How are stud fees set?

[crazy canuck]

How does a stallion owner determine a stud fee for a first-timer? I have read a few theories but would like to hear from you all.

thank you!

[Maven]

It's usually set on how much the stallion was bought (or syndicated) for.

[Dave C]

I think every farm/manager/owner uses their own system but when you boil it all down it works out to the decision makers opinion about what price the market will bare. You can find all kind of examples where the farm guessed wrong and had to make deals or lower the price to get mares. JMO

[bcassidy]

It varies tremendously, obviously the more money it cost to acquire the stallion the higher the stud fee will have to be. In general, the acquisition cost is schedule to be recovered before the first crop from that stallion has ever raced therefore most stallion syndicates plan to recover their full purchase price within 3 years. Any recovery beyond year 3 is total upside to the plan. If the stallion is a flop they already have their money back. Easy model

[Dave C]

The purchase price of a stallion is based on what the buyers think they can charge for the stud fee rather than the other way around. If the buyers bought the stallion and then tried to set the stud fee they would inevitably price themselves out of the market and not get sufficient mares to cover their investment. Therefore they look at the stud fees of similar stallions in the market, look at the number of mares those stallions are covering, make adjustments for uniqueness of their prospect, correct for their marketing program, average it over 3 or 4 years and determine how much they can afford to pay for the prospect before making the offer.

[bcassidy]

I know of a few stallions which were syndicated to cover almost 100% of the syndicate members mares so the stud fee is kind of moot until the foals make it to the sales. There are definitely several ways to build a business plan for a stallion syndication-----it just depends on some key variables.
I would bet the stud fee on some of Coolmore's or Darley's stallions are moot as well--- in that these stallions see many of their own mares----which will either be sold in foal or the foals sold as yearlings.

There is more than one way to recover a stud fee.