SOME NEW RULES
“Extract from the desk of Bill Oppenheim”
Some things have changed an awful lot in the last 20 years in this business, and in this week’s column I’d like to talk about a few of them: what has changed, why have they changed, and how the business has responded, and is responding, to these changes. Of course, some things haven’t changed much, and we’ll talk about one or two of those, too.
Those of us who were working in the business in the 1980’s have to remember that anybody born in 1970 or later - that’s 40 years old this year and younger - didn’t live through the first Golden Age of the Thoroughbred sales, nor the crash of 1986-1992. It isn’t important that they didn’t know about the ups and downs of the marketplace and business until about the middle of 2007. No, what it means is our business’ thirtysomethings have never seen a time when North American racing was dominated by the big stables of owner-breeders (unlike those of us from previous generations), nor were they around when the Europeans and Japanese bought hundreds of well-bred mares in Kentucky, decimating the North American broodmare band.
For today’s thirtysomethings, the North American breeding market has always been a commercial one, especially given the doubling of stallions’ book sizes and, to some extent, dual-hemisphere shuttling. When they hear our generation talk about “great families,” they must scratch their heads and wonder why these families - if they are so great - have been producing so few top horses for the last 20 years. The two things just about have to be connected, it seems to me: few owner/breeders in North America, fewer still new “great families.”
Things have changed a lot in Europe, too. From having a handful of the best stallions in North America and Europe, they now have half of the top 20 available. Plus, there are a number of large, active owner/breeders with broodmare bands in the hundreds: the Maktoum family, of course, including Darley, Shadwell and Rabbah (surely well over a thousand mares among them); Prince Khalid Abdullah’s Juddmonte Farms; the Aga Khan; and even Coolmore, though they are half commercial breeders, too, since their primary objective is to stock Ballydoyle and associates with maybe a hundred two-year-olds a year, including what they buy at the sales. Breeders love to buy at the annual culls, from the Aga Khan’s and Juddmonte operations in particular.
Still, even though these big operations have broodmare bands in the hundreds, it seems to me these days it’s not so much a case of there being one or more families in particular that turn out class horses as if from a gusher. Rather, it’s more a matter of them having so many class mares, they produce a certain number of top horses. Breeders tend to buy because it’s “an” Aga Khan family, or “a” Juddmonte family, rather than a particular family or families, which is more what we used to talk about - the Rough Shod family, the La Troienne family, and so on.
What Yearling Buyers Want…
During the first Golden Age of the Thoroughbred marketplace (1978-1985), yearling buyers would roughly weigh three factors of relatively equal importance: the sire, the dam’s side, and the yearling’s conformation. It wasn’t so much that they were weighted equally, but that any of the three factors could be a reason for throwing the horse out. Then came the crash of 1986-1992, when many top pedigrees went into private hands or were exported to Japan.
Coupled with the decline in owner/breeders in North America (which was then producing twice as many foals as Great Britain, Ireland and France combined), by the time we arrived at the Second Golden Age (1998-2007), the nature of one of the three factors had changed: there were fewer truly good first dams in yearling pedigrees. Over the last decade, buyers increasingly concentrated on the sire and conformation. Whereas previously the ratio of factors for “inclusion,” let us say, were 33-33-33, now they would be more like 40-20-40, the reduction coming in the importance of the first dam to yearling buyers relative to the other two factors. Yearling buyers, as a collective group, have made this abundantly clear over the past few years.
At the same time, within the context of its reduced influence, the pecking order on “the dam’s side of the page” also changed. A study carried out by Gary Hadden found that 29 percent of the dams of about 3,000 graded/group stakes winners in 1998-2003 were themselves black-type winners. When we compared those to the profile of racing fillies sired by two top broodmare sires of recent years, Alydar and Affirmed, we found that about 12 percent of their fillies were black-type winners. We have seen independent research which comes up with a similar 12-percent figure. So, the fact that as high as 29 percent of the dams of graded winners were themselves black-type winners looks pretty significant.
What does this all mean in English? It means, if you’re a commercial breeder contemplating buying a mare, your best bet is to buy a black-type winner. It doesn’t mean she should only be a black type winner; breeding history is replete with outfits that banked solely on black type to the exclusion of other pedigree considerations, such as the mare’s sire and the mare’s actual female family. But the research does tell us that black-type mares (black-type placed, too, though not as strongly as black type winners) have moved up the value scale, and non-black-type mares, no matter how good their pedigrees, have moved down the scale. A non-black-type mare is not worth as much as a producer of commercial yearlings as she used to be. So whether it’s actually a good idea, financially, to spend hundreds of thousands of dollars on mares who could not get black type must be more open to question now than was the case 20 years ago. This may appear to be less the case in Europe than in North America because of these other factors we’ve mentioned, but I’m not entirely sure that’s the case, either.
