One of the most surprising themes in Monday's Paulick Report article on Fasig-Tipton's new owner
, Synergy Investments of Dubai, wasn't so much the comments about the No. 2 Thoroughbred auction house, but what was said about the market leader, the Keeneland Association.
A word that was repeated several times by consignors and buyers commenting for the story was “arrogant.” It is an affliction that strikes many companies with a substantial lead in market share over their competition. Microsoft has been called arrogant. So were the phone companies before deregulation. Arrogant is a term often used to describe the New York Racing Association, especially when it was under the leadership of the Phipps family and suffered steady declines in business. It's also a word some in the horse business use to describe Keeneland.
How strong a grip does Keeneland have on the Thoroughbred auction market?
Last year, Keeneland did $815 million in business in a $1.2 billion North American Thoroughbred bloodstock market. That's 68% of the total receipts, more than a 2-to-1 lead over all of their competitors combined, including Fasig-Tipton, Ocala Breeders' Sales
Co., Barretts and several regional outfits.
Any company with that kind of lead in market share can become complacent, or, worse, arrogant. Based on comments we received, that may be the case with Keeneland.
More than 15 years ago, I had the opportunity to talk with a member of Keeneland's board of directors about how the company was run. I was surprised to learn from this individual, a major breeder and consignor in Central Kentucky, how little responsibility is given to the board members by the three trustees who run the company. (Current trustees are William S. Farish, former board chairman of Churchill Downs and current vice chairman of the Jockey Club; breeder Louis Lee Haggin, grandson of Keeneland founder Hal Price Headley; and attorney William Lear, who was recently named to replace the late attorney, Buddy Bishop.)
“They (three trustees) don't ask for any input at board meetings, and they don't like any questions from board members,” the Keeneland board member told me. “They tell us what they've decided they are going to do.”
Worse, this person said, “I have to practically crawl into Beasley's office on my hands and knees if I want something related to a sale.” Rogers Beasley was then the director of sales for Keeneland, a position now held by Geoffrey Russell. Beasley currently is Keeneland's director of racing.
There can be no doubt that Keeneland does many things right and is looked upon by numerous racing fans and organizations as an industry leader. Of course, it has the money to do things many other struggling racing associations cannot do. That money is fueled by sales entry fees and the 4.5% commission it rakes in during a sale.
Do the math: 4.5% of $815 million is $36.7 million earned in 2008. Since 2000, Keeneland has taken in over $243 million in sales commissions. Some have suggested one of the association's biggest problems is deciding what to do with all the money it has stockpiled over the years. It is a for-profit company, one with a charitable foundation, but it does not return dividends to any shareholders. Its financials are a closely held secret.
Trainer D. Wayne Lukas, who has been affiliated with some of the biggest spenders at Keeneland sales over the last 30 years, used to complain loudly about Keeneland's big race for 3-year-olds, the Blue Grass Stakes, having far too low of a purse compared with other Derby preps. It was around that time that the Blue Grass temporarily slipped from Grade 1 to Grade 2 status.
“All they need to do is reach into their safe deposit box and grab a few T-bills,” Lukas said. Eventually, Keeneland made substantial increases to its stakes program, including the Blue Grass Stakes.
The purchase of Fasig-Tipton by Synergy has many breeders excited because they are hopeful there will be significant investment in initiatives to bring new people in to the business as horse owners. “Keeneland has tried some new owner programs, but they've failed because they really don't have the talent or know-how to attract new investors,” one breeder said.
“If I were in Keeneland's shoes,” another breeder said in reference to the sale of Fasig-Tipton, “I'd be a little nervous right now.”
By Ray Paulick
Copyright ©2008, The Paulick Report
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