Dover Downs Entertainment, Inc. Business Information, Profile, and History

Company Perspectives:

The company's mission is to exceed customer expectations by providing a great entertainment experience with friendly, courteous, and timely service; to provide employees with challenging and exciting opportunities in an environment where teamwork and mutual respect are paramount; to contribute to the growth of the community by providing economic stimulus, employment opportunities, and active support; to provide shareholders with exceptional returns on their investments, emphasizing growth and long-term value.

History of Dover Downs Entertainment, Inc.

Dover Downs Entertainment, Inc. operates six tracks for motorsports racing, including Dover Downs International Speedway in Delaware, Grand Prix Association of Long Beach in California, Gateway International Raceway in Madison, Illinois, and Memphis Motorsports Park, Nashville Speedway USA, and Nashville Superspeedway USA in Tennessee. Dover Downs International Raceway also has live harness horse racing and offers wagering on simulcast horse races and more than 1,500 slot machines. The late chairman John Rollins's family owns about 48 percent of the company, yet controls 67 percent of the voting power.

Attracting Sanctioned Auto Racing

Construction began on Dover Downs International in 1968; it was built as a multipurpose facility for both motor and horse racing. Motorsports christened the track with a NASCAR (National Association for Stock Car Auto Racing) Winston Cup race on July 6, 1969, which was won by legendary driver Richard Petty. The track, one mile in length, soon became known as "The Monster Mile." In 1971, NASCAR formatted Winston Cup races at two per track a year. This, plus the NASCAR Busch Series races that take place the day before Winston Cup races, fueled further growth at Dover Downs.

Dover Downs added dates from the Indy Racing League in 1998 and 1999 and NASCAR Craftsman Truck Series events in September of 2000. MBNA America Bank, a major Delaware corporation, held the title sponsorship to all motorsport racing events at Dover Downs. The track had a seating capacity of 133,000 reserved seats, allowing the track to attract more fans at one time than any other professional sporting event from New York to Washington, D.C.

Harness Racing Highs and Lows

Harness racing began at Dover Downs on November 10, 1969. The popularity and profits from harness racing grew tremendously in the beginning, due in part to Sunday pari-mutuel racing during the winter months. Dover Downs also hosted thoroughbred racing in the early 1970s. From the mid-1970s through the mid-1980s, harness racing at Dover Downs became less significant. The draw of competition and casinos in New Jersey was cutting into the public's gaming dollars. In response to such competition, Dover Downs introduced simulcast racing of both harness and thoroughbred racing, which helped to lure customers back in the early 1990s.

In order to keep harness racing alive at the track, Dover Downs followed the national trend of adding slots to its facility. By 1998, slots accounted for $112.8 million of its $141 million in revenue. In comparison, Dover Downs revenue was $14 million in 1994, before slots were added.

Adding Slots

Faced with increasing competition in the form of live and simulcast racing, lotteries, and the casinos in Atlantic City, Dover Downs lobbied the state of Delaware to add slot machines to its facility. In 1994 the state passed the Delaware Horse Racing Redevelopment Act, which allowed for a maximum of 2,000 slot machines at Dover Downs. The slot machines were supervised by the Delaware State Lottery and the monies were divided between the state, the track, and horseracing purses. Dover Downs Slots opened on December 29, 1995, with 500 slot machines. Several expansions had increased the number of machines to the maximum of 2,000 by the year 2000.

With the opening of Dover Downs Slots, and the money added to harness racing purses because of it, the track was able to offer bigger purses and, in turn, attract higher quality racing. By 2000, Dover Downs was one of the top-paying harness tracks in the country and over 400 other racing facilities around the United States were simulcasting Dover Downs's races, bringing in more betting dollars.

Popularity of Auto Racing in the 1990s

In the 1990s, NASCAR gained in popularity and was on the edge of mainstream success. With more races and venues scheduled and a new multibillion-dollar television contract with FOX and NBC, NASCAR—and its affiliates—were posting more gains. Publicly traded racing related stocks were declining in the late 1990s; however, Dover Downs was poised to reap the benefits of NASCAR's growing popularity.

A report by Credit Suisse First Boston (CSFB) noted that track operators were involved in sponsorship deals and media access, all of which provided steady gains and growth potential. Racing related companies enjoyed growing returns, due to the stability of the sport sanctioning bodies, and sales generated on a predictable recurring basis. Track operators would share in the $2.4 billion six-year television deal that began in 2001 and in the $10 to $25 million generated from Internet and international fees.

The CSFB report also stated that the Winston Cup Series had 17 of the 20 largest spectator sports in 1999. In 2000, coverage rose to 17 markets in the United States and rose again in 2000 to 19, with the Chicago and Kansas City markets added.

NASCAR scrambled to take advantage of the sport's popularity. Once confined to tracks in the South, in the 1990s NASCAR added events in Las Vegas, Texas, California, Chicago, and Kansas City. Traditionally, each track had two Winston Cup races each year. To accommodate new tracks, NASCAR began taking away one date from some tracks and awarding them to the new tracks. Each June, the middle of the racing season, rumors circulated as NASCAR began to set the schedule for the following year. Owners of older tracks feared losing one—or even both—of their Winston Cup dates.

By 2001, Dover Downs was one of 13 tracks that still held two Winston Cup dates. To keep with growing demands and to hold onto dates, racetracks continually made improvements in seating, luxury, and concessions. Due to prep time before a race and breakdown afterwards, it was tough for track operators to use a racetrack for anything other than their NASCAR races. Dover Downs was one of the few, with the harness racing and the addition of slots, to utilize a multipurpose facility. Seating capacity at Dover Downs was 145,000.

