The Sport of Kings isn’t just for kings

Here’s a thought experiment. Who would be crazy enough to pay upwards of $8 million for a thoroughbred that will never run again, or a million or more for a horse that is less than a year old and may never race at all?

You might think – and very logically, at that – that no one would be mad enough to do such a thing, but people did make those purchases, and just in the past several weeks. The first two were for broodmare prospects, purchased in the hope that these ladies can drop racers as good as they were.

The baby is a foal by American Pharoah, and one investor felt that this weanling could be a Triple Crown winner like his father.

Quite an expensive investment for a business that some feel is in decline. And it can seem that way to the uninformed, if you just read articles about race tracks closing and aging horseplayers. Statistics can always be misleading, as people can always find some that support their view; witness the still-relevant book by Darrell Huff, How to Lie with Statistics, which was published in 1954 and has never gone out of print.

With that in mind, my opinion is – well, just re-read the first two paragraphs! It is obvious that horse racing will never again compete with the NFL or the NBA for size and exposure, but that notwithstanding it still offers a profitable exercise.

The amount of money that continues to be paid for horses of all ages is a testament to the ongoing, if quiet, strength of this business. Domestic stud fees are up, and in Europe, breeding fees for stallions that command over $100,000 at stud are up over 8 percent.

The increase in total handle at race tracks is up 6 percent year-over-year compared to last year at this time, and as has been pointed out by other columnists, both in this publication and elsewhere, corporations continue to expand their operations by buying tracks around the country. Attendance and handle at the biggest events in racing, like the Kentucky Derby and the Breeders Cup, are similarly increasing; purses and handle are the highest that they’ve been in decades, and the Pegasus World Cup will set a new single-race purse record of $16 million at its second running in January 2018.

The entry fee alone for the Pegasus is a cool $1 million, which seems a staggering amount. Yet people are doing it. Investors who aren’t able to play in that sort of rarefied air, ones without the resources for a full entry, are even buying shares in an entry, with the idea of selling it or partnering with someone who has a good horse. Talk about excitement: imagine putting up a million dollars with the chance to win over $10 million – in a race that lasts a little less than two minutes. Imagine putting up a fraction of that $1 million to buy a share of a horse that might win the biggest purse in racing history.

Certainly, at the top of this game, the people who play there have a lot of money and get both the attention and the notoriety they deserve. But just as there’s space in the market for both the ten-figure investor and the day trader, there are thousands more who are a part of the race game with only limited resources. Tracks around the country have horses running for just a few thousand dollars whose owners are making a profit. This is a tough business, but one where the profits come not only in dollars, but the excitement of owning a horse, or part of a horse – think of 2003 Derby and Preakness winner Funny Cide, owned by a ten-person conglomerate called Sackatoga Stable whose partners each put up a whole $5,000 to buy in – and being part of a classic American industry. Horse racing fading? I think not.

By the way, in the last 3 weeks, a 90-1 shot came in in a Florida race, and more recently a ten-cent superfecta – the first four horses in a race, chosen in correct order – at Aquaduct in NY paid over $32,000. Merry Christmas and Happy New Year to that bettor, and to all of you!