More Than Big Purse at Stake in Breeders' Cup Classic

When a field of 10 squares off Nov. 7 in the $6 million Longines Breeders' Cup Classic (G1), the richest purse in American racing will be on the line at Keeneland.

For the winning connections, there will be an unforgettable moment attached to a euphoric thrill that will last a lifetime.

They will also receive the lion's share of the purse, which will amount to a payday of about $3.3 million … for starters.

Much like the Kentucky Derby Presented by Woodford Reserve (G1), the Classic stands as one of a handful of races that can dramatically enhance a Thoroughbred's final selling price as a stallion prospect through a series of incentives commonly known as "kickers."

To illustrate their role in the economics of racing, for at least one of the starters in the Classic—and possibly more—the value of the kickers his original owners will receive for winning the Classic will be greater than the share of purse money.

"In the last three to four years, kickers have grown to the point where they are in virtually every stallion deal a major farm makes," said John Sikura, president of Hill 'n' Dale at Xalapa. "They used to be in some deals, but now every seller is aware of them and they are a standard term, not only in stallion deals but also deals for mares."

Akin to a bonus a major league baseball player might receive for winning a batting title or a Cy Young Award, these extra incentives are far more lucrative in racing where, in a best-case scenario for the seller, the value of kickers can grow to a point where they match or exceed the base purchase price for the breeding rights.

"Kickers let a seller have their cake and eat it, too," said West Point Thoroughbreds president and CEO Terry Finley. "They allow buyers to structure a deal that's a lot more attractive without having to put as much capital up front because these good horses are expensive. It's enhanced the number of transactions. Even wealthy people like to take some money off the table."

There's no better example of the economics of racing and breeding than Authentic. His kicker for winning the Kentucky Derby was $9 million, which is almost five times higher than the $1,860,000 winner's share of the $3 million purse.

Nor is that figure completely out of line with what has become a seller's market amidst furious competition among breeding farms for the best prospects. 

"I don't think those values are out of line with the prices I'm familiar with," said Sackatoga Stable founder and operating manager Jack Knowlton, who earlier this year sold the stallion rights to Belmont Stakes Presented by NYRA Bets (G1) winner Tiz the Law to Coolmore America's Ashford Stud. "They are not crazy in any way, shape, or form."

While kickers have been a part of breeding deals for more than 25 years, they have usually been private matters which neither side will disclose.

Yet that all changed in June when Spendthrift Farm bought into Authentic. 

The son of Into Mischief  was one of 24 yearling colts purchased in 2018 for a total of $11.4 million by a partnership consisting of SF Racing, Madaket Stables, and Starlight Racing through the help of an all-star lineup of bloodstock agents.

In some cases, other owners were added for individual horses, and when Authentic won the March 7 San Felipe Stakes (G2) to improve to a perfect 3-for-3 in his career for Hall of Fame trainer Bob Baffert, the ownership group also included Fred Hertrich III, John Fielding, and Golconda Stables.

After that race and before a second in the June 6 Runhappy Santa Anita Derby (G1) a stallion deal with a twist was consummated with Spendthrift Farm. Aside from acquiring Authentic's breeding rights, Spendthrift, which stands super stallion Into Mischief, also bought a large chunk of Authentic's racing rights. From the previous group, only Madaket and Starlight stayed on board as owners for the remainder of the colt's racing career.

As commonplace as that might be, Spendthrift also did something quite novel in selling 12.5% of Authentic's racing and breeding rights to MyRaceHorse Stable, which in turn sold 0.001% microshares of the colt to 5,314 investors for a price of $206 before the Kentucky Derby.

In doing so, Spendthrift and MyRaceHorse provided each of those owners with a full disclosure of the sale, listing all of the kickers that Spendthrift and MyRaceHorse could potentially pay out.

Aside from the $9 million tacked onto the sale price due to the Kentucky Derby win, there was a $2.7 million kicker for a grade 1 win, which Authentic notched for capturing the TVG.com Haskell Stakes (G1).

Those two kickers, combined with a base price believed to be about $15 million (the price the owner would receive if none of the kickers were reached), put the current price tag on the deal at about $26.7 million.

Beyond that, there's a $5,850,000 kicker for winning the Classic as well as kickers worth $1 million apiece for becoming the champion 3-year-old male and Horse of the Year. Considering that a Classic win would wrap up the 3-year-old Eclipse Award for Authentic and make him a favorite for Horse of the Year honors, that stallion deal could skyrocket to more than $34 million before all is said and done.

"I guess I don't have to make any win bets on Authentic in the Classic," Starlight Racing CEO and managing partner Jack Wolf quipped.

Suffice it to say, both sides would be elated if that happens.

"Even with that big of a kicker, I think it's fair value for Spendthrift considering what it can do for Into Mischief," Wolf said.

Sol Kumin, who heads the Madaket Stables group, said the kickers have the potential to be a win-win for buyer and seller.

