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Published in The International Horseman - October 1991

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 fine.

NO, 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 forever.









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