Horse Racing Fans Are the Big Winners as Breeding Industry Slumps

The Thoroughbred breeding industry is near the bottom of a slump and a victory in the Kentucky Derby is worth significantly less in the breeding shed than it was only a few years ago.

But what’s bad news for the breeding industry translates to good news for racing fans. Instead of retiring their stars quickly to stud, owners tend to race them longer--and their fans can see them more often.

In the heady days of the late 1970s and early 1980s, the spiraling market for quality horseflesh seemed to have no end. In 1985, $13.1 million was paid for a yearling who had never seen a saddle, much less a race course. But the bottom finally dropped out of the market, with many investors taking a bath in the past year.

With that decline in the market, the owner of the Kentucky Derby winner is no longer automatically assured of an astronomical price for putting his horse out to stud.

“Depending on the fashionability of the colt’s pedigree, the value of a Kentucky Derby is probably half of what it was two or three years ago,” said Barry Weisbord, president of Matchmaker Ltd., a Thoroughbred auction company.

“Five years ago, there was a syndication of a horse for $40 million,” said Robert Clay, who has 1977 Triple Crown winner Seattle Slew standing at his Three Chimneys Farm near Midway. “The prospects for that happening again are not nearly as good.”

“If a Secretariat came along today, he might be syndicated for $500,000 a share (with 40 shares) or perhaps a bit more than that,” David Heckerman, an industry analyst for The Thoroughbred Record, said of the 1973 Triple Crown winner. “The premium on retiring a colt has been greatly reduced. But at the same time, that greatly enhances the enjoyment of the sport.”

Heckerman said racing fans were denied seeing the top Triple Crown horses race beyond their 3-year-old campaigns when the breeding market was at its peak. “That is the way the great upsurge in the market hurt the racing industry,” he said.

Weisbord said when the breeding industry was booming, owners were practically forced to retire the top 3-year-olds to stud because the value in the breeding shed far outweighed the value of the purses and the risk of a continued racing career.

“You couldn’t even afford to race a horse as a 4-year-old,” said Weisbord. “I think unquestionably you see more horses run now and return to racing than you did three years ago. The prices (at stud) have a lot to do with it, but so does the increase in purses.”

Weisbord and Nick Nicholson, Kentucky Thoroughbred Assn. director, point to the 4-year-old racing campaign of Ferdinand, last year’s Derby winner, as a case in point.

“As the breeding market is down and racing is up, it makes it more likely that a horse will come back for another year of racing,” Nicholson said. “The people who are going to gain from that are the fans.”

Clay argues the retirement of the top horses after one or two big victories led to a decreased interest in the sport from the fans, which in turn hurt the breeding industry.

The boom market of the late 1970s and 1980s was fueled in large part by a shift in the breeding industry from horsemen hoping to recoup their losses on the race track to investors looking for a quick profit from the breeding shed.

“During the late 1970s, when we were in a period of double digit inflation and the economy in general was stagnant, there was a great flight from traditional capital investments, such as the stock market and other areas,” said Heckerman. “At that period of time, the Thoroughbred market was beating inflation. A lot of people with no background in the breeding industry got into it on purely an investment standpoint.”

Heckerman and Clay both say that shift in the industry was, from the outset, bound to lead to a decline in the market.

“I think it became a speculative game that was fueled by the notion that you could buy low and sell high. That never works in any market anywhere over an extended period of time,” Heckerman said. “I think the industry got a bit too far away from the traditional lure of the sport, which can stand on itself.”

Heckerman said when the market turned down, mostly due to an oversupply of horses and a decline in the oil market, those non-horsemen investors fled the industry in droves, spurring a more precipitous decline. The average price of a thoroughbred is down about 40% from its peak in 1984.

Heckerman and others downplayed the rumors that an agreement between two top buyers--British soccer pools baron Robert Sangster and Sheik Mohammed al Maktoum of Dubai--had led to the drop in the market.

“Is there an agreement?” asked Jim Williams, a spokesman for Keeneland, where the top sales are held. “The Arabs bought just as strong as ever last year.”

Sheik Mohammed, in a rare interview last year, told United Press International no such agreement existed.

While all market analysts interviewed said the bottom of the slump was in sight, Clay said he believes the breeding industry has to expand the level of interest in racing. He pointed to the fact that in 1986, for the second year in a row, baseball replaced racing as the nation’s biggest spectator sport.

“The real horse buyer comes from the racing fan,” said Clay. “A guy gets hooked on horses first by seeing them run. I don’t think you can walk into an investor’s office and sell him on becoming an avid horse sportsman without taking him to the arena.”

Heckerman said the so-called “correction” in the market already is helping to accomplish that goal.

“That is one of the best benefits of the correction in the market,” Heckerman said. “One of the things you can say about the Derby, whereas in past years there was the thought if a horse won the Derby, it wouldn’t race again. Now the likelihood is that it will race as a 4-year-old.

“The lure of the sport has become the more important factor. The sport suffered in the early 1980s because of the early retirement of the best colts and that was a retarding factor in building attendance at the race track. Because we have more exciting races, we have a better chance of attracting more fans to the sport.”