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20.
Rogers outlines his criticism of BOBS Scheme
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17/7/2003 |
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With
several private groups or individuals recently paying up to nominate stallions
to the BOBS Scheme, Arrowfield Stud’s Byron Rogers has outlined why he
believes the higher priced stallions are disadvantaged by the scheme in its
present format.
Firstly let me say that the statements I make here are solely my own” said
Rogers. “John Messara as Chairman of Aushorse and Managing Director of
Arrowfield, has given no input to this document. John Messara, Arrowfield or
Aushorse has not endorsed the views that I give here”.
Secondly my comments relate to the BOBS 06 Scheme, a complete scheme from
conception to racetrack. If I make comment on the 03-04 scheme, it will be
indicated clearly.
I understand that the 06 BOBS Scheme budgets for a contribution from stallion
owners of approximately $1.5m (ex GST). At the moment there is a total of
approximately $500,000 in the kitty at the TRB for this 06 Scheme. It is not
really a black hole per se, as the TRB has the money to cover the stallions that
are currently registered to the scheme (BOBS bonuses would be paid out less
frequently as the registered horses only win their fair percentage of races),
but it is more of a ‘black mark’ that the breeding industry as a whole
can’t support it in its current format.
While we are in an environment where ‘industry supporters’ are popping up to
nominate stallions in the 03-04 scheme, I doubt any will nominate Danehill, who
was put in the TRB projections when you came up with the original $1.5 million
figure as a budget.
If a scheme like the 06 scheme, had been in place for those mares bred to
Danehill back in 1998, foals of 1999 that have just completed their three year
old year (you only get the single crop over the 2yo and 3yo racing season in the
06 scheme), you would be looking at the following:
Cost of Entry (Danehill’s 1998 fee)…………..$100,000
1999 crop wins at 2 & 3
NSW Metro Sat wins……….5x$20K = ….....$100,000
NSW Metro Midweek wins….15x$10K…….$150,000
NSW Provincial wins……….6x$5K=………..$30,000
NSW Country wins……….2x$5K=……….…$10,000
………………………………………………...$290,000
Stallion Nominator’s percentage (12.5%)………$36,250
On the entry cost you would have lost $63,750 and that is presuming that ALL the
Danehill’s that won races in this state, were paid up by their owners to the
scheme. In reality only 85% do (which is what you at the TRB project) so if you
factor that in, you are looking at a return of just on $31,000 for a loss of
$69,000.
“The following year, Danehill’s fee went to $120,000 which all being equal
would result in a bigger loss if it was a one crop conception scheme, and the
year after that it went higher still for greater losses”.
The 03-04 scheme has two crops racing for you, a single three year old crop and
a crop who can get bonuses at two and three. From the analysis above,
Danehill’s progeny won $55,000 in bonuses at two and $235,000 in bonuses at
three. For the sake of the argument lets add another $235,000 in for the single
three-year old crop, giving us a total of $525,000. At the nominator return of
12.5% you are looking at $65,625, reduce this by the 85% take up rate and you
are looking at a return of $55,781. However, to nominate Danehill for the 02/03
season you have to pay the fee that he stood at in 2000. It was listed as
private but published by the Australian Bloodhorse Review and generally regarded
to be $200,000. A loss of $144,219.
Clearly, no one of sound mind will nominate a stallion that stands at a
significant fee while the structure of the BOBS Scheme acts as a progressive tax
against excellence. I have examined Snippets (twice!) and you have just seen
that by nominating the best stallion in the country, you are going to lose
money.
Just as a comparison, I looked at Marwina, a very solid stallion in the Riverina
that gets his fair share of winners and that stood in 1998 for $3,500. Doing the
exact same analysis that I did for Danehill, based on the 06 scheme in its
current format, Marwina would have returned about $10,000 in stallion nomination
bonuses from that initial $3,500 nomination – a profit of $6,500.