What Euros Want…
Another huge difference between the Thoroughbred market in the 1980’s and the market now is the level of participation by European buyers in the North American (essentially, Kentucky) market.
Though they still constitute a significant portion of especially the upper reaches of the North American market, there is a powerful layer of European buyers below the Maktoums and Coolmore who are not active in North America, whereas 20 or 30 years ago half of them would have mares in Kentucky and be breeding to Kentucky stallions.
Part of the explanation, of course, is that the ratio of top 20 stallions went from something like 80-20 in favor of Kentucky to 50-50. European breeders now have much a much better group stallions to breed to - certainly just as good as the group in Kentucky - for European racing. But there’s something else, too, and it’s something really fundamental to the value of horses in the marketplace: Europeans do not understand North American black type below the graded level and, as a consequence, they do not have the confidence to invest in American black type like they used to.
I don’t think it is possible to underestimate the true influence of black type. It was the invention of black type in the 1950’s that resulted in the creation of a scale of value in pedigrees which - refined by the introduction of the Pattern of Graded and Group Races in 1972 - provided the very framework for the growth of the auction sales. These peaked at over $1.8 billion annually in North America and Europe in 2006-2007. I’m not saying it wouldn’t exist; I’m saying the creation of black type provides the framework from which specific scales of value can evolve.
The Europeans are right to be confused, because as it has evolved, there is a huge anomaly in the qualification for black type in favor of North America. To put it in a nutshell, there are three kinds of black type: graded (in North America) or group (in Europe) - Pattern Races; then there are listed races; finally, non-listed black type races. The shocking truth is this: in the major European countries - Great Britain, Ireland, France, Germany and Italy - there are no black type races below listed standard, according to the International Cataloguing Standards booklet issued by the IFHA (International Federation of Horseracing Authorities) for the year 2008. In North America in 2008, there were 1,890 black-type races, and 1,148 of them, or 61 percent, were non-listed, black-type races - in other words, below listed class.
It’s no wonder Europeans can’t make head nor tail of American catalogues, and therefore lack the confidence to buy. Percentage of black-type races below listed class in Europe: zero; percentage of black-type races below listed standard in North America: 61 percent. In a racing population in Europe, if the top tier was 39 percent black-type, the tier below (which in North America is 61 percent of black-type horses) would be high-level handicappers, say horses with Official Ratings in Britain and Ireland of 100, maybe even 95. Europeans don’t consider these black-type horses because they’re below listed standard. But in America, about 1.5 times the number of horses which are listed standard and above are still black-type horses.
There is a devastatingly simple solution: instead of calling them listed races, change the name: call them Grade 4 in North America, and Group 4 in Europe. By adding the G4 option, we would all understand it much better. Europeans could simply see if black-type listings in a pedigree included any “G” designations; that would restore their confidence in the system. The Americans could continue to assign black type as they have, confident both that Europeans would understand North American black type much better, and that they themselves would, too. Of course, it would require a change, from Listed to Grade/Group 4, but all you’re doing is renaming a classification to make it more understandable for everyone.
One other matter cited by Europeans concerning their reluctance to buy in the U.S. is “the medication issue.” At least some European professionals harbor the view that racing on medication by definition signals a weakness in the breed, and therefore they are very wary of breeding to horses that have raced on medication. Since something like 99 percent of American horses now race on Lasix, it becomes a kind of “reducto ad absurdum” - an absurd argument - to ignore American breeding, which they already find confusing. But I would like to say this is a point of view which seems to me to have absolutely no evidence to support it.
For example, the following horses all raced on Lasix: Medaglia d’Oro (sire of two Group 1 two-year-olds in Europe last year); Elusive Quality (sire of Raven’s Pass and Elusive Pimpernel); Distorted Humor; Street Cry; Tale of the Cat; Lemon Drop Kid; and so on. There is one very good reason, even now, why Europeans should still be looking to the U.S. for horses to race in Europe: the success rate is high. America produces twice as many horses every year as the three top European countries combined, and a good many of them can run. The fact their parents raced on medication hasn’t changed things at all, as far as I can see; availability of sires and the pedigree issues I’ve discussed; might have. But the medication knock: can’t buy it. Not proven.
