Hard Sell - By Lenny Shulman

By Lenny Shulman

(Originally published in the July 17, 2010 issue of The Blood-Horse magazine. Feel free to share your own thoughts and opinions at the bottom of the column.)   

With the year’s initial sale of yearlings in the rearview mirror, what do we make of the Thoroughbred industry’s journey along Recession Road?

After the Fasig-Tipton Kentucky July sale delivered numbers that represented shallow drops in gross, average, and median, and improvement in the buy-back rate, is the glass half-full or half-empty?

Truth be told, many are happy there’s still fluid in the container.

That breeze you feel against your sunscreen is the collective sigh of relief that the Fasig-Tipton sale averted having the bottom drop out of the market. No one would argue that this year’s modest drops represent anything close to turning the corner—remember, the Dow Jones Industrial Average sits nearly 2,000 points higher than it did during the sale last year—but at least the cloak of stability draping the market, however uneasily, means that players can heal their wounds and fight another year, a year that will reflect lower production costs due to the stud fee depression that began in 2008.

Make no mistake, though. This will be a smaller industry going forward. The damage for many has already been done, either through reduced revenue streams or less friendly bankers. Satish Sanan, an owner, breeder, and industry activist, told us recently he believes 42% of the farms in New York, Florida, and Kentucky will soon be out of business. Mediocre sale numbers will not save everyone.

“We were satisfied the (July sale) results were solid without being spectacular,” summarized Fasig-Tipton chief operating officer Dan Pride. “Our clients who sell 2-year-olds reinvested from their business last spring, and for those that need to sell yearlings, there is still demand.”

There are several ways to shade the July sale’s results toward the sunny side of the street. For one, batting lead off in troubled times can be a difficult position. Buyers aren’t necessarily in a big hurry to write checks unless they’ve absolutely fallen in love, and many would rather wait for the wider selection of products they can examine on the September shelves. Also, the July auction’s emphasis on first-year sires doesn’t play nearly as well in a down market, when investors tend to gravitate toward blue chips, making unproven commodities a much tougher sell. Combine those elements with the fact that Sheikh Mohammed, the world’s most prolific buyer of bloodstock, bought three head this year for $820,000 compared to five lots worth $1.55 million a year ago, and the modest downturn doesn’t seem all that bad a performance.

It was the improved buy-back rate, from 36.8% a year ago to 28.7%, that may well prove the most important statistic coming out of July.

“The increase in the clearance rate was a minor victory,” noted Pride. “Getting a depth of buyers throughout the whole yearling sales year is a major focus of ours, so that was encouraging.”

The buy-back rate was helped after the sale, as well. Consignors such as Bret Jones of Airdrie Stud and John Sikura of Hill ‘n’ Dale Farms noted they completed sales privately subsequent to lots failing to meet their reserve in the ring. Both were satisfied with their results at Fasig-Tipton, with Airdrie selling the second-highest-priced yearling in the sale, and Hill ‘n’ Dale getting its inventory moved to new homes.

And that, in this environment, is the name of the game.

“We’re all looking for trade,” noted Keeneland director of sales Geoffrey Russell, “and what I take away from this is that there is trade taking place in our industry. That in itself will represent a success this year. So the buy-back rate being down is, I think, a very positive thing.

“I’m not sure any trend was established. (Fasig-Tipton) Saratoga will give us a look at where we are at the upper end. But until the (Keeneland) September sale, we really won’t know. If every sale for the remainder of the year can do what the July sale did, there will be happy people in the business. This is a year to buckle down and get through and hope to be around next year to sell again.”

So, while everyone likes to dream of home runs, this moment might be better served concentrating on base hits and, if it can be afforded, patience. As the 18th-century wordsmith Oliver Goldsmith wrote, borrowing heavily from the 15th-century’s Desiderius Erasmus, “For he who fights and runs away/May live to fight another day;/But he who is in battle slain/Can never rise and fight again.”


Leave a Comment:


Horse racing is returning to a time when only the the wealthy "sportsmen" owners will exist. The small owners are getting out of the "business" because of the terrible economics. New York racing has become an absolute joke for anyone crazy enough buy a NY Bred and run there. It makes no sense to pay $100.00 a day for your horse to run every 2 months.

