who need our help. For some, it’s a difficult choice where to direct their charitable donations
Enter the Thoroughbred Charities of America (TCA), whose annual telephone auction of seasons is Dec. 1-3 and whose charitable auction dinner will be held in Lexington, Ky., on Friday, Dec. 5. The TCA serves strictly as a fund-raising organization that allocates money raised to a variety of equine and human organizations that work toward improving the lives of racehorses and the people who work with them.
Here are the five areas the TCA supports:
Thoroughbred rescue, rehabilitation, retraining, adoption, retirement and euthanasia
Backstretch workers including disabled jockeys, farm and track employees with little or no medical coverage and child care for them while working
Equine educational organizations including those who provide equine-based scholarships and those who utilize Thoroughbreds in their educational programs
Therapeutic riding programs which include the use of Thoroughbreds in their programs
Research into equine diseases and ailments
The concept for the TCA, which is now affiliated with the Thoroughbred Owners and Breeders Association, was begun in 1990 by the late Allaire DuPont and Herb and Ellen Moelis (pictured), who felt a need to help promote the well-being of retired racehorses. It began with a small auction at the Moelis’ CandyLand Farm in Middletown, Del., where $15,000 was raised and donated to the Thoroughbred Retirement Foundation. The event grew, especially after the generous addition of stallion seasons, and before long the group was raising nearly $1 million through its annual dinner auction.
The TCA was thus created to serve as a “United Way” type of organization to pass through donations where it’s most needed. To date, more than $15 million has been given to over 200 different Thoroughbred non-profit organizations by the TCA, which sends 94 cents from every dollar raised directly to these charities. Click here to see the list of organizations which have received funding from TCA.
Oversight for the TCA, which has one employee, falls on a knowledgeable and respected board of directors who are active in both fund-raising and grant decisions.
This year’s 19th annual TCA Stallion Season and Art Auction takes place at the Keeneland Entertainment Center on Friday, Dec. 5, beginning at 6 p.m. For tickets, call (859) 312-5531. For information about this important event and the Dec. 1-3 telephone auction that precedes it, click here. If you’re unable to attend, you can still bid on the stallion seasons and other items up for auction. To make a donation to TCA, click here.
The Paulick Report will spotlight a different charity each day of Thanksgiving week, when we traditionally take time to reflect and give thanks to the blessings we have and to help those less fortunate. This is a difficult time for many Americans, and charitable organizations are feeling the effects of the global economic crisis. We hope you’ll spend a few minutes to learn about some of the charities that make us a better industry, and consider giving to these or to others that we won’t have the opportunity to publicize. Remember that no gift is too small.
Is American racing getting better, or is the American Graded Stakes Committee finding it increasingly difficult to downgrade races as it moves more stakes into Grade 1 and Grade 2 categories? The committee, organized by the Thoroughbred Owners and Breeders Association, announced its graded stakes designations on Tuesday, adding six races to grade 1 status while downgrading just one and moving seven to grade II while not downgrading a single race from that category. Ten races were moved up to grade III status, while four were stripped of their grade III ranking, including one race at a track that is being closed.
That’s a net gain of 18 graded races at a time when some tracks are shutting down and others are reducing their number of racing programs.
“I think we have some great racing in this country,” said Peter Willmott, chairman of the TOBA committee, “whether it’s getting better…I don’t know. When we looked at the statistical data on all these races, we find some of the statistics on the Grade 2 and Grade 3 races merit moving them up.”
Willmott referred to a pyramid the committee has used as a model, with 20% of the graded stakes ideally rated Grade 1, 30% Grade 2 and 50% Grade 3. In recent years, however, as more races are designated with higher grades, the pyramid has gotten heavier on the top. Including the new grades for 2009, the percentage of Grade 1 are now at 23.6%; Grade 2, 32.6%; and Grade 3, 43.9%. The committee graded 488 races from the 746 stakes (65.4%) it considers eligible: those races which are unrestricted and offer a minimum purse of $75,000.
Two of the six new Grade 1 races are Breeders’ Cup events added in 2007: the Dirt Mile and Filly and Mare Sprint. A third Breeders’ Cup race, the Juvenile Turf, also new in 2007, was designated as a Grade 2. The new Breeders’ Cup races in 2008: the Marathon, Juvenile Fillies Turf, and Turf Sprint were not graded because they have had just one running.
