For West, The Sense of Incentives

by Lucas Marquardt

The stallion market isn't what it was a decade ago. The mare population is down significantly, some 40% from the mid-2000s, and with the same number of Grade I races producing the same number of stallions, competition between stud farms for quality mares is fierce. Moreover, breeders burnt by the 2008 fiscal crisis continue to be wary of the overexposure that comes with high production costs. 

It was this set of circumstances that owners Gary and Mary West considered when they retired the Grade I winners New Year's Day (Street Cry {Ire}) and Power Broker (Pulpit) for the 2014 breeding season, and when they recently retired the Grade II winner Flashback (Tapit) for the '15 season. All three stand at Hill 'n' Dale Farm in Kentucky. 

The Wests, in short, were confronted with the same pressing question put before every stallion manager: How do you attract a big book of quality mares in this day and age? It's a simple question, often with no simple answers. 

For the Wests, who retained full ownership in the stallions, the resolution has been to incentivize breeders. Then incentivize them more. And then, for good measure, incentivize them even more. 

“Ten years ago, these sires would have had a book of 100 mares each, at much higher stud fees, without any incentives,” Gary West told the TDN. “But this is today, not 10 years ago, and the stallion market has really changed.” 

So the Wests teamed with Hill 'n' Dale's John Sikura and set what most would agree are very reasonable fees: $7,500 for New Year's Day and Flashback, $5,000 for Power Broker. Then they announced a four-part incentive plan. The plan is in some ways modeled after already existing incentive programs, like the Spendthrift-devised 'Share the Upside,' but also perhaps is unique in its scope. 

First, stud fees can be paid out of weanling or yearling proceeds, with the first $7,500 for weanling sales and $15,000 for yearling sales going to the breeder. If a foal is retained, the full stud fee is due Dec. 31, 2017. Second, as part of the “Team West Trifecta,” if a breeder sends mares to all three stallions, the stud fee for each is $5,000. Third, the Wests established lucrative bonus awards worth $5.65 million. Breed the winner of any of the four 2018 Breeders' Cup juvenile races, get $1 million. The breeder of the first Grade I winner by each stallion gets $500,000, while the registered agent that buys a season that leads to a Grade I winner from each stallion gets $50,000. 

“I need the breeders of Kentucky and in other states to help me get a full book of mares,” West said. “I can't do that the old-fashioned way, by putting a high price tag on the stallions and not incentivizing the breeders. The breeders right now are kind of in the catbird seat. They have the factories that everyone needs to make their sires.” 

Lastly, the Wests say they plan to support breeders by targeting yearlings by their three young sires at sales in the next few years. Given their track record, that's no empty pledge. If one includes an RNA the Wests purchased privately, they were the leading buyer at Keeneland September, with 30 head bought for over $8 million, said West. 

“Obviously, when the weanlings and yearlings from our own sires come to the market, they will be the first horses we will look at,” he said. 

West warns, however, that it won't just be the sires they're looking at. “Obviously, we're pretty particular about athleticism, and they have to have a decent family,” he said. “I'm not going to buy a foal who has zero family. We don't breed any to our stallions that don't have family, and when we buy them, they have to have good credentials.” 

Sikura and West agree that one of the reasons they're being aggressive with stud fee pricing and incentives is so that they can be choosey with the mares that each stallion gets. 

“They'll all breed healthy books, but we're not going to breed 200 mares to them,” said Sikura. “I would say between 125 and 130 mares. We'll breed less than we can, that's for sure.” 

Added West, “I would much rather get 100 good mares than 200 so-so mares. At the end of the day, there's a balance between quantity and quality. The model of some farms is to get a bunch of stallions and then literally breed anything to them. We're going to be more selective.” 

The Wests' incentive program is on top of what is essentially a fifth prong to support their stallions, a 90-strong broodmare band earmarked for Flashback, New Year's Day, and Power Broker. 

“We'll send about 30 to each one,” said West, whose agent Ben Glass was a leading buyer at the bloodstock sales last winter. 