20 Jul 2010 2:29 PM

Did anyone in the industry ever hear of, or read the book by E.F. Schumacher: "Small Is Beautiful: Economics As If People Mattered"?  In the thoroughbred industry are not the lives of humans intertwined with the horse? I'm no expert or participant in the industry - I'm just a horse lover who does not want to see racing die in this country.  I am loosely throwing out some of Schumacher's ideas: '...modern economy is unsustainable...'  The banking and Wall Street debacle and its aftermath is a testimony to that thought (as well as the hard times breeding and selling horses is facing).  It seems 'sustainability and enoughness' in our American culture/society and this industry as well is not acceptable.

As we have seen with the banks - bigger is not better - it is very risky.  The bubble burst on the economy and has impacted the horse industry as well.  It could be the wake-up call for the breeding and racing industry to get itself a new model. 'Schumacher proposed the idea of "smallness within bigness": a specific form of decentralization. For a large organization to work, according to Schumacher, it must behave like a related group of small organizations.' Could such a model work for breeding and racing to end some of its financial woes and save racing from extinction?  It would take intelligent, brave, open mind(s) to think outside of the box to see if it could.  Personally, I think smaller crops of foals each year might lead to the development of a balanced, sounder, faster, and stamina loaded equine. Mares and stallions would not be 'overworked' and perhaps genetics would be improved for the resulting foals.  As I said, I'm not an expert, I just love the thoroughbred!

20 Jul 2010 4:09 PM

I understand the temptation to try to be optimistic and spin the sale by saying that it could have been worse.  That, in your words, there was a "collective sigh of relief that the Fasig-Tipton sale averted having the bottom drop out of the market."  However, there really is no "sunny side of the street".  Tracks are struggling, closing down or eliminating days.  Owners are losing money left and right.  The number of fans and race attendees are dropping daily (as is handle).  Article after article about horse racing decries the state of the racing industry.

Yet, where is the ACTION being taking by the industry leaders to at least try to fix the problems and revive the sport?  Nowhere.   The only action being taken is to try and get slots. "Hope" that next year or the next sale will be better is nothing more that sticking your head in the sand and pretending that the problems don't exist or will magically fix themselves.  The time for lamenting the problems has long passed.  Emergency action is needed now or racing in this country will cease.  And that, in my opinion, would be very sad; more so because I believe that it is preventable.

20 Jul 2010 4:25 PM

The blame for racing's demise can be shared by all participants in the sport.

The track owners refused to take care of their customers. They have overcharged for their product (just take a look at the prices for tickets and beverages on Derby Day or Breeders Cup Day) These are fans that may come back if not for the dissapointment most of them have conveyed to me on their expensive adventure.

Look at the trainers in spite of the public outcry for drug free racing we have seen them steadfastly refuse to change their practices and have only come to the table kicking and screaming. The breeders have been breeding unsound horses for years. They are breeding many unraced mares to stallions who didn't make many starts, if any, past their three year old year. Is it any wonder why the offspring couldn't race very long? The owners most of whom blasted the trainers for using medication didn't seem to mind sending horses to the worst offenders . This rush to send all the horses to the same trainers caused enormous hardship and headache for the racing office trying to fill races, it has caused short fields which are bad for betting. Way to many of the horses needed to fill races are housed in the same barn.

The racing commissions have also failed to keep up with the times forcing owners to fill out the same forms year after year. Getting fingerprinted to own a horse seems outdated.And instead of instructing trainers and vets on what the withdrawel time should be on various medications they just let everyone guess. I suppose they wanted to find the presence of one nanogram of any drug thereby justifying their position.Regardless of the fact that the amount found had no bearing on the horses performance.

In the words of the great American philosopher Pogo " I have met the enemy and it is me"

20 Jul 2010 6:57 PM

A smaller industry going forward is just what this industry needs.  The variable costs of owning/racing thoroughbreds is simply too high verus other forms of gambling.  Probably not much that can be done to reduce those costs. Net, there will be continued downward pressure on the fixed costs (purchase price).  The average price of thoroughbreds will need to be reduced by roughly 30-50% to entice buyers going forward.  Bankruptcies and reorganizations of horse farms will be a reality. Fewer tracks & racing days are also a reality that needs to happen ASAP.  There is no reason for so many Mid Atlantic tracks to be running simultaneously with a preponderance of horrible short fields.  For that matter, it's ridiculous that Arlington & Churchill overlap and compete for a dearth of quality Midwestern horses.  There is simply too much lousy product due to an excess of racing vs. the supply of horses.  