The other new Grade 1 races are the Jamaica Handicap for 3-year-olds on dirt at Belmont Park; the Pat O’Brien Handicap at Del Mar for sprinters, 3 and up; the Clement L. Hirsch Handicap for fillies and mares at Del Mar; and the Vinery Madison Stakes for filly and mare sprinters at Keeneland.
The only race to lose Grade 1 status was the Suburban Handicap at Belmont Park for older horses going a route of ground at Belmont Park.
The upgrading of the Pat O’Brien gives Del Mar two Grade 1 sprint races of the nine Grade 1 sprints in the older horse division. Combined with the three Grade 1 races at a mile (Metropolitan Handicap, Cigar Mile, Breeders’ Cup Dirt Mile), there are now more Grade 1 races for older horses on dirt or synthetics at distances of a mile or less than there are Grade 1 races for older horses going longer than a mile on those surfaces.
The committee uses different statistical tools to grade races, including individual horse ratings compiled by a panel of North American racing officials. Some subjectivity is also included in the process.
Click here to view the TOBA press release about the 2009 graded stakes, including those races that changed in grade.
Click here to view the entire 2009 list of American graded stakes.
Lane’s End Farm is expected to announce that reigning Horse of the Year Curlin will enter stud at the Versailles, Ky., farm in 2009 for a live foal stud fee of $75,000, the Paulick Report has learned. Lane’s End is owned by William S. Farish, vice chairman of the Jockey Club and former ambassador to Great Britain for President George W. Bush.
Jess Jackson owns 80% of the son of Smart Strike—Sherriffs Deputy, by Deputy Minister, with the other 20% owned by the Midnight Cry Stable of disbarred attorneys Shirley Cunningham and William Gallion. That share has been the focus of a complicated legal battle resulting from a $42-million judgment against Cunningham and Gallion in a civil case. The two also face criminal charges.
Jackson and wife Barbara Banke have offered to buy Midnight Cry’s 20% for $4 million, based on an appraisal by bloodstock expert Ric Waldman that set a $20-million fair market value on Curlin. While Curlin may have been insured for an amount in excess of $40 million, Waldman’s appraisal took into account the current global economic crisis and recent trends in the bloodstock market. The just-concluded November breeding stock sale at Keeneland resulted in a 46% decline in gross revenues.
Jackson announced Nov. 15 that Curlin would enter stud in Kentucky in 2009, though he did not name a farm. At the time, he said various offers were being considered, and also indicated Curlin could become the first stallion to stand at the Stonestreet Farms in Lexington that he owns. The late-season announcement, made after matings for many broodmares already have been planned, may also have contributed to Waldman’s appraisal, which Andre Regard, an attorney for Gallion and Cunningham, said was below the horse’s true value.
No decision is expected on the Midnight Cry share of Curlin prior to a Dec. 1 court date in Franklin County, Ky. If a judge rules that the share should be sold to Jackson for $4 million, an appeal could extend the legal battle well into 2009.
It is believed Gainesway Farm was a “finalist” in the bidding for Curlin’s stud services. Jackson owns a large share of dual 2005 Classic winner Afleet Alex, who stands at Gainesway, owned by South African Graham Beck and run by his son, Antony. Jackson and the Beck family are both involved in the wine business, Jackson in California as the owner of Kendall-Jackson vineyards and the Becks primarily in South Africa. Jackson sells many of his horses through Gainesway and Taylor Made Sales Agency, which is also believed to have been a finalist to stand Curlin. Jackson also is part owner of 2004 Horse of the Year Ghostzapper, who stands at Adena Springs. It isn’t known whether Adena Springs, owned by Frank Stronach, actively recruited Curlin.
With a fee of $75,000, Curlin would be the highest-priced first-year stallion entering stud in Kentucky in 2009. Kentucky Derby and Preakness winner Big Brown will stand at Three Chimneys Farm for $65,000, the same amount as Coolmore/Ashford’s multiple European Group 1 winner Henrythenavigator, who finished second to Raven’s Pass in the Breeders’ Cup Classic in which Curlin was fourth.
“Curlin has proven himself across two continents with 16 starts, the honor of 2007 Horse of the Year and the greatest North American money-earner in racing history,” Jackson said in the Nov. 15 announcement that Curlin would enter stud in 2009. “He always gave it his all and has done everything we have asked of him. I am proud to announce that he will start a new career in 2009 and contribute his soundness, stamina, durability and athleticism to the breed. I am looking forward to seeing his foals compete and possibly exceed his unequaled racing record.”