The Winston Cup Series was not the only auto racing event offered at Dover Downs. The track also hosted the Busch Series and Craftsman Truck Series. The Winston Cup Series saw a 97 percent growth in attendance, going from 3.3 million fans in 1990 to 6.5 million fans in 1999. Dover Downs pushed hard to make the Busch Series racing stand on its own, with higher purses and its own stars, making it an attractive package for network programming and more revenue.

NASCAR looked to expand in the Northeast, specifically the lucrative New York-area market. Plans were to build a track in New Jersey or New York. While some felt a track in the New York area would pull fans from Dover Downs, the company maintained they get fans from across the country and there were enough fans to support Dover Downs and a track in the New York vicinity.

Adding New Tracks in the 1990s

On January 2, 1998, Dover Downs acquired Nashville Speedway USA, a banked oval racetrack just over one-half mile long. Located in the Tennessee State Fair Grounds, the track was one of the oldest in the United States, having held its first auto race in 1904. Nashville Speedway hosted one of the most successful NASCAR Weekly Racing Series on Saturday nights. Between 1957 and 1984, Nashville Speedway hosted NASCAR Winston Cup races, and eventually hosted the Busch Series, Craftsman Truck Series, NASCAR Slim Jim All Pro Series, the ASA AC Delco Series (American Speed Association), and the Southern All Star Racing Series.

Dover Downs acquired the Grand Prix Association of Long Beach, Inc. in July 1998. The Grand Prix Association hosted the Grand Prix of Long Beach, a race through the streets of Long Beach, California. The race was sanctioned by CART (Championship Auto Racing Teams). In the acquisition of the Grand Prix Association of Long Beach, Dover Downs also received St. Louis Raceway Park and Memphis Motorsports Park.

Memphis Motorsports Park was long used for minor races. When Grand Prix acquired the track, it put over $13 million in improvements, making Memphis one of the few multi-use racetracks in the country. It could host drag racing, off-road events, and amateur nights. The completion of a three-quarter-mile track allowed Memphis to compete for a Busch Series event, elevating its status. The track had a capacity of 28,000 and 13 corporate suites. In 1998 Memphis hosted a Craftsman Truck Series event and in 1999 hosted the Busch Series Sam's Town 250. Dover Downs planned to invest more money in the track to bring seating capacity to 88,000.

Dover Downs pumped some $10 million in improvements to the St. Louis Raceway Park, known as "the swamp" because of its terrible conditions. By 1999 the track was renamed Gateway International Raceway, and boasted new grandstands, a suite tower, a new foundation, outside lights, restrooms, and concession stands. Gateway attracted a Busch Series and Craftsman Truck Series race, plus an Indy Racing Northern Light Series race. The work at the track was completed in 2000, with a seating capacity of 120,000, a sufficient enough capacity to attract a Winston Cup date.

Nashville Superspeedway had its inaugural season in 2001. Dover Downs broke ground on the property in July 1999. The facility has a 1.33-mile superspeedway and when completed will have a short track, oval dirt track, a drag strip, and a road course. Nashville hosts races from Indy Racing Northern Light League, Busch Series, Craftsman Truck, ARCA (Automobile Racing Club of America) RE/MAX Series, and the USAC (United States Auto Club) Coors Light Silver Bullet series. The first race scheduled was a Busch Series event on April 14, 2001.

2000 and Beyond

Dover Downs broke ground in December 1999 on a new hotel and conference complex in Dover. The opening was planned for January 2002 for the first phase, which would have 232 rooms, a ballroom and concert hall, and a fine dining restaurant. The second phase of the hotel would add 250 rooms. When completed, the hotel would have 12 suites and almost all rooms would have a view of the track.

The completed hotel and conference center, in addition to slots and continual improvements to the Dover Downs track, should allow the company to hold onto two dates from the Winston Cup Series for some time to come. Pushing to elevate the Busch Series will add profits to Dover Downs, as well as the other tracks the company owns.

The improvements to the Dover Downs track helped attract horse racing fans, and the purses offered, along with the revenue from slots, would allow the company to continue to attract high-quality races. Acquiring and building new tracks in new markets allowed Dover Downs to add revenue through smaller series auto racing. Especially at the new Nashville Superspeedway, Dover Downs hoped to be in the forefront as NASCAR looked to add dates in nontraditional areas.

Principal Subsidiaries:Dover Downs, Inc.; Dover Downs International Speedway, Inc.; Dover Downs Properties, Inc.; Nashville Speedway USA, Inc.; Grand Prix Association of Long Beach, Inc.; Gateway International Motorsports Corporation, Inc.; Gateway International Services Corporation, Inc.; Memphis International Motorsports Corporation, Inc.; Motorsports Services Corporation of Memphis, Inc.

Principal Competitors:Richmond International Raceway; Pocono International Raceway; Nazareth Speedway; Atlanta Motor Speedway; Talladega Superspeedway; California Speedway; Indianapolis Motor Speedway; Kansas Speedway; Harrington Raceway; Delaware Park; Rosecroft Raceway; Philadelphia Park; Garden State Park; The Meadowlands.

Chronology

• Key Dates:
• 1968: Construction begins on a multipurpose track in Dover, Delaware.
• 1969: Dover Downs hosts first Winston Cup race and runs its first harness race.
• 1995: Dover Downs opens slots.
• 1996: Company goes public.
• 1998: Dover Downs hosts first Indy Racing League event; acquires Nashville Speedway USA; acquires Grand Prix Association of Long Beach, Inc.
• 1999: Dover Downs breaks ground on the Nashville Superspeedway, as well as the Dover Downs Hotel and Conference Center.