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The following post first appeared earlier this week at Paulick Report.

The retrenchment in the bloodstock markets resulting from the world economic depression touched all segments of Thoroughbred breeding, even the relatively insulated stallion market.

Not only have stallion prospects been harder to sell in the prevailing economic situation, but stallion farms have had to make cuts in fees and services, a few have adopted different practices to fit the changing economics, and some are even rumored to be precipitously on the edge of default.

The number of new stallions coming to stud has declined significantly, and the prices paid for them have had to decline because farms could not easily stand horses at high fees when prices for yearlings and mares were in a headlong decline.

Whereas just a few years ago, the premium stallion prospects were selling for tens of millions and going to stud for $100,000 or thereabouts, the priciest prospect this year is Uncle Mo (by Indian Charlie), who will enter stud at Coolmore’s Kentucky farm, Ashford, for a fee of $35,000.

The second-highest stud fee this year is $25,000 for Tizway (by Tiznow), who will stand at the Spendthrift Farm of B. Wayne Hughes. Spendthrift has retired more stallions the past few years than any other Kentucky farm, and a significant part of their ability to find breeders to use their stallions in a down market is a program called “Share the Upside” that allows breeders to earn a breeding right in stallions by the purchase of a set number of seasons to the horse.

Rob Whiteley, owner of Liberation Farm and co-breeder of Belmont Stakes winner Ruler on Ice, said that “I give B. Wayne Hughes and his staff at Spendthrift a lot of credit for their innovative thinking. The concept of stallion owners seeing breeders as partners in the success of their stallions and rewarding them accordingly is a long overdue and welcome idea. This approach benefits both sides and builds better relationships and a stronger industry over time.”

Ned Toffey, general manager at Spendthrift, said, “Mr. Hughes feels strongly that we have to offer value and take care of our breeders, especially small breeders. If we are charging as much as we can for stud fees, people are going to go elsewhere after the first or second year to minimize their financial risk. Without breeders, our stallions won’t have a chance to make it. What works for us also works for the breeders. Making this program affordable and something that is attractive to breeders will bring our customers back to breed year after year and instill some loyalty to the operation.”

The purchase of breeding rights, which are not equity in a stallion but are rights of use to him, is a distinct variation on the syndicate shares in stallions that became popular in the 1940s through the early 1980s but have generally fallen out of use since.

Recently, however, some farms have been having luck with their syndicated stallions and attracting attention to this method of sharing risk in a stallion prospect.

Bernie Sams of Claiborne Farm said, “We’ve been lucky. But, overall, I think owning shares has more to do with the farm that’s managing the stallion than anything. It’s about accessibility to the stallion.

“Especially with the less-expensive stallions, syndicates work well to give you a group of people out there talking about the horse, who are fans of the horse and want to help the horse succeed.”

Both stallion shares and breeding rights offer continuing rights of access to a stallion, which is only of continuing significance if the prospect becomes a success. But in the past 20 years, interest in that right of access has eroded, particularly among commercial breeders, as stallion farms, led by Coolmore’s various stallion operations, as well as those of Darley, have bought stallion prospects for very high prices, kept the entirety of the horses, sold as many seasons as possible, and let the chips fall.

Overall, this has proven a highly profitable commercial model for the stallion farms, but it has proven less so for the majority of breeders, and in this contracting marketplace, many breeders are selecting stallions for their management, as well as for their bloodlines and commercial appeal.