There's not enough time to adequately address the revenue side of the equation.  The complete incompetence of racing in presenting it's product before the American people is staggering.    

20 Jul 2010 7:42 PM

Horse racing began as "The Sport of Kings". That's because only royalty (or people as rich as kings) could afford to do it right.

I don't think it's right, that anyone who might be able to scrape up enough money to buy a thoroughbred should be able to race them simply for the chance of winning a purse. "Easy-come-easy-go" horse ownership fosters calloused regard for the living breathing sentient animal, the glorious, swift, and yes, fragile and expensive, Thoroughbred or Standardbred, with a natural lifespan of 30 years or more.

Breeders must breed with the total lifespan of their "product' in mind.  Owners must purchase with the total lifespan of their "property' in mind. The indu$try, from race tracks, to stable workers need to clean up their act...and conduct their bu$iness with the total lifespan of their "meal-tickets" in mind.  

If they can't do that, then Oh Lord Please...let the world of thoroughbred breeding, ownership, and racing again become The Sport Of Kings.

20 Jul 2010 8:26 PM
Randy P. Brungard

 The TB industry needs a Leader, one who understands marketing, and who realizes that the Product we are selling is not just the horses, but also the jockeys, trainers, and colorful owners.  We need the main stream sports pages to want to print stories about Zenyatta and her "Last to first" style of running;  Calvin Borel's refreshing "blue-collar" appeal;  Bob Baffert's wit; Bill Casner and Well Armed's healing relationship; Saratoga's charm; to name just a few.    

20 Jul 2010 8:40 PM

They can put a twist on the results of the sale any way they want. It wasn't good. As long as the stud farms keep sticking it to the small breeders, they are going to continue to get out of the business. Stud farms wants the banks, the sales companies, to work with them. Help them. But yet they keep sticking it to the breeders and not working with them. We can not continue to sell yearlings in 2010 at the stud fee level breeders signed on for in 2008. Yet stud farms refuse to negotiate or lower the fees clients and breeders owed on the fees to help everyone survive this market. The more breeders and farms, small or large that survive this, the industry will be stronger for it. The FT sale, if you look at it on the sales prices basis, were well below the stud fees of 2008. SO tell me how many people made money or did they just get rid of the horse.

20 Jul 2010 8:51 PM
C. G. Dean

We need to raise takeout so the owners can race for more money and the breeders will in turn get higher prices for their stock.

Racing needs to create more revenue and with the new found instant racing money added to the extra revenue from increased takeout, we can put the industry woes behind us.

20 Jul 2010 9:04 PM
Fuzzy Corgi

Horse racing has become a broken model in so many ways. The media is against horse racing. I think mostly because of the influence of groups like PETA. I was so excited to tell friends about witnessing Zenyatta win her 17th consecutive race! One co-worker said, "Big deal. They are all on drugs anyway. And I don't condone animal abuse."

The triple crown races get some coverage by the mainstream media. But the only other time is when a catostrophic breakdown occurs to a popular horse. Then it is front page news and scrutinized by newscasters that only have an interest in creating drama and filling time. An example of that was a few years ago when a horse, whose name escapes me, in NY won a stakes race and a few days later was found dead in his stall. The story made the AP national news with the writer insinuating that the horse died because of drugs but that an autopsy was pending. A few days later I read in racing publications that the horse had died of acute colitis. Nowhere in any national news website could I find the follow up story. So this left the general public thinking that the horse died of human greed instead of the owner, trainer and grooms being shocked and devastated at the horses sudden, natural death.

The racing industry needs more good press to help it heal.

20 Jul 2010 9:22 PM

Horseman have to get on the same page and lobby Washington to change the tax laws back to the way it was before the 1980's when racing and horse ownership was a hobby not a business.  Back then the government thought most owners were "cooking the books because 5 out of 7 years they were not showing any profits.  That's reality!!!!

