Keeneland Restructuring Commission Scale

Beginning with their upcoming September Yearling Sale, Keeneland will restructure their commission structure, a move that will result in a $500 minimum commission on all horses sold for $20,000 and under. Keeneland requires an entry fee of $1,000 per horse for any of its three sales. The new structure will effectively make it $500 more expensive to sell a horse at Keeneland.

Bob Elliston, the vice president of racing and sales for Keeneland, said that after roughly three decades of being the industry's 'low-cost provider' and within the context of the service it provides to its patrons, the time had come to make a change.

“We haven't made modifications to our entry fees or sales commissions in over 30 years,” Elliston explained. “As a matter of fact, when you look at horses selling for $20,000 or greater, Keeneland was the low-cost provider–at each level $20,000 and above, we were about $500 lower than the other major American auction houses. As much money as we reinvest in our facilities, as much as we reinvest in the treatment of our customers when they come here and going across the world to create a huge buying bench that benefits those that sell at our auctions, we didn't think that being the low-cost provider made a whole lot of sense. It was taking a small step to ameliorate that differential while at the same time letting us continue to invest at a level that is expected of Keeneland in terms of being the world's largest auction house.”

At last year's September sale, a total of 904 horses were sold for prices between $1,000 and $19,500. Jim and Pam Robinson's Brandywine Farm sold 46 horses in that price range and Pam Robinson suggests that the decision to restructure the commission scale is not only misguided, but is it not being implemented the right way.

“I was not very happy with the decision,” she acknowledged. “I would have no problem increasing the commission on the first few books, but at the same time I think they should have helped the small breeder who already is struggling. I'm not at all pleased with the new structure. I think they could even decrease the commissions for the last couple of books. The smaller breeder selling in those last books…the horses bring a whole lot less.”

Elliston is sympathetic to the plight of the small breeder.

“I feel for those folks and they know well that it costs as much to raise a $5,000 as it does a $50,000 horse or a $500,000 horse. I understand that,” he commented. “At the same time, we all have to be reasonable about how we deploy our capital in terms of a proper return on that investment. The September Yearling Sale is the largest in the world, attracts the biggest buyers in the world and has the deepest buying bench. But it may not be for everybody. If the opportunity to get a return on that investment of putting the horse into the sale and prepping that horse for the sale–not only for Keeneland, but for the consignor and the breeder of the horse is not there, then they might have to look at some other options in the regional markets and where exactly that horse fits.

He continued, “It's a growing problem. When you look at the polarization of the market, it's been discussed for a while that you have a strong upper and strong upper middle and then when you get to the bottom part of the market, there just isn't a whole lot of demand. I think that's something we're all facing–Keeneland and the consignors and breeders–because at the end of the day, we're all partners in this regard. I think we have to challenge ourselves if we bring those horses to market that aren't commercially viable because there is a fixed cost associated with that.”

To that end, Robinson said that Brandywine will reduce their Keeneland September offering in favor of Fasig-Tipton sales.

“I kept out about 15 yearlings to take to [Fasig-Tipton] October that I would otherwise have put into the September sale,” she confirmed. “I normally take 15 or so over there [to Fasig-Tipton] October and this year I'll probably be taking closer to 25. September we usually sell between 90 and 100 and this year that number will be closer to 80. And I'm also taking a few extra to [Fasig-Tipton] July.”

Robinson questions the timing of the decision.

“Do they really need to do this now?” she said. “I haven't heard anybody say that they're happy with the situation,” she said. To the small breeder, that $5,000 horse can make the difference between whether they stay in business or not. And we need all the small breeders, not just the top end of the market–we need everybody.”