"A kicker is a way to add to a financial transaction so you don't look back and say, 'Why did I sell cheap?' It allows you to do the prudent thing and take some money off the table while allowing yourself to participate in some upside going forward," Kumin said. "The good news about kickers is that normally the buyer is happy to pay them because you are adding substantial value to the horse as a stallion. It's a win-win for everyone."

Given that Spendthrift's now 87-year-old owner B. Wayne Hughes was able to celebrate as the owner of a Kentucky Derby winner for the first time, there's surely no sign of buyer's remorse at the famed Kentucky farm.

"Part of the reason we were able to be so aggressive with our offer was that we received racing rights," said Ned Toffey, general manager of Spendthrift Farm. "From a stud farm's standpoint, what's nice about a kicker is that it allows you to make a nice and exciting offer and if the horse doesn't win that race you are safe with your base offer. If he wins, you're more than happy to pay it. With Authentic, we had no doubts over what we were offering."

While kickers have become a standard part of deals, there is not a universal formula for them. Deals are tapered around races that will ultimately impact a horse's stud fee, so a sprinter may receive a bonus for winning the H. Allen Jerkens Stakes Presented by Runhappy (G1) or Breeders' Cup Sprint (G1) while a deal for a 2-year-old with classic potential might involve a kicker for a 2-year-old championship or winning the TVG Breeders' Cup Juvenile Presented by Thoroughbred Aftercare Alliance (G1) and/or a Triple Crown race. 

"It's not rocket science," Toffey said. "You have to go through the possibilities and project what he's worth and if he was to retire today or if he was to win certain races before then. What you have to do is put yourself in the shoes of a breeder and say, 'What would I pay to breed to that horse if it's a Kentucky Derby winner?' Every horse has a slight variation on the same formula. Were they impressive at 2 or did it take a while to get going at 3? Are they sprinters or can they stretch out?

"Most farms are specific about the kind of race they want to see a horse win and structure kickers that way," he added. "A grade 1 on turf will not carry anywhere near the value of a grade 1 on dirt. To stretch out adds a new dimension. In this country, we place a lot of emphasis on speed but also stamina, so when a horse has stamina but is devoid of speed, you better be careful about the way you structure your kickers. He isn't going to be as popular as a stallion. There's a tremendous amount of nuances to it and you have to try and remove yourself from all that and fast forward to January and project how many seasons you can sell and what you can sell them for."

In the case of Authentic, Spendthrift's interest was quite understandable, and he was worth more to them than other farms.

"We're Into Mischief fans," Toffey said with a laugh.

Looking at the financial elements of the deal, if a season to Authentic is ultimately offered for $40,000, 150 matings would add up to $6 million in his first year. Yet in addition to that, thanks in part to having one of Into Mischief's sons win the Kentucky Derby, Spendthrift was able to boost their flagship stallion's fee from $175,000 to $225,000 in 2021. While Into Mischief was bred to 248 mares this year, even with just 200 matings next year that adds up to an additional $10 million.

Of course, in some instances, success for the seller can become costly for the buyer.

"The pendulum often swings, but today everything is in the seller's favor," Sikura said. "I understand performance bonuses, reasonable performance bonuses. The reality of today is that you have to give full value. Anytime something good happens that makes the horse worth another dollar, it costs you $1.40. And any disappointment, under-performance, or miscalculation you have, that loss belongs to you. You get all the downside. … Sellers share in the good and you take the bad. Sometimes sellers get 10 chances to enhance the value of the deal through kickers and we have COVID-19 market changes, horses getting beat, a new crop that takes the spotlight away from the horse you bought. You have vulnerability all the way through. 

"I'm a buyer of horses and I'll say it's the buyers' fault since it's so highly competitive with five or six people in on all of these prospects because there's not the kind of loyalty among sellers that there used to be," he added. "Nobody wants to lose, and the buyers are overly exuberant because the bonuses don't feel like real money. It's like losing a handful of poker chips. Later you see the money come out of your account."

The SF-Madaket-Starlight partnership and the teamwork behind it that has been nicknamed "The Avengers" has put stud deals on display in a few ways. From the 24 colts, breeding rights for three of them (Authentic, Charlatan and Eight Rings) have already been secured by farms. A fair estimate of the combined worth of the trio would be more than $45 million.

"It's hard to make economic sense in this business, but we've had a very good year thanks to Tom Ryan (of SF Racing and Bloodstock) who put this together and the bloodstock agents who picked them out and Bob Baffert who trained them," said Wolf. "You can see from all of this that the real money is made by selling the breeding rights."

The first deal was for Eight Rings, a son of Empire Maker who won the American Pharaoh Stakes (G1) last year at 2 and was secured as a stallion by Ashford Stud before the Breeders' Cup. But none of the kickers in his deal were checked off. He finished sixth in the TVG Breeders' Cup Juvenile (G1) and is unlikely to race again after suffering three straight losses following the sale.