What Euros Got: Inbreeding to Northern Dancer…
This is an issue that seems to still be keeping bloggers, other pedigree buffs and professionals occupied: is there too much inbreeding generally, and is there too much inbreeding to Northern Dancer in particular? Brianne and I will be doing some further research on this in the next few weeks, when the new APEX numbers come out to include all 2009 racing, but in the meantime, I’ve been doing some work on the matter with a database of some 12,000 A Runners foaled 1996-2005, through racing of 2008.
These are very definitely limited measurements. We are measuring only within this population of 12,000, not taking into account what is called “opportunity in the general population.” This is a big thing with a lot of people now, how things ought to be measured against opportunity in the general population. I used to think it would be better if I could do that, but I don’t think so any more. As far as I’m concerned, the “general population” consists of 98 percent of horses that are not “A Runners” (top two percent earners), and two percent which are. I’m not sure I even believe it’s meaningful to compare one population to another essentially 50 times its size.
The other limitation on the information I analyzed is that the “inbreeding” is only “sire on damsire,” or what has also been called “first cross” data. Though this is the most frequently occurring form of inbreeding, there are many other combinations, especially involving the sire’s damsire and the second dam’s sire. I can’t count those - that’s a limitation of the system.
Even given those limitations, what I can count yields what seem to be to be impressive results. The incidence of “Northern Dancer over Northern Dancer” as a percentage of all Northern Dancer-line sired A Runners, by year foaled, 1996-2005, has increased from 13.2 percent among 380 Northern Dancer-line sired A Runners foaled in 1996 to 22.4 percent of the 566 Northern Dancer-line sired A Runners foaled in 2004, and 22.7 percent of the 409 Northern Dancer-line sired A Runners of 2005 (including just three-year-olds by the end of 2008, so the number of 2005-foaled A Runners will have increased significantly by the end of 2009). The percentage of “Northern Dancer over Northern Dancer” A Runners as a percentage of the entire population of A Runners foaled that year has increased from 4.3 percent (50) of the 1,151 A Runners foaled in 1996 to 9.3 percent (127) of the 1,371 A Runners foaled in 2004, and 9.6 percent (93) of the 967 A Runners (through the end of 2008) foaled in 2005.
Those trend lines tell us one thing: Whatever the theories, it is working. Is “Northern Dancer over Northern Dancer” nine or 10 percent of the whole population? I don’t know, and I don’t think I care. What I can see for sure is that, as a percentage of the annual population of new A Runners, the percentage has more than doubled in the last 10 years. How much faster could it possibly be expected to accelerate?
My conclusion: We shouldn’t even be discussing “Northern Dancer over Northern Dancer” any more, except as a sort of umbrella designation, like “Native Dancer” or “Nasrullah” are now used. Northern Dancer is so successful, so powerful, that it really has branched off into nine separate sire lines (in my classifications, one of those lines is actually “Nearctic other than Northern Dancer,” such as Explodent, Icecapade, and Wild Again. Even though it’s historically incorrect, because Nearctic was also Northern Dancer’s sire, that’s the way I classify it). Of the nine, Danzig, Sadler’s Wells, and Storm Cat/Storm Bird are the most active; Nureyev and Deputy Minister/Vice Regent may or may not survive as active sire lines. Nijinsky, Lyphard, Nearctic, and miscellaneous Northern Dancer (includes the likes of The Minstrel and, more recently, Dixieland Band) are very unlikely to survive as sire lines. In any case, it’s time to stop talking about Northern Dancer over Northern Dancer and start talking about, for example, Danzig over Sadler’s Wells - a cross that didn’t even exist in 1996, but had 39 A Runners through the end of 2008, including 11 foaled in 2004. The “cross index,” at that point, came out at 2.39, when 1.00 is average.
Well, I could keep going: the myth that a horse has to be a Grade/Group 1 winner to “really” count for something (Grade/Group 2 winners: Distorted Humor, Pulpit, Dansili); and what really hasn’t changed: prizemoney. The Irish figured out a couple of years ago that prizemoney could be funded by a two percent commission, ring-fenced for that purpose, on all bets, regardless of who placed them; how they were placed (what platform); and where. The endemic problem in this industry is still that the buzz is at the sales, not the racetrack: the tail is still wagging the dog. Ultimately, the industry can only grow by attracting new owners, and an obvious way to attract new owners is to improve prizemoney to the point where owners have a fighting chance, instead of having to accept a desultory return. But that’s another subject. In the meantime, I persist in believing the best strategy for success, or at least the best shot at success, in this business is to see things how they are, not how they used to be, or how we wish they would be. Happy New Year.