Marwina (and I am sorry but I had to pick a stallion) is an integral part of our
breeding industry and serves the Riverina well, however the very fact that he
can turn a profit and the best stallions in the country can’t begs the
question. Is the purpose of this scheme to make the industry re-invest in low
service fee stallions that just get a lot of winners, or are we trying to
maintain the NSW breeding industry’s current position as the premier breeding
industry in the Southern Hemisphere?
Owners and trainers that I have spoken to seem to think that the bigger farms
are dodging a responsibility. My understanding is that they just want is a
scheme that is fair to all, and evenly promotes every stallion standing in NSW.
The current scheme fails to do this.
Owners and trainers are the first to complain when their horse is unfairly
handicapped in a race and cannot possibly fight out the finish. Bigger farms /
Stallion Owners aren’t asking for a system to be created that lets them win by
six lengths hard held, they want one that lets them at least fight out the
finish with the likes of Marwina. Right now they are asked to carry 65kg and
understandably finishing out the back.
What is required to make a Scheme work in NSW is :
1) A Scheme that is adequately funded with all major stallions participating in
it.
2) A Scheme that does not act as a disincentive to success, or look like a
scheme where high fee commercial stallions are subsidising lesser commercial
stallions.
So….here is my proposal (to add to the 1000’s of others!)
Leave the basic structure of the current BOBS 06 Scheme the same with two
adjustments:
1) CAP THE MAXIMUM PAYABLE STALLION NOMINATION FEE TO $20,000 (ex GST)
2) RAISE THE STALLION NOMINATOR TAKE OUT BY 2.5% to 15%
I have tested a solid sample of stallions at varying fees to see what BOBS bonus
scheme income is generated by the stallions. I went back to the stallions of
1998 and went through their progeny performances at two and three to see what
bonuses would have been paid to these stallions had a scheme like the 06 Scheme
been in existence. Some have performed well in the scheme, some have been
average and some have stunk. Some have been compromised by small books which has
limited opportunity, but what is noteworthy is:
1) In the current scheme if you have a solid country based stallion, which has a
good number of foals in a crop (more than 50) that can churn out country and
provincial winners, almost all of them turn a profit. They don’t even have to
have a Saturday Metro winner to do this.
2) As a general group, the better performing stallions that get metro winners
consistently enough will return somewhere around $100,000 - 175,000 in BOBS
bonuses. Danehill returned $290,000 in bonuses in the example I gave but
unsurprisingly he was the highest of all the horses I examined and the likes of
solid performing stallions like Secret Savings, Canny Lad, et al all checked in
around that range.
3) On the current 12.5% return a group of better performing stallions would get
a return in the range of $10,600 to $18,500 but if you put the take out rate to
15% the range goes from $12,750 to $22,000.
By capping at $20,000 and raising the take out to 15% there is a realistic
chance for every stallion to at least break even.
Sure there are going to be plenty of instances where a $20,000 capped stallion
can’t manage to make his money back in a given year. Some will be a disaster.
However, if they can’t produce enough winners to do this then they aren’t
worth their salt/service fee in the first place and by capping the maximum fee
it is not a situation where it is just IMPOSSIBLE for you to get your money back
before you go into the scheme.
If you can appreciate even at a 15% take out the most a stallion is likely to
earn is around $37,000 (Danehill), and in general they are going to return
around $15-$20,000 in bonuses, then it shouldn’t surprise anyone why there is
great difficulty for stallion owners nominating the likes of Anabaa, Dehere, Red
Ransom etc to an uncapped scheme at their current fees.
If you think big studs are going to start to make some money out of the scheme,
if you just look at the Arrowfield stallion roster of 1998 (foals of 1999) you
will see that this generally isn’t going to be the case:
Stallion……….’98 Fee
Brocco…………$12,500
Catrail…………$15,000
Flying Spur……$17,500
Fuji Kiseki…….$20,000
Hector Protector…$20,000
Snippets………..$15,000
Timber Country..$30,000
Unbridled’s Song...$30,000
Here are the results:
……………………………….......OUTLAY……..RETURN……PROFIT/LOSS
06 Scheme (12.5% - no Cap)….$155,000……..$71,250……….-$83,750
15% - No Cap…………………$155,000……….$85,500………-$69,500
15% - $20K Cap……………….$140,000……….$85,500……….-$54,400
Even with a cap and 15% take out Arrowfield would have still made a loss in the
revised scheme, but not as much as the current one.