So are programs like the Wests' and Share the Upside the new norm in breeding? Both West and Sikura believe they are. 
“If you stand a horse at, say, $10,000 or less, you have to do things differently than you used to,” said Sikura. “I have mixed feelings [about the programs], but right now, the breeder has a huge advantage at that level. With proven, elite horses, it's different. But it's a great time to breed to some of these prospects at very, very favorable terms that have never been seen before in the business.” 

Said West, “I don't see the mare population getting back to previous levels, probably in my lifetime. So you better have a damn good sire at a very fair price, with something to incentivize breeders, or you won't get very many mares to your stallion.” 

West-ward Expansion… 
Gary and Mary West first got into racing 35 years ago. Like many others, they started with cheap claiming horses. But then things changed. Outside business interests, primarily in the telecommunications field, took off. In 1986, they launched the West Corporation, which grew into a diversified portfolio of companies including banking, retail and technology. Twenty years later, when they sold West Corporation, the conglomerate boasted 35,000 employees and more than $35 billion in annual sales. 

Following the sale of the West Corporation, the couple established The Gary and Mary West Foundation, which, among other things, aims to lower the cost of health care in America. A philanthropic arm, the West Health Institute, has provided more than $151 million to non-profits. 

“Racing is in Mary's and my DNA,” said West, who is now based in California. “These days, philanthropy is the main focus of our lives, and racing is the fun part of our lives.” 

Business success has enabled the Wests to throw considerable resources at their stable. But when it comes down to it, said West, they haven't changed much in terms of outlook. “I still get excited about winning $25,000 maiden claiming races,” he said. “I know people say that, but I really do.” 

The Wests' earnest plunge into the breeding business marks a seismic shift for, at very least, their own operation. For the past 15 years or so, they built up one of the country's best racing outfits, one based almost exclusively on well-heeled auction purchases. 

To be sure, consignors and breeders were plenty happy when Glass took a shine to one of their yearlings. The Wests made the Top 5 buyers' list at Keeneland September in each of the last seven years, including in 2013 (#2, $7,015,000), 2012 (#3, $4,825,000), 2011 (#4, $5,225,000), 2010 (#3, $3,722,000), 2009 (#4, $3,810,000), and 2008 (#5, $6,455,000). 

In turn, they have been successful on the track. In 2012, Power Broker broke his maiden in the GI FrontRunner S. The 2013 season saw Flashback take the GII Robert B. Lewis, while New Year's Day gave the Wests their first Breeders' Cup winner when capturing the GI Juvenile. By year's end, the Wests were the number-three-ranked owner in North America by earnings. Other recent graded winners include Casino Host (Dynaformer), Corporate Jungle (Giant's Causeway), Title Contender (Pulpit), Code West (Lemon Drop Kid), Poker Player (Harlan's Holiday) and Guilt Trip (Pulpit). 

But lately, the Wests haven't had success only with auction buys. The filly Book Review (Giant's Causeway) became their first homebred Grade I winner when she rallied to win the 2012 GI La Brea S. This year, another homebred filly, Room Service (More Than Ready), dead-heated in the GI Ashland S., then won clear in the GI American Oaks a start later. 

“That obviously has encouraged us to breed to race,” said West. “To have a homebred, a horse you've watched as a little bitty baby right out of the mare, grow up and cross the finish line first in a Grade I, it doesn't get any better than that.” 
West admits he's somewhat addicted to the feeling. “My hitting the lottery in horse racing would be to have a homebred by a sire we own, out of a mare we own, winning a Grade I,” he said. “That would be the pinnacle.” 

As they at least partially shift their focus to breeding-to-race, the Wests believe they have the right stallions to drive their ambitions. 

“All three of these stallions were really good racehorses,” he said. “They have great physicals and impeccable pedigrees. And they're all by the right commercial sires–Pulpit, Tapit and Street Cry.” 

West added, “Listen, we still own 100% of these horses. We don't buy other people's horses to stand at stud. If we didn't own and race them, we won't stand them, and we'll only stand stallions that we believe in.”