A Business Perspective on Horse Racing Partnerships
Horse racing partnerships have increasingly become a part of the “sport of kings”. It is well recognized that horse racing partnerships allow for greater inclusion of participation for the general public; no longer is the “sport of kings” limited to the great racing families of Kentucky or the very wealthy. In 2017, each leg of the Triple Crown (Kentucky Derby, The Preakness Stakes, and The Belmont Stakes) was won by horses owned by horse racing partnerships. Horse racing partnerships appeal to a wide audience of people who have different desires and familiarity regarding horse racing and therefore, it is important to appreciate the business aspects of horse racing partnerships. The greater inclusion of the general public propels the need for education on the important aspects of the business issues of a partnership. In selecting a partnership, a potential member needs to consider many aspects, but two considerations stand out: communication and victory. A member should maintain an open dialogue with the partnership manager so that the member can continually expand its knowledge and experience regarding key decisions, such as 1) selecting a horse to purchase; there are different issues involved in purchasing a yearling versus a two-year-old, 2) whether to purchase through a private sale or claim, 3) selecting a trainer, and 4) selecting races to give the horses and members the best opportunities for victory. Victory for the members is not limited to financial gain but must recognize the social and entertainment aspects of the sport. Most partnerships include members who enjoy racing and the ability to attend the track meetings, participate in the paddock and be involved in the discussion and development of the horses (recognizing this may be a limited amount as the manager must have “final decision” ability). As a general overview, the business issues regarding partnerships can be divided into three groups. First, decisions regarding the amount to be paid for a horse, the percentage of ownership a partner may want of the horse and recognizing the “mark up” to the partnership members to cover the expenses and evaluating a horse prior to purchase. Second, the members of the partnership must understand the level of communication and participation they desire regarding the development of the horse and racing. While the partnership manager will have the final decision, being in a partnership wherein the manager appreciates and considers the comments of each member makes the experience more enjoyable and fulfills a great sense of satisfaction. Third, understanding a member’s status and goals, such as whether the member is in the midst of a busy career, a retiree or investor. By understanding these, you can maximize the business benefit of the partnership venture through tax deductions, business expenses, investment accounts, etc. Recognizing these key business issues provide the “bridge” which serves as a conduit to provide beneficial business advantages simultaneously with enjoyment of horse racing. Being a lifelong horse racing enthusiast and having a legal practice that includes gaming law, and more particularly equine law (directed to thoroughbred and standard bred issues), it was imperative for me to become involved with a partnership that recognized my limited time to participate but also allowed me to use my legal experience to contribute to my investment in the partnership. In my particular situation, I invested in Zilla Racing Stables (www.zillaracingstables.com). The approach taken by Zilla, and its manager Michael Piazza, allows me to continually learn the aspects of selecting and training horses while giving me a thorough understanding of the business and legal issues involved in horse racing. Michael Piazza provides a continuous flow of information to the members of the partnership regarding the partnership’s horses and horse racing generally, answers specific questions, and is the conduit to the trainers, grooms and bloodstock agents to provide an understanding of the issues of the sport. The evolution of horse racing partnerships has provided an opportunity for racing enthusiasts, such as myself, to participate at various levels that can be coordinated with their personal and business goals. Potential members should obtain an appreciation of each particular partnership and match its characteristics to their specific needs.