Having access to good bloodlines does not mean automatic success for anyone wanting to stand stallions. You must be willing to take some risks and make good decisions. Having a little marketing acumen doesn't hurt, either.
Take Sheikh Mohammed of Dubai, for example. The investment over the last two decades of hundreds of millions of dollars for some of the world's finest Thoroughbred bloodlines wasn't enough to make his Darley stallion station in Newmarket, England, as successful as he would have liked. Last year, the sheikh gave the green light to a pricing and marketing plan for some of his stallions that delayed stud fee payments until after the resulting foal was sold. Icing on the cake for breeders was an agreement for them to pay no more than the auction ring price if the foal sold for less than the stallion's live foal fee.
"The motivation is that we are in the business of making successful stallions. That's our primary goal," said Jocelyn Targett, head of marketing for Darley. "To do that, we need the support and patronage of successful breeders. We really need them to make our horses."
Targett said the program has been well received by European breeders, and that it has been especially beneficial to stallions entering their third or fourth year at stud, traditionally the toughest time to attract mares. "This way, breeders can have the comfort of knowing they are not risking as much, and it gives them a longer period to pay their bills."
Darley--which because of the enormous wealth of its owner is not under the same financial pressure as most other stallion operations--is not alone in recognizing the competitive and fickle nature of the stallion business. Darby Dan Farm in Lexington recently devised what it calls the "profit protection plan" that softens the blow for breeders in the event they wind up with a foal that comes a cropper in the sale ring. But the plan also addresses what happens if a breeder hits a home run in the commercial market. John Phillips, managing partner for Darby Dan, said the plan creates an "adjustable" stud fee.
Darby Dan stallions standing for less than $10,000 live foal are eligible for the plan, which requires no stud fee payment until the resulting foal is sold as a weanling or yearling. When the foal is sold at public auction, Darby Dan limits its upside to 125% of the stud fee; for example, the most the farm would receive from the sale of a weanling or yearling sired by a stallion with a $5,000 fee is $6,250--even if it sells for a high multiple of the stud fee. In a traditional foal sharing, the stallion owner would split the net proceeds of a sale.
If the mating to that same stallion results in a foal that sells poorly, breeders pay just half their net proceeds as the stud fee. If the hammer price is $6,000, and the sale company and consignor commissions total $2,000, the net is $4,000. Breeders would thus pay $2,000 for the fee.
"This is risk management," said Phillips. "It does guarantee that a breeder isn't caught upside down if he has a bad foal."
From the farm's standpoint, Phillips says the profit protection plan is designed to ensure a full book and provide a higher quality group of mares from which to choose. He and Davant Latham of Darby Dan Bloodstock said the program has been well received as the breeding season approaches.
In California, Jim Wilson of Tommy Town Thoroughbreds of Santa Ynez created a marketing concept for 2004 freshman sire Old Topper that is sure to attract attention. A recent ad stated the 2003 stud fee for the son of Gilded Time will be fully refunded if he is not California's leading freshman sire when the 2004 racing year is complete.
At $3,500 per stud fee, Wilson is making a pretty big bet that Old Topper's first foals of 2002 will be runners.
A safer bet is that creative breeders will continue to explore new ways to promote their stallions.