At the time of the announcement, Jackson said he would consider one more race in 2008 for Curlin if “an appropriate venue and purse are offered.” Curlin has been ruled out of the Clark Handicap at Churchill and Cigar Mile at Aqueduct, the two most likely races for him, so it’s extremely doubtful he will run again.
Curlin, who began his career under the care of Helen Pitts and was transferred to trainer Steve Asmussen after breaking his maiden at Gulfstream Park early in 2007, retires with record earnings of $10,501,800. He won 11 of 16 starts, with two seconds and two thirds. He won seven Grade 1 races: the Breeders’ Cup Classic, Dubai World Cup, consecutive runnings of the Jockey Club Gold Cup, Woodward, Preakness and Stephen Foster Handicap. Bred in Kentucky by Fares Farm, he sold for $57,000 at the Keeneland September yearling sale. Jackson, Satish Sanan and George Bolton bought at 80% interest in Curlin through bloodstock agent John Moynihan for about $3 million after the colt’s maiden win. Jackson eventually bought Sanan and Bolton’s interests.
Curlin’s sire, Smart Strike, stands at Lane’s End for $150,000. Also joining the 2009 roster at Lane’s End is War Pass, the 2007 2-year-old male champion and winner of the Breeders’ Cup Juvenile who will stand for $30,000 live foal.
Kevin McGee, legal counsel for Jackson’s Kendall-Jackson Vineyards in California, would neither confirm nor deny that a deal with Lane’s End was imminent. Attempts to reach Will Farish were unsuccessful. Bill Farish, son of the Lane’s End owner, said he could not comment on the matter.
After 48 hours of being told horse racing needs newer and younger and more female fans, Ray Paulick is mad as hell and he isn’t going to take it anymore. He wants to know, among other things: Why does racing hate us old men? Ray’s gavel to snooze button coverage of the 32nd Asian Racing Conference takes a diversion today as he offers stream of consciousness (when conscious) coverage of the final programs from Tokyo, which touch on television, wagering, and the dreaded S.S. (synthetic surfaces).
CONFESSION: I’M AN OLD (55) MAN and am feeling a bit lonely. Racing doesn’t want me anymore. It seems more interested in younger people, men with fulls heads of hair, and women who giggle and love horses but have never bet more than $2 to show on a race. What have I done, to borrow from the Aussies, to hack you off? All I and my fellow old men do is go to your tracks, buy your lousy food, bet till our pockets are empty, and fall asleep on the train on the way home. Yet you would rather cater to people who don’t even like your product. Where’s the love, racing?
It’s not just an American problem, this fixation racing has on replacing the dead with people with a heartbeat. It’s going on in Australia, Hong Kong, Japan. Everywhere horses race, the marketers hate us old men.
Just yesterday, a producer from Fuji television, which broadcasts into 90% of Japanese homes, was lamenting that his Sunday racing telecasts have a demographic that is so old that he can only sell advertising time to rocking chair and walking stick manufacturers. Actually, it isn’t quite that bad, but old men were making up such an increasing percentage of the Sunday racing programs’ audience over the past 10 years (from 47% to 63%) to the point that producers decided to shake up the broadcast and bring in people who knew nothing about racing but had some connection with celebrity. There’s hope for David Hasselhoff over here in Japan!
Worse yet, Fuji’s racing telecast ratings declined over those 10 years, from 7.7 (about 3 million households) to 5.0 (about 2 million). Fuji’s metrics people are very clever, measuring their audience segments into eight categories (two youth, and three each by age group for male and female). The "old man" portion of the audience remained the same over those 10 years, with losses coming in the younger and female segment. So Fuji decided to take it out on the old men by providing programming that was irrelevant or irritating to them.
But wait. The Fuji TV producer, Masanari Funaki, said the younger generation is watching all of television less, not just racing telecasts. They have discovered the Internet, video games and mobile phone networking. Nevertheless, Fuji opted to ignore the old men and provide less information about handicapping and gambling (which us old guys like) and show more personality features, make the program more entertaining and focus more on "the sporting aspects of horse racing."
His reason? "We wanted to catch some of those sports fans who might be channel surfing," Funaki said. "We think it’s very important for viewers to see horse racing programs in the same way they see other sports programs, so we don’t overpromote the gambling aspect and get viewers to see the human element. We show more about jockeys, their histories and their background."
What a fool, I thought.
Not so fast, my friend. "This year’s racing telecast ratings are up," Funaki said.