Sikura landed the stallion rights to Charlatan for Hill 'n' Dale at Xalapa off maiden and allowance wins. Believed by some around him to be the most talented of the stable's three stallions, he won a division of the Arkansas Derby (G1) to pick up one lucrative kicker. But that May 2 victory was taken away due to a drug violation which Baffert blames on an inadvertent exposure to lidocaine used by his assistant trainer. 

It is believed the loss of the grade 1 win removed several million dollars from the stud deal.

Adding to the sting, shortly after the news of the failed drug test broke, the Speightstown  colt suffered an ankle injury.

"Charlatan was a brilliant prospect," Sikura said. "It was a big gamble because of our base price. If he had gotten beat (in the Arkansas Derby), we would have fallen off a cliff. I thought there would be a lot of upside with a grade 1 win. There seemed to be more of a downside risk than an upside risk, but in my mind it was a calculable risk. I didn't factor in a lidocaine positive.

"There's a lot of unknowns and you should be careful, but if you want to be careful you're going to watch every horse get sold to someone else. You won't get any of them. I thought he was well-sold and well-bought. But the disqualification and the injury hurt. That was a tough week on me."

At least in Charlatan's case, he is back in training with Baffert and is being pointed to the Malibu Stakes (G1) in late December at Santa Anita Park for that elusive and highly valuable top-level win.

While there are kickers for turf horses or horses whose stallion rights are bought late in their careers, the most lucrative ones are for 2-year-olds or 3-year-olds before the Triple Crown begins. This year, aside from Authentic, Tiz the Law is also believed to have earned kickers for winning the Belmont Stakes and Runhappy Travers Stakes (G1), with another in the waiting should he prevail later this week in the Classic.

"The Kentucky Derby is always the big kicker," Knowlton said. "Everything else is peanuts because of the television exposure. You'll also see it in the payments jockeys get for wearing advertisements in the Kentucky Derby. Most of the good horses who get those big kickers don't run after 3, so the incentives are not there the following year."

For turf horses, the lucrative kickers typically do not come into play until their 4-year-old campaigns.

"Here in America, you are up against it with a turf horse," Finley said. "It's better than it was 10-15 years ago because people are seeing that turf racing is a lot more prevalent and turf horses have gone to stud and had successful starts as sires. We have a grade 1-winning 3-year-old turf horse in Decorated Invader and there's some interest in him as a stallion. He'll stand somewhere, but there's a ceiling for him. You're dealing with one more year before the interest grows and kickers come into play. A 3-year-old doesn't win the Belmont Invitational Derby (G1T) and go to stud. You have to wait until after that 4-year-old season at the earliest. It's a different dynamic."

Triple Crown Yin and Yang

Some observers believe the current kickers craze was sparked by the yin and the yang of the stallion deals Ashford Stud made for Triple Crown winners American Pharoah  and Justify .

American Pharoah was sold by owner Ahmed Zayat to Ashford Stud in a deal drawn up early in his 3-year-old season and announced following his victory in the Preakness Stakes (G1). After his Triple Crown season of 2015 ended with a Grand Slam victory in the Classic, reports surfaced placing the value of the stud deal in the low $20 million range. Court documents made available recently during a lawsuit against Zayat revealed the deal consisted of an $8 million base price that escalated to $23.5 million with kickers, including a $2 million bonus for winning the Classic and $3 million for his Kentucky Derby victory.

That $23.5 million price tag turns out to be lower than Authentic's estimated value.

Three years later, when Justify swept the Triple Crown, the original ownership group of SF Racing, China Horse Club International, and WinStar Farm hit the lottery. According to Lenny Shulman's book "Justify: 111 Days to Triple Crown Glory," the Justify deal was worth $60 million and escalated to between $75 million and $85 million because of the Triple Crown sweep.

Now, mindful of the relatively low price for American Pharoah and the astronomical amount for Justify, sellers of young stallion prospects are going out of their way to get as much money as possible either up front or through kickers.

"American Pharoah was one of the great buys of all time and I think he changed kickers," said Kumin, who bought a share of Justify's racing rights through his Head of Plains Partners group after the Scat Daddy colt's first race. Starlight Racing did likewise. "No one thought about a huge Triple Crown kicker, but then they watched a horse that good sell for that amount and people realized they have to protect themselves."

As valuable as kickers may be, they are a different beast from purse money in that only the winner collects—owners do not have to share them with the trainer or jockey. Winning, as Vince Lombardi would say, is everything, with no payments for second- or third-place finishes, which explains why a disqualification, narrow loss, or bad trip in a major stakes can be so exasperating for an owner.

It also puts in perspective the reason why, over the course of two days and 14 stakes races at the Breeders' Cup, there could be a small group of extremely happy owners should they get to experience not only the thrill of victory—but a kick to sweeten their financial reward.