Tuesday, March 30, 2010

Saving California's Commercial Thoroughbred Market to Help Assure a Steady Supply of Runners

A guest post by Jerry McMahon.

There was no one less surprised than yours truly at the recent disclosure by officials of the Los Angeles County Fair Association that indicated that the company was looking into alternative uses for portions of land and buildings currently devoted to its Thoroughbred operations, including barns utilized by Barretts Equine Limited, a company I helped start in 1989. In today’s brutal California economy (the one in which thousands of tenured teachers have been given pink slips) not even a not-for-profit company can afford to sit passively on 50+ underperforming acres. The Fair’s President, Jim Henwood articulated it well last week in statements to The Thoroughbred Times and Blood-Horse.

More than a year ago now, I looked at everything going wrong in the California game, and realized that I was neither persuasive nor talented enough to do much about it. Having been in a leadership role in the sales business for more than 25 years, it was time for somebody else to bring a fresh perspective. And the current staff at Barretts has done a terrific job under the circumstances.

After reading Mr. Henwood’s statements I decided to revisit some of my core beliefs about the industry. One of those is that you can’t run a commercial auction business in a vacuum. It has to be an integrated part of a healthy Thoroughbred breeding and racing circuit, whether that is local, national, or international.

On the horse supply side, Barretts was developed on the theory that if we built it, they would come. They did come…. from Florida and Kentucky and Virginia and South Carolina (and buyers from the UK, Dubai, Saudi Arabia, Tokyo and points in between), but not so many from Santa Ynez, Temecula, Fresno, or Paso Robles. It seems that the housing boom had wiped out huge amounts of acreage previously devoted to Thoroughbred production. Perhaps the current housing slump could actually be a good thing for the local industry, if we could figure out a catalyst for renewed production of quality runners. Also, I don’t think you can have a deep and healthy racing environment on the island that is California without a viable commercial auction business. The industry can HOPE that its owners and trainers will venture back east to the established markets there and bring back large numbers of future runners, but the truth is that many of those horses get poached along the way by racing circuits in those areas. (Don’t get me started on how our 10+% sales tax literally induces California owners to buy, train, and race outside the state!)

Filling California’s races with quality home-breds is never going to be the answer. That’s primarily because it is well-known within the industry that breeding to race is for billionaires and people who hate money. Just ask a Kentucky breeder how much they enjoy buying one back in September. Unless California’s stake-holders prefer to operate a weekend only and/or seasonal game (because that’s where we’re currently headed), racetrack managers, owners and trainers, regulators, breeders and all the other stakeholders need to care about what happens to Barretts and its first-class facilities, not to mention its track record of attracting top-class talent to the state. Remember Brocco, Brother Derek, Sharp Cat, Officer, Unbridled’s Song, etc.? Do you recall where the late, great Bob Lewis and current heavy-weight Jess Jackson bought their first horses?

So what kind of vehicle could be used to re-stimulate our commercial market? One idea that has been utilized elsewhere in various formats, and previously proposed by others in California, is the concept of providing enhanced stakes purses for runners that have passed through local auction rings. This has usually been undertaken by private auction companies like Magic Millions or Goff’s in an effort to compete with other, more established companies. In those cases most of the purse money is put up by the individual breeders and subsequent owners, a concept that won’t work in California due to the currently depressed breeding environment.

A plan that the industry here might consider would be a lucrative, year-round stakes program for sales graduates funded through a combination of: 1) current purse allocations at each track; 2) racing association contributions; 3) a portion of the funds currently allocated to breeders and stallion awards; 4) auction house contributions, based on commissions earned; 5) breeder/consignor contributions (on a sliding scale, based on sale price; and 6) buyers in the form of continuing eligibility payments.

Of course the devil is always in the details when it comes to these things, but the overriding goals would be to bring the entire industry together in support of California’s commercial market before it is too late to save it, and to insure a steady supply of quality runners for the state’s racetracks.

If Barretts is allowed to go the way of Bay Meadows and (soon to be gone) Hollywood Park, the rest of the industry might just follow sooner rather than later.

For more information about McMahon, see Contributors on the About tab.


Anonymous said...

Actually, starting about six years ago under
McMahon's direction the sales company was deteriorating rapidly. McMahon as a non horseman
had his way or the highway with an unfortunate arrogant style. McMahon also had his favorites whether buyer or seller and if you were not one of them you were absolutely the grunt. Successful businesses that survive do not operate under these management rules. It is a shame that Bill Baker took the reins after the downfall as he is smart, fair and not arrogant....

Anonymous said...

Barretts has been digging its own grave since Fred Sahadi sold it to Fairplex. When he left, so did the entrepreneurial spirit he brought to the table. Barretts was left with caretakers---not creative forces---and their collective indifference to sellers and buyers forced the collapse we're about to witness.

I understand the new tenant for Barretts converted barns is a large Hot-Rod manufacturer/retailer. That should make life utterly miserable for anyone selling or shopping at Barretts three remaining auctions.

If the proven Magic Millions format had been adapted by Barretts ten years ago the likelihood is that our industry wouldnt be in the sorrowful condition Barretts is leaving it in.

The Titanic's captains should be thrown overboard. A new ship must be built with innovative entrepreneaurs at its helm.

watcher said...

Excellent article, Ray. Your mention of the CTBA being incapable of operating a new sale is right on target. It's going to take new leaders with big ideas to resurrect a healthy sales environment in California. God knows the status quo has botched things up badly; why should they be given a second chance to do it again?

Whoever said that William Baker isn't arrogant hasn't offered any suggestions to him. He makes Jerry McMahon look like Santa Claus.

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