Fuji TV also developed a Saturday night midnight racing telecast that focuses on handicapping the Sunday race, using well-known handicappers from six Tokyo newspapers who scream at each other about how stupid they are.Kind of like the three talking heads on TVG. "Those programs are very popular with younger men," Funaki said.
In my country, Mr. Funaki, old men are asleep by midnight.
SOMEONE ELSE ON THE TELEVISION PANEL SET UP A HORSEY PINATA representing the American racing industry and people took turns whacking it and reminding us of how stupid we are in the United States.
Those guys from the United Kingdom and Australia are so smart, just because they know how to tell time. Smug. They have a 3 o’clock race at Ascot and a 3;15 at Lingfield in the UK, and in Australia (where the clocks are upside down), they manage to televise about 12,000 horse races every day without having any post times overlapping with one another. The reason? Apparently, they can maximize wagering by coordinating post times for the races.
In America, experience has shown that it’s much better to have three races from major tracks all start at exactly the same time, so that simulcast or account wagering customers have to choose between races rather than bet on all three. It’s called maximizing stupidity, or something like that. "America’s most famous racetracks have races going off right on top of each other," said Brendan Parnell, chief operating officer for Australia’s Tabcorp. "They are cannibalizing or eating each other’s lunch and missing great opportunities. People are getting shut out."
Whack! Take that, you damned Yankees.
OLD MEN AREN’T THE ONLY ENEMIES OF RACING. So are governments, who set and enforce ominous hurdles that keep the sport from seizing on some great opportunities, such as a "global bet." (Aren’t most governments and racing regulatory bodies run by old men? Yes!)
John Stuart, who carries the creative title "director of international marketing and operations" for the make-believe Phumelela Gaming and Leisure Co. (what, there really is a place called Phumelela?), presented a science fiction video about a global horse bet called the "Universal," where fans in any country pick the first eight finishers of a big international race like the Japan Cup and create a betting pool in excess of a billion dollars. "Had Barack Obama been watching that," Stuart said, "he’d be shouting ‘yes, we can,’ ‘yes, we can.’ So should we be."
Of course, that will never happen because too many governments have protectionist laws prohibiting commingling of betting pools from one country to another. Plus, the American totalizator companies would still be accepting bets after the race is over.
A SERIES OF PRESENTATIONS ON MEDICATION featuring dreadfully boring attorneys and veterinarians has just about everyone in the room nodding off until a snappy Q&A segment near the end when the moderator directed a question about illegal drugs to Brian Stewart, head of veterinary regulation and international liaison to the Hong Kong Jockey Club. Specifically, Stewart was asked by Australian turf editor Bart Sinclair whether blood-doping agents like EPO, which have plagued cycling and some other sports, are being used in racing. Stewart nodded to the affirmative. "How big a problem is EPO?" Sinclair asked. "I’d say it’s widepread," Stewart said. That sent many Asian Racing Federation delegates straight to the bar for a stiff one.
THERE ALSO WAS MUCH DISCUSSION ABOUT HANDICAPPING INFORMATION. What should be given to these young fans who don’t exist yet? How should we deliver information to them? Gift wrapped with local currency, I think.
Howard Wright, senior editor for England’s Racing Post and one of the people in the media who "gets it," had me going there for a minute when he said the racing industry in Great Britain actually wants to make money from newspapers for providing information about horse racing to fans. Good one, Howard. They can’t be that arrogant over there, can they? Seems like the industry should be paying newspapers to promote the sport, not the other way around.
Howard, like me, is a slightly grumpy old man who does see the need for racing to replace those of us who will soon be pushing daisies. He also understands these young kids today don’t know how to read a newspaper, but doesn’t think the traditional ways of providing handicapping information (Racing Post, Daily Racing Form) should be abandoned. "One size fits all no longer applies," he said. "The media has to find ways of satisfying its traditional horse racing audience while also accommodating the PlayStation generation, who want their involvement presented in small pieces and want it now." It’s time for "Racing Form Lite" he said. Tastes great, less filling!
Howard also mentioned the budget cutbacks in most daily newspapers (e.g., they are dying faster than us old men), and suggested that racing isn’t alone in having its editorial space reduced. "Racing will never beat football," he reminded. Someone got out the Pinata again and started talking about how American newspapers have stopped covering horse racing altogether. Whack, whack, whack!
