For the first time in 30-some years, Keeneland has tweaked the commission structure for all of its auctions.
Beginning with the two-week September yearling sale, the sales company will charge a minimum $500 commission, a move that will make it more costly for breeders who sell with the Lexington firm.
Keeneland charges a $1,000 entry fee for each horse entered in a sale. Previously, however, that fee would be applied to Keeneland's standard 5% commission for any horse selling up to $20,000.
With the new minimum commission, it will cost $500 more to sell every horse than it previously did at Keeneland, according to Keeneland vice president of racing and sales Bob Elliston.
Elliston said that the organization had the lowest commission structure among major North American sales companies at the price point of $20,000 and above before the latest adjustment. Keeneland reduced its commission to 4.5% in 2001 and raised it to 5% in 2011, saving breeders more than $28.8 million during that period, according to the sales company.
"I think it puts us on even footing with other sales companies," Elliston said. "As you might expect, it is a rare situation where a company doesn't change its pricing in over 30 years. So we believe we've invested significantly in the sales pavilion and how we treat our customers when they come here, and it really didn't merit being the low-cost provider because we think it is an exceptional experience and it helps us pay for our representatives being around the world, attracting buyers to ourselves."
Tweaking the commission rate is the second major change announced by Keeneland for the Sept. 11-23 sale.
Earlier, Keeneland announced it was creating a bonus scheme for yearlings selling during Book 1, which has been re-formatted to be a nighttime session limited to about 200-250 of the most select horses in the sale.
Keeneland said it will award a cash bonus to any Book 1 September yearling sale graduate that wins a grade/group 1 stakes anywhere in the world. The bonus will be split between the seller and buyer. The Lexington sale company will commit $750,000 to the rewards pool for the first year, which will apply to Book 1 graduates of this year and be offered to top-level winners during their 2-year-old and 3-year-old campaigns.
Elliston said the Book 1 bonus scheme is funded through Keeneland's combined resources and the new commission change is unrelated.
"They are two separate items altogether," Elliston said. "What you have to look at is what it costs to sell a horse across the board and when you haven't modified your pricing in our 30 years, we all know our cost level has gone up. The second thing is rewarding those who participate at the highest level and that comes from all the assets of Keeneland. We believe something we should do is incentivize those people and excite those people who play at the highest level, with the bonus program. That comes from Keeneland proceeds and not from changing our commission structure."
Reiley McDonald of Eaton Sales said he supports the Book 1 bonus scheme and that it made sense for Keeneland to revamp its commission structure at this time.
"Keeneland has not had a rate increase in many years, so from a business standpoint it made sense, and now there is a need for funding the new Book 1 bonus scheme," the consignor said. "Sadly part of it falls on the backs of smaller breeders who are breeding horses in the zero to $20,000 range, and will have to pay more than a 5% commission."
Peter O'Callaghan of Woods Edge Farm said the commission restructuring would be more palatable had either the percent charged on buy-backs been lowered or if the Book 1 bonus scheme was spread throughout more of the price points.
"The bonus scheme is great idea but it is coming at a cost," O'Callaghan said. "I thought for a long time they should have had a bonus scheme but I'm certainly not in favor of it being only for Book 1. It appears they are taking from poor Peter to pay rich Paul."
O'Callaghan said he would also like to see a greater percentage of the bonus money going to the buyer rather than the proposed 60%-40% split between seller and buyer.
"Nobody likes it, and I wish that it didn't happen, because it costs you more money to sell horses," said Mark Taylor, sales director for his family's Taylor Made Sales Agency. "We feel for our customers because a lot of the breeders are not making a profit and it is more difficult than ever. But it's not surprising; everything else has gone up in price and I'm sure Keeneland's cost of putting on the show has gone up also.
"Keeneland puts on a hell of a show, and they do everything first class and it's a not-for-profit organization that puts all the money back into the community or for its racing. It's unfortunate but it's just a part of life."
Editor's Note: A previous version of this story had a different description of horses sold that would be subject to the minimum commission.