With the “15% - 20K Cap” Flying Spur, off his 1998 fee, makes a very small
profit. Snippets (who had a lot of winners but in other states), Fuji Kiseki and
Unbridled Song roughly break even or lose a grand or so. Brocco and Timber
Country (surprisingly!) lose a little more than that, and Catrail and Hector
Protector lose a lot.
This is how a scheme that pays money based on performance should work….the
good stallions, that have the winners turn a small profit, the solid/average
stallions break even/lose a little while ordinary stallions lose a lot. The
latter group should lose, as an incentive scheme should not exist to protect
ordinary stallions.
Move forward to 2003 and presuming both Flying Spur and Snippets stand at
$40,000 (+GST). Without a Cap, both these stallions would lose significantly
even at the 15% take out. It gets back to what I have been talking
about…penalising excellence. If you don’t Cap the fee payable, as a stallion
fee goes up you end up penalising the horses that you shouldn’t.
As far as funding the scheme, if the bigger breeders of Arrowfield, Coolmore,
Darley, Vinery, Widden and Woodlands (I know the latter are already in the
scheme) found the “15%-20K Cap scheme” a little more palatable (as they
won’t get a complete hammering which they are up for now) and nominated all
their 2003 stallions for the 2006 Scheme they would contribute a $1m (ex GST).
The other farms in this state should have at least $0.5m to put in if the TRB
has around that figure to date already. I am sure I am not telling you anything
you don’t already know as far as this is concerned.
So there are my thoughts. With a 15% - 20K Capped Scheme;
The TRB should be happy – they get their pound of flesh from the Breeders and
the Scheme should be adequately funded from the Breeding Industry.
:The Stallion Owners / Bigger Breeders should be happy - they can freely trade
to stand stallions at high fees without the thought that a progressive tax is in
place and with the cap, if their stallions are good enough to perform well they
will at least break even.
:The broodmare owners should be happy – they have an inclusive scheme, which
hopefully allows them greater returns in the sale ring.
And finally
:The Owners/Trainers should be happy – they get a scheme which almost all the
horses that they would buy/train are in the scheme which is what we need.
The only stickler might be owner groups / administrators burring up over raising
the take out for the stallion nominator to 15% which would mean that the owner
take out rate would fall from 80% to 77.5%. However, if they are serious about a
Bonus Scheme that is all-inclusive and want to bitch over 2.5% that makes the
scheme work, then there is definitely something wrong with them.
Now as far as BOBS 2003 is concerned it is not an easy one to answer.
There is no doubt that there is no benefit in nominating a stallion that
stands/stood for more than $20,000 and as the structure of the scheme involves
stallions that are dead, relocated or banished from our shores, it is a tough
one. In the case of the horses for the 03-04 scheme breeders major benefit of
the 06 Scheme, the fact that the horse might sell in a sale ring for more, is
gone, as these yearlings have already found homes. It is also very hard (read
impossible) for farms to go back and get money from syndicates or lease deals
for horses that are no longer at their farm.
With the TRB’s keenness to be seen doing something for the racing industry and
initially bullying this scheme on the breeding industry without actually
thinking out how it would work it is unsurprising that something like this has
occurred. Unless you have an inventive way to use the $1m surplus from last year
to qualify the stallions it might be best left in the too hard basket….
However, there is nothing to stop the 2004 and 2005 schemes working. If the TRB
changed the 2004 scheme to a “15% - 20K Cap” scheme, even though the season
that these mares were bred is long gone the stallion owners can at least see
that unless they are quite poorly represented, their stallions will have a
chance at breaking even and the benefits of a BOBS sticker placed on a yearling
backside is still available.
Finally, someone will probably find holes in what I have suggested, or reasons
for not doing what I have suggested but never let it be said that while critical
of the current scheme, I wasn’t prepared to offer some sort of solution.
Byron Rogers
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