SOMEONE SUGGESTED THIS NEW THING CALLED THE INTERNET might be a good way to deliver information to these newbies. That’s where the kids are hanging out these days, aren’t they? To strategerize about this, the Asian Racing Federation found a really smart kid, Koichi Yamamoto, who must be the youngest senior research director the Dentsu Institute has ever had. (He got his MBA from Columbia University when he was, like, 12 years old.)
Yamamoto outlined how blogs and social networking have changed things and talked about how businsses need to reach "new influencers," people who are constantly communicating online by networking and commenting on blogs and never breathing fresh air. These "new influencers" might not be as informed as us old guys or as opinioned; in fact, they are more easy to influence than us stick in the mud types, Yamamoto said. But don’t inundate these "new influencers" with gibberish, he said, because they are adept at filtering out useless crap. "Only the most attractive and relevant information gets through," he said.
If the message gets through, however, Katy bar the door. Word of mouth is the new king, he said. Social trends spread at lightning speed. "People want to tell friends about things that at least some people know, but not too many people know," Yamamoto said. "The topicality window opens faster and closes faster."
Yamamoto said the newbs are hip to the trick of marketing people. "Increasingly sophisticated consumers can easily see through marketing schemes," he said. "Relationships with these consumers is more important than ever. Strong relationships turn information-filtering consumers into information-hungry consumers."
Can I get a translator please?
"WHAT IF STEVE JOBS WERE TO ENTER THE RACING INDUSTRY? How would Apple innovate the customer experience?" Those questions were asked by Edward Tse, a McKinsey and Co. consultant to the Hong Kong Jockey Club who encouraged racing associations to think more innovatively than they have done in the past. Tse reviewed the depressing statistics that show pari-mutuel handle losing altitude and asked if it is sufficient to simply launch new bet types, which many racing associations have tried. "Or," he asked, "do we need a new approach?"
He then listed six building blocks needed for innovation: 1) tax reform and product pricing; 2) customer segment expansion; 3) channel innovation and expansion; 4) product and service innovation; 5) image or brand building; 6) customer relationship management/loyalty.
Savvy guys like Tse do all sorts of analytics, and he said the most valuable ones are predictive in nature: in other words, get a swami to crunch your numbers. Short of that, he said, try and get predictive analytics that answer the following questions: What’s the best thing that can happen? What will happen next? If these trends continue, why?
Tse said companies that do this well include Capital One, the annoying credit card company that fills your mailbox with junk every day, the consumer electronics store Best Buy (news of their current problems hadn’t reached Tse yet), and the Harrah’s casino company, which he said "revolutionized the casino industry by adopting highly analytic customer focused innovation."
Harrah’s, he said, separates all of its customers into segments by profit potential, drives those customers to aspire to a higher level, optimizes placement of its slot machines in the best locations, and uses customer satisfaction measurements to shape their business plan. The whole point of this is to separate the customers from their money, and Harrah’s is extremely good at that.
Back to racing. Tse insisted that new approaches to the customer experience are required to modernize the industry. Following Harrah’s lead, racing associations must use deep customer segmentation and analytics as the foundation for innovation. "For most racing organizations," Tse said, "this will require a different mindset and new skills."
Unfortunately, many people with those skills end up working at a company like Apple.
DO LOWER PRICES INCREASE SALES? The Hong Kong Jockey Club was curious to see if the cost of a bet could affect how much is wagered, so they tried something foreign to most horseplayers: they lowered prices. Specifically, the HKJC offered rebates for losing bets made by some of their highest-rolling customers. The net result: players who received rebates, thereby effectively lowering their takeout, wagered more.
It wasn’t that easy, though. To give rebates, the HKJC had to cut a deal with government that gave them the flexibility to offer innovative programs like rebates. The agreement worked both ways, with the HKJC guaranteeing HK$8 billion in annual revenue to the government, more than they’d gotten the previous year. The HKJC wanted to expand the number of race days from 78 a year and the number of commingled simulcasts from 10. The government didn’t budge on those requests.
The rebates were for losing bets of HK$10,000 and up (about US$1,200) on win, place, quinella and quinella place wagers. To coincide with the introduction of the bets, the HKJC convinced 500 bettors from different wagering segments (frequent, occasional, big bettors, small bettors) to allow their betting to be tracked for analytical purposes. Not surprisingly, big, frequent players took advantage of the rebates the most, effectively lowering takeout from 18.7% to 16.9% and increasing the volume of their bets by having more money to churn. For the occasional and smaller players, the rebate and lure of lower takeout made little or no difference.
