The Stud Fee of a
Thoroughbred Stallion is the determining factor for the entire thoroughbred
economy. When a colt is a successful racehorse and goes to stud, he is
valued based on his stud fee. Sucklings, weanlings, yearlings and two
year olds in training are based on some multiple of the stud fee of the sire
with some variations for conformation and female family.. Broodmares
are valued in part, by who they are in foal to, and what the resulting foal
will be worth as a sales prospect. Naturally, performance, produce
record and appearance are part of the equation for value of the broodmare.
However, the stud fee will be the guiding light when you figure the value of
the mare. The sire of the broodmare and who the mare is currently in
foal to, will be of tremendous importance in determining her value.
Suffice it to say that it is important to
determine the proper Stud Fee for understanding how to exist in the
thoroughbred business in these times. Profit is more than ever the
name of the game and it all begins with the Stud Fee.
Long ago a man raced a horse and sold him
or retired him and the resulting stallion stood for a Stud Fee. Later,
horses were bought by a few people and they bred their mares to the
stallion. Bull Hancock of Claiborne Farm imported several great
stallions and they were owned by three or four breeders. The impact of
Nasrullah is one of the strongest examples of such group ownership.
When Nasrullah's son Nashua was syndicated
by Leslie Combs, a new era began and other syndications followed rapidly.
The million dollar stallion was here at last because of syndication. Swaps
was syndicated and the progression began to spiral upwards - Raise a Native
at about two and a half million dollars, Buckpasser at nearly five million
dollars, Secretariat at over six million dollars, What A pleasure at eight
million dollars, Seattle Slew at twelve million dollars, Spectacular Bid at
twenty two million dollars, Conquistador Cielo and Devil's Bag at thirty six
thirty million dollars, El Gran Senor and Shareef Dancer at forty million
dollars and Alydar at One Hundred Million Dollars.
Season prices on top horses had become no
guarantee and Northern Dancer at One Million Dollars for a no guarantee
season best illustrated how wild things had become by the time we had
reached the mid-nineteen eighties. Seattle Slew was over three million
dollars a share and at seven hundred fifty thousand dollars for a no
guarantee season, it was the proper price.
The player were the British Bloodstock
Agency et al, the Arab Sheikhs, the Japanese and American Businessmen and
Australians and South Africans and French and Swiss and Germans and so on.
Thoroughbred horse prices and stud fees went wild and names like Sangster,
Hunt, Yoshida, Maktoum, Brennan, Icahn, Paulson, Farish, Jones, Lukas, Brant
and many, many, many more began to become serious players in the
thoroughbred horse industry. The banks were lending money, limited
partnerships were running wild and the international cash flow in the
thoroughbred industry was something truly fantastic. If Northern
Dancer's stud fee was one million dollars and his average yearling sold for
about three and a quarter million dollars and his average top quality racing
colt was syndicated for about forty million dollars, then it all worked out
IT DID NOT WORK OUT FINE. The price of the stud fee had no basis on the
intended use of the product. = which was the racetrack. The business
of race horses had forgotten all about horse racing. The thoroughbred
business had become about taxes and write-offs, about syndication and
yearling sales, and about partnership group money versus foreign investment,
and billionaire versus billionaire
It all collapsed because it was a money
game and when some investors in the horse industry took money out of the
cycle, the cash void could not be filled. Newstead Farm, Tartan Farm,
Warner Jones, Bunker Hunt, John Franks, Ryehill, Aaron Jones and far too
many more to name withdrew from the business by cashing their chips.
Large stallion investments caused other great losses such as Spectacular
Bid, Devil's Bag, Shareef Dancer, Conquistador Ceilo, Storm Bird, Assert,
Halo and many many more were all victims of less than expected stud careers
or the stud fee crash and several more hundred million dollars were lost
from the cycle. When several billion dollars of liquid money was lost
to the broodmare, yearling, stallion season cycle, the game was over.
