MARKETING AND BRANDING OF RACING RACING APPROACH WILLIAM CARSTANJEN, PRESIDENT & COO, CHURCHILL DOWNS

Prepared For: General Assembly & 47 th International Conference 7 October 2013 Paris, France International Federation of Horseracing Authorities

3 The Kentucky Derby – The Heartbeat of Churchill Downs Incorporated  The Kentucky Derby is not just “The Greatest Two Minutes in Sports” – it’s a cultural and social phenomena  The longest continuously running sporting event in North America – 139 years  In 2012, Forbes ranked the Kentucky Derby the 7 th most valuable sporting event brand in the world*  151,616 people attended in 2013; 16.2 million viewed the television coverage *Event brand value is estimated by Forbes Magazine as the average revenue from sponsorships, tickets and licensed merchandise per event day of competition.

4 The U.S. racing industry has been in a depression U.S. Thoroughbred Handle (Billions of Dollars) down $4.2 bil. (27%) 8-Year Depression U.S. Thoroughbred Foal Crop & 3-Year-Olds Number of Foals Number of 3-Year Olds We face several more years of decline in the number of racehorses Source: The Jockey Club

5 Churchill Downs has changed with the times Racetracks Live Days Arlington Park94 Calder Race Course181 Churchill Downs73 Ellis Park41 Fair Grounds83 Hollywood Park95 Hoosier Park121 Total688 Racetracks Live Days Arlington Park90 Calder Race Course150 Churchill Downs60 Fair Grounds84 Total384 Churchill Downs 2005 Churchill Downs 2012 Divested racetracks to focus on high quality racing and strategic initiatives

6 Today, Churchill Downs Incorporated operates in three distinct segments We are a diversified Racing, Gaming, & Online Entertainment Company Racing 1 Gaming 2 Online Business 3 4 race tracks that conducted 381 days of live racing in 2012 Longest continuously held sporting event in the U.S. - the Kentucky Derby Growth driven by Oaks & Derby innovations, Night Racing and productivity initiatives 5 existing operations with ~3,400 slots, 33 tables, 36 poker tables, 185 hotel rooms, & ~775 video poker machines Developing a $272 mil. Racing & Gaming facility as part of 50/50 JV with Delaware North near Lebanon, OH scheduled to open in December 2013 Twinspires.com - the largest legal Online gaming platform in the U.S. Luckity.com - a mobile and online platform that offers fun games with the opportunity to win real cash Positioned to participate in Online Poker if legalized with the Bluff brand ($millions) 2012A IH 2013 Revenue$183$95 EBITDA$45 $25 EBITDA Margin24%27% ($millions) 2012A IH 2013 Revenue$223$139 EBITDA$64$41 EBITDA Margin29%30% ($millions) 2012A IH 2013 Revenue$302$185 EBITDA $54 $59 EBITDA Margin18%32%

7 CDI: How we succeed in racing  Capital improvements that maximize return on investment Amenities that drive revenues during big events On-track innovations, such as FastBet Mobile, improve customer service  Invested in technology to more effectively reach wagering customers Grown TwinSpires into the largest ADW platform in the U.S. Launched Luckity.com to capture lottery and social gaming customers  Combined top quality racing with other entertainment to make the Kentucky Derby and Kentucky Oaks very successful large scale events Investments in capital improvements and technology

Derby Week results prove the resiliency and brand power of this iconic event  Derby Week all-sources wagering up 2% over 2012 to record US$258.5 mil.  Despite dismal weather on both Opening Night and Derby Day, attendance for Derby Week reached 332,000 NBC Telecast Viewership (in millions) Kentucky Derby and Oaks have prospered despite economic downturns  Television ratings 2 nd highest since 1989 with16.2 million viewers - up 9% from 2012, up 12% from 2011

9 Eighteen races in which finishers earn: 1 st = 10 points 2 nd = 4 points 3 rd = 2 points 4 th = 1 point The Road to the Kentucky Derby; Expanding the reach of the Derby Sep.2013 Feb.2014 Apr Leg 1 - Eight races: 1 st = 50 points 2 nd = 20 points 3 rd = 10 points 4 th = 5 points Mar Leg 2 - Eight races: 1 st = 100 points 2 nd = 40 points 3 rd = 20 points 4 th = 10 points “We don’t have any horses in the Kentucky Derby this year [2013] that I would say really don’t belong. There are no sprinters in here that are going to carry them for three furlongs and stop. It’s probably one of the most wide-open betting Derbys. It might need to be tweaked a little bit, but as of now I think it’s a pretty darn good system.” – Hall of Fame and three-time Kentucky Derby- winning jockey Gary Stevens

10 Kentucky Oaks—Charitable affiliation has transformed the event  Since 2009, Churchill Downs has partnered with charitable organizations, leveraging the Kentucky Oaks to raise awareness and funds for cancer initiatives. Annual “pink out” where patrons are encouraged to wear pink in support of cancer awareness Churchill has contributed more than $350,000 to cancer related charities  Prior to the running of the Kentucky Oaks, cancer survivors participate in an on-track parade of honor and hope, which is included as part of the national telecast

11 Capital improvements that maximize return on investment Major renovations to Churchill Downs racetrack completed in 2005 Clubhouse Renovation New Turf Club Finish Line Suites Millionaire’s RowJockey Club Suites

12 Night Racing at Churchill Downs  Thus far, over 450,000 people have attended night racing at Churchill Downs. In terms of attendance, over the last 4 years, night racing has been roughly equivalent to: 5 Breeders’ Cup weekends (Fri. & Sat.), or 4 Kentucky Oaks days, or 3 Kentucky Derby days Racetrack lighting installed in 2010  Downs After Dark debuted in 2009 (using temporary lighting), with crowds of 28,000 to 33,000. It has become a permanent feature on the Churchill Downs schedule, with typical crowds of 22,000 to 25,000.

13 The Mansion at Churchill Downs  Seating and exclusive entertainment for more than 320 guests on the 6 th Floor of Churchill Downs at the finish line.  Guests of The Mansion have access to a private wine cellar and personal concierge service which ensure an unforgettable Kentucky Derby and Kentucky Oaks experience. Ultra-luxury venue completed in 2013

14 Grandstand Terrace US$14.5 million expansion to be completed in 2014  New Grandstand Terrace & Rooftop Garden  51,000 square feet of new space  Adding ~ 2,400 new reserved seats  New amenities serving 20,400 existing seats Renderings of new space

15 What’s Next? One of the largest high definition video displays in the U.S. Approx. 16,000 sq. ft. in size, the high definition video display will command the attention of patrons in every seat at the track. Examples of Scale The largest HD display is currently at Charlotte Motor Speedway in Charlotte, North Carolina

16 Investments in on-track innovation Self-Service technology improves the on-track customer experience On-Track Wagering Innovation FastBet Mobile Account Management Kiosk Tote Ticket Redemption Kiosk Other On-Track Innovation Wi-Fi Network that supports FastBet Mobile supports other digital patron amenities  Order food and beverage  Find friends at the track  Social Media  Locate seats  Stream video content  Purchase tickets and merchandise

17  U.S. Owned & operated  80 million wagering transactions per year  Over 4 million calls handled per year  Over 3.5 petabytes of streaming video delivered per year TwinSpires has grown into the largest U.S. online wagering platform Innovative Features  Mobile wagering app  TwinSpires TV live streaming video The online segment continues to grow