The rebates were funded by the HKJC, which looked at them as a marketing investment in their future. Handle increased, but not to the extent that it paid for itself. Bill Nader, the former New York Racing Association chief operating officer who is now executive director of the HKJC, said the organization hopes it will pay dividends in the long run.
MR. SEKIGUCHI, WHERE ARE YOU? Fusaro Sekiguchi, the flamboyant Japanese businessman who raced Fusaichi Sekuguchi to victory in the 2000 Kentucky Derby and has been a major buyer at foal and yearling sales around the world over the last decade, has been keeping a very low profile in his native Japan recently.
Some Japanese racing insiders have said he has sold most of his horses and others have suggested the global credit crunch may have dealt him a severe blow. Last time I saw him was in the paddock of the Tokyo Race Course at the Japan Cup a couple of year ago, where he was nattily dressed as usual. Sekiguchi has had some ups and downs in his racing and business career (famously failing to pay Keeneland on some yearling purchases prior to buying FuPeg for $4 million, and later getting fired by the company he started), and he always seems to land on his feet.
Here’s hoping we see him in the winner’s circle again real soon.
DARLEY JAPAN FARM EXPANDING: Darley Japan Farm, the Japanese breeding entity on Hokkaido owned by Ken Mishima, has expanded with the purchase of Nishiyama Farm, whose previous owner raced Paradise Creek, winner of the Eclipse Award as outstanding turf male in 1994. Though it’s a bit confusing, Darley Japan Farm and Darley Japan (which stands stallions) are separate entities, in part because of the licensing peculiarities of the JRA that require Japanese owners of breeding farms.
FINALLY, THE GRAND FINALE THAT WE HAVE BEEN LOOKING FORWARD TO…the "cage match" discussion arguing the merits of synthetic surfaces.
Ian Pearse of Pro-Ride surfaces of Australia, bragged on the results of the Breeders’ Cup at Santa Anita while Michael Dickinson, waiting for his turn to speak about his creation, Tapeta Footings, sat patiently onstage sticking pins into a voodoo doll that resembled Ron Charles, who chose Pro-Ride over Tapeta for Santa Anita, host of the 2008 and 2009 world championships.
Raji Jayaraju then sang the praises of the synthetic surface installed at the Singapore Turf Club track where he is senior manager. Singapore’s new track has been very useful because of the heavy rain they get in Singapore that often leaves the turf course extremely soggy. Jockeys and trainers said in a video that the synthetic track was terrific (under threat of a caning?).
Dr. Toshiyushi Takahashi, a representative of the JRA, presented some scientific research that showed why synthetic tracks might be safer than Japanese dirt tracks. The JRA installed synthetic material on one of its training tracks and compared hoof impact between dirt and synthetic tracks, measuring the velocity of impact and time of hoof stabilization at impact. Dr. Takahashi summarized by saying that synthetic tracks are more stable and provide more traction than dirt or wood chip tracks, and are more constant at the time of hoof landing.
But that science is meaningless in the face of comments from turf writers and horse players who are more concerned with tradition and form than the safety of horses.
"To those of you who train, for those of you who’ve got sand and dirt tracks, please switch to synthetics," Dickinson said. when asked about safety. "Whether you go with Tapeta, Pro-Ride or my good friend Martin Collins’ Polytrack, please change. It’s much safer for the horses." Apparently, someone "got to" the panelists and said no name calling. Cage match cancelled.
That’s it from the Asian Racing Conference. I’ll summarize what I’ve learned over these last few days in a forthcoming commentary.
(from Keeneland publicity department)
My White Corvette, dam of 2008 Breeders’ Cup Juvenile Fillies (G1) winner Stardom Bound, brought top price of $825,000 on Wednesday at Keeneland’s November Breeding Stock Sale.
Barry Weisbord signed the ticket, on behalf of celebrity chef Bobby Flay, for the 10-year-old mare by Tarr Road. My White Corvette was not mated in 2008 since her weanling filly by Lion Heart was a May foal. She was consigned by Hunter Valley Farm, agent.
On Wednesday, Keeneland sold 224 horses for gross receipts of $24,698,000, down 42.1 percent from 2007 when 258 horses brought $42,638,000. Average price of $110,259 decreased 33.3 percent from last year’s $165,264. The median price of $82,500 was down 36.5 percent from $130,000 in 2007. The buy-back rate was 28.2%.