NOW THE GAME IS ONCE AGAIN
BEGINNING. They race horses each and every day.
There is purse money and racehorses win that purse money. The good
horses are the good horses and the race horse business is becoming all about
horse racing. All of this brings us back to a logical way to sense the
true market value approach to determine a Stud Fee.
These days a stallion is worth
approximately the amount of money he has earned on the racetrack. He
should be a legitimate Grade One winner or at least a Grade Two stakes
winner and Grade One stakes placed to go to stud. He is worth a
bit more if ye is by a leading sire with a good female family and he is
worth a bit more if he is a Derby or Classic horse. He is with a bit
more if he is very good looking and shows flashes of brilliance on the
racetrack with regard to speed ratings or big victories. A horse like
Hansel is about a four or five million dollar stallion prospect who should
be worth One Hundred Twenty Five Thousand Dollars per share. He should
stand for about Twenty Five Thousand Dollars live foal and his yearlings
should bring between Seventy Five and One Hundred Thousand dollars.
You should be able to buy a yearling by Hansel and be able to run in a
high price claiming race if you have to and not lose your shirt.
Great stallions like Danzig, Sadler's
Wells, Mr. Prospector, Nureyev and the others of that class should stand at
stud fees between one and two hundred thousand dollars. In this way, a
better chance at a good horse cost more money and stallions receive the
proper Stud Fee reward for success at stud.
The racetrack earning potential of horses
is what must drive up the entire business. In this way the horse
business will escalate on a sound footing.
The standard stallion syndication has
become harder to do in the current horse market. Alydar was sold as
lifetime breeding rights and Alysheba allows for conversion of stud fees
paid towards the purchase of a share. Forty Niner and Easy Goer stand
for a stud fee. Blushing John is owned by Foxfield and Brookside.
Danzatore stood at stud in tow hemispheres. Stallion season packets
and option deals have come into the horse business and the next time that a
stallion is syndicated, a live foal share should be created. It is
time for new ideas but most important, it is time to value horses on a
realistic basis of racetreack accomplishment.
After Thoughts - April 30, 2002
In more than a decade since this article
was written. Alydar, Mr. Prospector and Nureyev are no longer with us.
Stallions retire to stud that did not demonstrate soundness on the
racetrack. Many of these unsound horses stand for substantial stud fees.
Mares that started four times are bred to stallions that started five times
and all to often, we are lucky to see five starts out of a foal.
Where are the stallions like Damascus and Buckpasser and Nashua and Swaps
that proved their endurance and quality for so many years on the racetrack?
We are certainly not going to subscribe to the theory that the racetracks
are too hard or the competition so rough that horses simply cannot last.
We are living in the most progressive times in the history of the world.
Science, technology and equine medicine should be giving us the ultimate
athletes that we have seen in our lifetimes. It seems surely not the
case as most horses cannot withstand the rigors of the classic races.
Just maybe the commercial aspects of the
horse business have come back into fashion. That is no problem
however, because things will cycle around again and we will soon enough have
to rely on the race to be the ultimate source of true value.
As for me as a racing fan, I have seen so
many of the greats in this lifetime. I have seen Seattle Slew and
Affirmed do battle going head and head as the only two American Triple Crown
winners to run against one another. I have seen Spectacular Bid and Affirmed
in action against each other. I think of the epic battles between
Alydar and Affirmed and I know what a special time for racing that was for
our industry. For me there is Kelso and Gun Bow and Kelso and Mongo.
There is the meeting of three Horses of the Year between Damascus, Dr.Fager
and Buckpasser or the other meetings between Damascus and Dr. Fager.
Cigar and Skip Away and Skip Away versus Gentlemen are all special moments.
I mean the race is what this is all about. That is the part of the
business that makes itall so special.
My father once told me that money isn't
choosy, anyone can have it. A great horse and a great horse race is
the real substance of our business and the part that I hope will go on