Prices cannot continue to spiral upward

Average price was down at the Barretts March two-year-olds in training sale on March 13. That should not be surprising. The broad stock market, at least as measured by the NASDAQ, is down 62% from the time of last year's Barretts sale until this year's sale.

Many Thoroughbred racehorse owners use discretionary income to operate their racing stables or base investment decisions on their overall net worth, so when owners feel they are worth less, they will reduce expenditures on nonessential purchases.

In the wake of the general decline in the stock market, the Barretts sale registered a 21% decline in average price, a 42% decline in total amount spent, and a 45% buy-back rate.

Prior to the downturn in the stock market, the wealth effect created by the increases in stock prices enriched many commercial breeders for much of the 1990s. At public auctions in North America in 1993, buyers spent a total of $354.5-million. By 2000, the total amount of money spent at auctions rose to $1.087-billion, an increase of 207% in seven years.

From 1993 to 2000, total purses in North America rose from $748-million to $1.093-billion. In other words, at the end of 2000, the ratio of total purses to total auction receipts was 1-to-1. The ratio was 0.47-to-1 in 1993. Buyers in 2000 were spending as much on horses at auction as they could win in total purses.

What does all this mean? Despite the recent downturn in averages at this year's two-year-olds in training sales, the amount of money being spent for racing prospects is still near an all-time high.

The reason for this spending peak seems more directly related to the upside potential that exists today for racehorse owners. Specifically, it relates toward the top syndication price available for the best racehorses. That amount dwarfs the purses a horse can win.

The upper end of the market has risen substantially recently. Last year, Fusaichi Pegasus was sold for approximately $60-million as a stallion prospect and Lemon Drop Kid for $40-million. In 2000, the highest fee for a horse newly retired to stud was Forestry, at $50,000. Other than for Cigar at $75,000 in 1997, the top end of the market for a newly retired horse had been $50,000 through most of the decade.

Where the top end of the stallion market goes from here will be dependent on what breeders are willing to pay for stud fees for unproven stallions. For now, it would not be surprising to see prices moderate and take a breather, just as they have done on Wall Street.

In the long run, that is healthy for both commercial breeders and buyers of racing prospects.

NTRA needs focus

The National Thoroughbred Racing Association announced several initiatives at its recent marketing summit in Las Vegas. One, the mystery voucher program, will distribute some $3.5-million worth of tickets that can be redeemed at a track on a certain date, with one $1-million voucher included.

The other initiative will be an effort to get infrequent track patrons, known as light users, to attend the track more often. Market research indicates that this group tends to be more affluent and to wager two or three times a year on races.

Given the two promotional choices introduced, one appears to be a better avenue to pursue.

The mystery voucher is nothing more than an attempt to mimic a lottery. Those who go to the track with a mystery voucher are lured by a dream of a rich payoff but are not making an emotional commitment to racing. How many of these people will return, let alone stay for the day once they have found out whether they won?

That concept goes against the grain of the sport. A study by the Jockey Club in the mid-1980s on general consumer attitudes toward racing addressed that very subject. Wrote the Bruskin Report: "The excitement and the challenge of beating the odds are very much part of the enticement to attend Thoroughbred racing.

People who have attended know the feelings. People who have never gone, however, do not."

A mystery voucher does not address the fundamental attraction of the game: picking a winner.

Marketing money is better spent on efforts to get people who have shown an interest in racing to increase their visits.