Keeneland November Cumulative Prices
First Three Sessions:
2002-08
Year
Sold
Revenue
Average
Median
2008
523
$114,725,000
$219,359
$125,000
2007
638
$221,137,000
$346,610
$190,000
2006
616
$194,352,000
$315,506
$190,000
2005
633
$200,002,000
$315,959
$200,000
2004
691
$202,533,500
$293.102
$150,000
2003
606
$165,541,000
$273,170
$135,000
2002
613
$134,944,000
$220,137
$110,000
Through the first three days, Keeneland has sold a total of 523 horses for $114,725,000, down 48.1 percent from last year’s $221,137,000 when 638 horses sold. The average of $219,359 was down 36.7 percent from $346,610 in 2007, while the median of $125,000 decreased 34.2 percent from last year’s $190,000
“In general, given the state of the world today, it was a very good session,” said Geoffrey Russell, Keeneland’s director of sales. “What is good is that there is active trade here; and active trade with an international feel.” Woodland Farm, the day’s leading buyer, purchased the session’s second-, third- and fourth-highest priced horses, paying $500,000 for Capeside Lady, in foal to Empire Maker; $385,000 for Sacred Feather, in foal to Giant’s Causeway; and $375,000 for Princess Patricia, in foal to Hard Spun.
Graded stakes winner Capeside Lady, a seven-year-old mare by Cape Town, was consigned by Dapple Stud, agent.
The six-year-old Sacred Feather is by Carson City out of graded stakes winner Marianna’s Girl, and a half-sister to such stakes winners as Marastani, Christine’s Outlaw, and Crimson Classic. Princess Patricia, a five-year-old mare by Aptitude, is a half-sister to recent Emirates Airlines Breeders’ Cup Filly & Mare Turf (G1) winner Forever Together. Both mares were consigned by Nursery Place, agent.
Keeneland’s November Breeding Stock Sale continues through Monday, November 17. Sessions begin at 10 a.m. daily.
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Bloodstock prices continued their downward spiral on Tuesday during the second session of the Keeneland November breeding stock sale, and after two days total receipts are down almost 50% from one year ago and are the lowest in years.
The Lexington, Ky., sale company reported there were 150 horses sold on Tuesday for $42,006,000, a decline in revenue of 39% from the $69,435,000 gross in 2007. The average of $280,040 was a decline of 25% from $373,306 recorded last year, and the median fell by 27.3%, from $220,000 to $160,000. Tuesday’s buy-back rate was 34.2%, down from Monday’s 38.2% but still extremely high and an indication of how soft this market is.
Cumulative figures are worse, in part because last year’s opening session set an all-time record for gross revenue. After two days, Keeneland has sold 299 horses for $90,027,000, down 49.6% from a year ago when 380 horses brought $178.489,000 the first two days. The two-day average of $301,094 is a 35.9% drop from $469,734 in 2007, and the median fell by 32%, from $250,000 to $170,000. A higher number of horses, 315, were withdrawn from the catalogue (145) during the first two sessions or bought back by consignors (170), than the 299 that were sold. The aggregate buy-back rate is 36.2%.
Keeneland November Cumulative Prices for First Two Sessions:
2002-08
Year
Sold
Revenue
Average
Median
2008
299
$90,027,000
$301,094
$170,000
2007
380
$178,489,000
$469,734
$250,000
2006
342
$149,675,000
$437,646
$275,000
2005
372
$157,438,000
$423,220
$270,000
2004
424
$162,463,500
$383,169
$200,000
2003
366
$140,093,000
$382,768
$190,000
2002
368
$111,859,500
$303,966
$167,500
The top lot to sell in the early stages was Hip 374, J Z Warrior, which agent Olin Gentry purchased for $1,125,000 on behalf of an unnamed female client from Washington state. J Z Warrior was the first racehorse or broodmare prospect to sell from the Zayat Stables consignment being handled by Eaton Sales. J Z Warrior is a 3-year-old stakes-winning filly by Harlan’s Holiday.
Half Queen, a 12-year-old Deputy Minister mare in foal to Distorted Humor, brought a higher hammer price of $1,650,000, but she was bought back by her owner. Hagyard Farm, agent, consigned the mare, who produced 2003 champion 2-year-old filly Halfbridled.
The mood of the sale is anything but upbeat. Asked about the health of the market, one agent standing near the outside ring behind the sale pavilion pointed in the direction of a near empty viewing area. “That should tell you a lot right there,” he said. “There’s not many people here.”