20 Jul 2010 9:51 PM


21 Jul 2010 6:37 AM

I think the problem started when breeders began to believe the dreams they sell. Nine years ago I took care of a Pulpit filly with an asking price for $800,000. Some dreamer offered $700,000 for her and it was declined. That's when I knew many people in this business had gone mad. In the real world, horses are only worth how many baseballs and how much soup you can make from them. For the last several years, when you dangled the Breeders' Cup Ecorche in front of a buyer and gave them a mystical price, they whipped out their checkbook and paid it. Now horses are more realistically priced and it seems that the folks who made all that "dreamy" profit are the ones crying the loudest. Did they blow their business account on Bentleys and trips to Greek islands and why do they continue to buy back horses that bring three or four times the stud fee? Time to wake up from the dream.

21 Jul 2010 7:03 AM

Once again when the industry needs straight talk we get BS from the print media. all this blatant optimistic puffery about the recent sale HARMS the industry with its misrepresentation of current reality.

For instance, you claim; "...It was the improved buy-back rate, from 36.8% a year ago to 28.7%, that may well prove the most important statistic coming out of July..."  

It is the most important statistic but not for the reasons you claim.  

The better buyback rate is because everyone has lowered their reserves because they are broke! upside down! under water!

their reserves reflect their unfortunate circumstances.  The buyback rate reflects that as well yet, you hint that it may be because the demand is stronger from last year.

your analysis insinuates that this improvement in buyback rate is a healthy sign for the industry.

While technically the stats might suggest as much, the reality to most of your audience is quite the opposite.    

Your metrics for analysing the industry are mostly about puffing the business.  Here's a suggestion: why not share observations from owners who RNA'ed their horses in an effort to bring balance to your reportage.  

Please stop the puffery; its a disservice to the uninformed and is a form of DISHONESTY!  

21 Jul 2010 10:30 AM
Cheap Claimer

C. G. Dean wrotes: "...when a catostrophic breakdown occurs to a popular horse. Then it is front page news and scrutinized by newscasters that only have an interest in creating drama and filling time."

If you are a part of the thoroughbred industry, get YOUR act together and you you won't to sit up nights worrying about how much time newscasters have on their hands. Killing the messenger will not cure what ails thoroughbred racing. Thoroughbred racing is killing itself.

21 Jul 2010 8:33 PM
C. G. Dean

Cheap Claimer,

That was not me who wrote what you quoted.

22 Jul 2010 1:27 AM

MP, I wish the IRS laws would go back to a hobby, too, but that's a dream, especially when you have all the partnerships, etc. Did you see the webinar here on BH? All it showcased was diversity of portfolio, approaching it as any other profit-making investment (except the caveat of not expecting a profit) and how to handle your portfolio losses.

Not one word on loving horse racing for the love of horses and racing.

PS wait 'til the new tax rules coming in '11 take effect!

22 Jul 2010 7:06 AM

did someone pay $16 million for a yearling? How bad could things be?

22 Jul 2010 1:50 PM
Cheap Claimer

C G Dean: My apologies. It seems Fuzzy Dog wrote that. MY reply still stands, however.

22 Jul 2010 8:24 PM
susan in NC

I was a small breeder but I got out in 2008.  I can't afford to send mares to Kentucky anymore and pay $25-$30 per day, plus vet bills, etc. etc., then not be able to sell the mare in foal for what the stud fee costs.  It's crazy.  It's sad too.  I hope that things will turn around.  

26 Jul 2010 5:05 PM
tom mallios

a major problem of the sales industry is that the shiek has basically dropped out of buying horses.he is now buying the top sires and breeding his own.he was probably responsible for about 30% of all sales when he was going full tilt.he is still buying but almost at a recreational pace.

tom m

26 Jul 2010 7:49 PM

 I agree the samll owner can't make it work anymore  , but I think The LLC sPartnerships will fill some of the gap hopefully.

After many years of thinking about it I took the plunge this spring on a 2 year old  , cost me  peanuts and it looks as if i may have gotten lucky , on my first shot at it , time will tell , anyway don't be like me and think about it for 10 years  ,, do Your research for  sure ,, talk to some partners  check out the Partnership and when a offering strikes Your fancy buy a litle piece of Horse Heaven  ,My Gen Partner is  REALLY great keeps us informed daily , e-mails.  Reports , pictures even videos makes ya feel like Your in the Loop. Now Not All parnerships Do so again do your research  The sport needs new owners , time for us old rail birds to step up and support the sport we've loved .

 thanks for reading


27 Jul 2010 11:10 AM

Recent Posts

More Blogs