Tuesday, November 5, 2013

What would you do? Exactly what they did.

With the retirement of Orb, people are knocking the owners of the horse and the industry as a whole. I will grant the industry argument, but as for the owners, if you are knocking the owners of Orb, then it is likely you have never run a business and certainly never actually owned a racehorse, let alone a high caliber one like Orb.
So, I will explain it to you like someone who has. I have run a business and I have owned many racehorses.
Here is the reality. Most racehorses lose money. The ones that don't walk a tightrope where any day they can be worthless to the owner. Many simply keep earning but don't earn much and will eventually lose you more than you put in until they are completely worthless. 
Now, if you were the owners of Orb, what would you do?
Lets look at the numbers. The horse has made $2,612,516..before expenses...to this point. Factor in what it cost to acquire him-in this case breed him as they owned his dam--add in all the training fees, insurance, stakes payments, entry fees and all the rest and they likely cleared about 1.8 million to this point. That's great. Most wont ever do that on any horse. 
And he is still valuable. And his greatest current value--is as a stallion. As a racehorse, he is likely not even worth 700k, and that was being generous. Racehorses are worth what they can be expected to earn, less expenses and depreciation. Simple as that. In all likelihood, Orb as a racehorse (if he was a gelding) is worth about 450k.
And now the owners sit with Orb. What are his future prospects?
Well, he won the Kentucky Derby. Good for him. That makes him pretty valuable as a stallion prospect. Take that away and his stud fee would be at least half as small as the 25k they will get for each foal that stands and nurses. But even so, he did very little after that, and in fact doesn't appear to be a horse that could earn anywhere near 500k (before expenses) next year. And then likely be done and much less valuable as a stallion. 
Most horses that race the Derby trail and most of their 4 year old year don't last past 4 and even if they do, they can't keep up that level. Orb already started to show that right after the Derby and only got worse. At best he is an also ran with his own aged class, and as aged would have to face all the best out there. Again, the more he loses, the lower his stud be would be when he is done. Right now, he is still the Derby winner and that means something. Not the horse who lost the Preakness, Belmont and wasn't dangerous for the rest of the season. And he isn't the 4 year old that got whipped by a whole host of horses. 
And if they race him as a 4yo and he continues to flop and be, at best, one of many in a pretty weak crop of 3 year olds? What then? Then, he is pretty much worth about 10% of what they can get for him today. As a stallion.
So, without the risk of ever racing him again and paying all the bills that come with that, they are going to pull in at least 2 million dollars a year before expenses. That is for 2 or 3 years before we find out if he is a lousy sire..or...one that hits big and then they win the breeding lottery and really cash in. But even if he flops..and they don't win the lottery, they will be ahead 5 or 6 million by then. That is if he only gets 100 mares in foal each year and they produce babies that live and stand. If he gets 150 in foal, then they will be ahead another 3 or 4 million. And if they shuttle him to a place like Austrailia or South America, you can add even more to that.
And yet, you want them to just keep racing him? Why? Because it pleases you and makes you feel better to see him race? Great. Good for you. 
If you want to see him stay racing, then you have two options. 
First, you can offer them 4 million now, and they might take that. And then you can spend 3 years trying to make that back, and realize you have to earn at least 5 million to do that. 
How many thoroughbreds have ever earned 5 million dollars after their 3 year old season? Not effing many. Certainly, Orb doesn't look like one who would even approach that total. But, if you really want to see him race, then go ahead, blow your fortune on that. 
Second, you could not support the racing system until they up the purses for older horses to the point that they don't have to be insane superstars to make the kind of money that stallions can make. Good luck with that. It has not happened in many years and it doesn't appear to be heading in that direction.
So, if you were the owners of Orb What would you do? 
Exactly what they did.