However, another prominent commercial breeder said the prices represent a much-needed correction in a market that has been inflated in recent years by newcomers to the breeding industry. “Prices have been so out of whack for mares in recent years because of the presence of outfits like ClassicStar and a number of billionaires from other industries who decided to get into the breeding industry," he said. "They drove up mare prices to the point that they couldn’t possibly make money selling yearlings out of those mares, and that made it much more difficult for us. I think it’s a healthy change for commercial breeders who are in this for the long haul.”
One agent commented that he heard a rumor that as many as 20% of the horses being sold are “owned by banks.” A representative of one major lending institution said his bank had liens or interests in about 325 of the horses being sold. “There are a lot of horses in here where the money will go straight to the bank,” he said, adding it wasn’t that unusual an occurrence.
“There is still money out there to be borrowed,” he said in reference to the recent crisis in the banking industry and financial markets that resulted from the sub-prime mortgage fiasco in the real estate world. “The banks might be tightening the amount they’re willing to loan on a horse, maybe only 40% of its appraised value versus the 50% that had previously been the standard.”
The session was topped by the $2.4 million Mushta, a racing filly from the Zayat Stables consigned by Eaton Sales, agent. Fran Abbott signed a ticket to buy the 3-year-old graded stakes winner on behalf of Betty Moran’s Brushwood Stable, The Empire Maker filly will continue to race under the care of trainer Bill Mott. Mushka, whose dam, Sluice, is a half sister to multiple grade I winner Lakeway. Mushta won the Grade 2 Demoiselle Stakes at Aqueduct last year. Zayat purchased Mushka for $1.6 million as a yearling at the 2006 Fasig-Tipton Saratoga sale.
Mushta was one of seven horses purchased for $1 million or more on Tuesday, compared with 11 during last year’s second session. The cumulative number of seven-figure purchases is 18, less than half of the 39 sold at this point in 2007.
"There’s no depth here," said one horseman. "The best mares are still selling, but below that top level it’s not good. And there’s virtually no market for older mares right now."
“There was more uniformity to today’s session; it was more comparable to the Tuesday session last year," Geoffrey Russell, Keeneland’s director of sales, said in a press release. "We saw active bidding from a wide range of people and countries,” he added, noting that the market continued to place a premium on quality young race fillies.
Click here to see results and a summary of leading buyers and consignors.
The concept for the TCA, which is now affiliated with the Thoroughbred Owners and Breeders Association, was begun in 1990 by the late Allaire DuPont and Herb and Ellen Moelis (pictured), who felt a need to help promote the well-being of retired racehorses. It began with a small auction at the Moelis’ CandyLand Farm in Middletown, Del., where $15,000 was raised and donated to the Thoroughbred Retirement Foundation. The event grew, especially after the generous addition of stallion seasons, and before long the group was raising nearly $1 million through its annual dinner auction. 
In my country, Mr. Funaki, old men are asleep by midnight.
which have plagued cycling and some other sports, are being used in racing. Stewart nodded to the affirmative. "How big a problem is EPO?" Sinclair asked. "I’d say it’s widepread," Stewart said. That sent many Asian Racing Federation delegates straight to the bar for a stiff one.
It wasn’t that easy, though. To give rebates, the HKJC had to cut a deal with government that gave them the flexibility to offer innovative programs like rebates. The agreement worked both ways, with the HKJC guaranteeing HK$8 billion in annual revenue to the government, more than they’d gotten the previous year. The HKJC wanted to expand the number of race days from 78 a year and the number of commingled simulcasts from 10. The government didn’t budge on those requests.
Some Japanese racing insiders have said he has sold most of his horses and others have suggested the global credit crunch may have dealt him a severe blow. Last time I saw him was in the paddock of the Tokyo Race Course at the Japan Cup a couple of year ago, where he was nattily dressed as usual. Sekiguchi has had some ups and downs in his racing and business career (famously failing to pay Keeneland on some yearling purchases prior to buying FuPeg for $4 million, and later getting fired by the company he started), and he always seems to land on his feet.
Raji Jayaraju then sang the praises of the synthetic surface installed at the Singapore Turf Club track where he is senior manager. Singapore’s new track has been very useful because of the heavy rain they get in Singapore that often leaves the turf course extremely soggy. Jockeys and trainers said in a video that the synthetic track was terrific (under threat of a caning?).