BC Projects Decline in Stallion Fees

Nomination fees tied to stud fees.

Based on projections and economic conditions, Breeders’ Cup expects an 8% decline in revenue from stallion nominations for 2008, and anticipates a 22% decrease in 2009.

The numbers aren’t unexpected given a reduction in stud fees charged by breeding farms and the retirement of several big-ticket stallions. Many farms announced the fee cuts last year in the midst of sharp declines in the auction market.

From 1984-2007, the largest decline in stallion nomination revenue was 20.6% from 1991 to 1992. Since 1993, stallion revenue generally has increased each year and hit $9.13 million in 2007, the highest figure since 1989, according to figures provided by Breeders’ Cup.

In 2006, Breeders’ Cup began collecting a “live foal assessment”—an increase in nomination fees for stallions with more than 50 live foals. Owners of Breeders’ Cup-nominated stallions pay one time the advertised stud fee. If stallions sire 100 or more live foals, the amount doubles; for 50-99 live foals, the fee increases 1.5 times the advertised fee.

Including the live foal assessment, stallion revenue totaled $13.4 million in 2007 and $12.7 million in 2006. Dora Delgado, senior vice president of nominations and on-site operations for Breeders’ Cup, said the organization in 2008 “experienced the unprecedented loss” of $825,000 in revenue from three stallions—Storm Cat, Seeking the Gold, and Kingmambo—that retired or had fertility problems. The three stallions accounted for 76% of the overall decrease for 2008, she said.

The projection for 2008 stallion revenue is about $12.3 million, which includes the live foal assessments. Breeders’ Cup said figures should be finalized after March 31.

Stallion fees for 2009—based on submitted stud fees—could drop 22% from 2008 and 28% from 2007, Delgado said, though the figure could change depending on fee adjustments breeders can make before April 15. Total revenue for 2009 won’t be known until after March 31, 2010.

“While North American stallions decreased at a rate of 15% from 2005 to 2007, the Breeders’ Cup-nominated stallion count during the same time saw only a 4.5% reduction, and from 2007 to 2009 it has dropped approximately 11%, which is still below the national average,” Delgado said. “In addition, the Common Fund stallion nomination program experienced almost a 50% growth in stallion nomination fees from 2006 to 2008.”

Common Fund stallions are those outside the Breeders’ Cup and European Breeders’ Fund. Their owners can make contributions that allow the stallions’ offspring to be nominated to the Breeders’ Cup, EBF, or both programs. The two organizations share the stallion nomination fees.

Breeders’ Cup earlier this year announced it would dip into its reserves for $5 million to fund the 2009 Breeders’ Cup stakes program, which supplements purses for about 100 stakes around the country. Officials also said the two-day World Championships would remain intact this year with $25.5 million in purses.