The Multi-Million-Dollar Financials Behind A Kentucky Derby Winning Horse

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Hey Friends,

Rich Strike won the 184th running of the Kentucky Derby this past weekend, and I think it’s probably one of the most impressive underdog stories in sports history.

The summary goes like this: Rick Dawson (owner) and Eric Reed (trainer) acquired Rich Strike from a $30,000 claiming race at Churchill Downs in September 2021.

A claiming race is a type of race where horses are put up for sale at a set price. The horse’s owner must agree to sell the horse if someone claims them during the race. If more than one person puts in a claim, they do what is called a shake — where one of the bidders is chosen at random through a draw.

But while these races are seen as the backbone of the sport, the odds indicate you have virtually no chance of acquiring a premium, Kentucky Derby-winning horse.

Still, Rick Dawson claimed Rich Strike for $30,000, and the training began. Rich Strike ran well in a few races over the last few months but finished at No. 21 on the Derby’s Top 20 list — that meant Rich Strike missed the cut by one spot & wouldn’t be racing.

Rick Dawson started to tell his family, friends, and staff that they wouldn’t be heading to Louisville, Kentucky. But then he got the call — Ethereal Road was being scratched from the race just 30-seconds before Friday’s deadline, and since Rich Strike was first on the alternate list, the horse would now be included in the race just 24 hours later.

“I couldn’t even breathe to answer and say yes,” Reed recalled to Sports Illustrated.

And as they say, the rest is history. Rich Strike started from post position 20 (the worst starting spot) and fell behind most of the field early on. But trainer Sonny Leon weaved through the pack and completed one of the greatest upsets in sports history.

Rich Strike’s odds closed at 80-1 before the race, and only one horse has won from worse odds in Derby history — Donerail won the 1913 Kentucky Derby at 91-1 odds.

Still, with the Kentucky Derby carrying one of the largest purses in sports, owner Rick Dawson turned his $30,000 investment into (at least) $1.86 million.

There are other things to consider when calculating the profit that owner Rick Dawson might make with a horse like Rich Strike. Of course, you have to consider the cost of boarding, training, and grooming. But there is also the less-talked-about world of stud fees and breeding rights that typically end up being the most valuable part.

Now, I’m not an expert on this by any means. But I’ve done plenty of research on it in the past, and my hope is to at least provide some directional context on the industry.

So here’s what we know — Rich Strike is expected to race at the Preakness Stakes at Pimlico Race Course in Baltimore, MD, on May 21. That’s the next step in Rich Strike’s attempt to win the coveted Triple Crown. But even if that doesn’t happen, the horse will still have a good market when it comes to stud fees and breeding rights.

Typically, a horse like Rich Strike might retire in twelve to eighteen months. Then it would be sent to a stud farm —that’s where horses are boarded and kept for breeding.

The stud fees are determined through various factors, including the winning history and performance of the horse, and even the performance of its immediate offspring.

So the range can be pretty wide, but the best horses can command $100,000-plus per live foal (baby horse) that they produce. And since they are expected to mate at least 100x per year, that adds up to about $10 million in annual income for the owner.

But sometimes, the breeding rights can sell for much higher, eye-watering amounts.

For example, Justify’s breeding rights were purchased for $75 million by Coolmore (described as the New York Yankees of Horse Racing) after he won the Triple Crown in 2018. They can pay such a high fee because they transport the horse between the Northern and Southern Hemispheres, enabling them to increase annual breeding from 100x per year to roughly 250x per year.

Breeding Rights For The Last Five Triple Crown Winners

• Justify (2018): $75 million by Coolmore (source)

  • $100,000 stud fee (source)

• American Pharoah (2015): $10 million by Coolmore (source)

  • $80,000 stud fee (source)

• Affirmed (1978): $14.4 million (source)

  • 86 stakes winners from 869 named foals with progeny earnings of nearly $55.8 million

• Seattle Slew (1977): Undisclosed

  • Stud fee was as high as $800,000 in 1985 and was $300,000 at the time of his death in 2002 (source)

• Secretariat (1973): $6.08 million (source)

But these are Triple Crown winners, and if Rich Strike doesn’t perform well at the Preakness Stakes, the breeding rights and stud fee can drop dramatically. For example, here are the reported stud fees for previous Kentucky Derby winners.

Stud Fee For The Last Six Kentucky Derby Winners

• Mandaloun (2021): N/A (still racing)

• Authentic (2020): $70,000 stud fee (source)

• Country House (2019): $7,500 stud fee (source)

• Justify (2018 - Triple Crown): See the above section 

• Always Dreaming (2017): $12,500 stud fee (source)

• Nyquist (2016): $55,000 stud fee (source)

As you can see, stud fees are all over the place. But the general idea is that if the horse wins races, the fee goes up. And if the horse produces competitive offspring, the fee goes even higher. But if the horse doesn’t win more races, the fee can be reduced. And then if the horse also doesn’t produce competitive offspring, the fee can go even lower.

So only time will tell what the true economic value of a horse like Rich Strike is to its owner, but we know one thing for sure — it’s already much higher than $30,000.

I hope everyone has a great day. I’ll talk to you tomorrow.

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