www.PublicGaming.com REFLECTIONS ON A PERIOD OF MAJOR TRANSITION Sarah M. Taylor, Executive Director, Hoosier Lottery (Indiana) President of the North American Association of State and Provincial Lotteries (NASPL) BLUE OCEAN STRATEGY APPLIED TO THE GOVERNMENT LOTTERY SECTOR Jeff Anderson, Executive Director, Idaho Lottery MARCH/APRIL 2023
© IGT. This is the future of Lottery. Explore new territory with true omnichannel games across retail and digital formats. Redefine game playability and the player experience. All things Lottery. All through one integrated solution. To learn more, visit: IGT.com/OMNIA © IGT. This is the future of Lo tery. Explore new territory with true omnicha nel games across retail an digital formats. Redefine game playabilityand the player experience. All things Lottery. All through one integrated solution. To learn more, v sit: IGT.com/OMNIA
4 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 Publisher & Chief Executive Officer Paul Jason pjason@publicgaming.com President Susan Jason sjason@publicgaming.com Brand and Design Dan Eggers Design Lottery Industry Consultant Jim Acton Honored Founders Doris & Duane Burke Subscriptions United States: $145 USD Canada & Mexico: $160 USD All other countries: $225 USD For email address changes, subscription requests and requests to be placed on our e-Newsletter distribution list, e-mail Susan Jason at sjason@publicgaming.com Contact Information PGRI, Inc. 1769 Flagstone Terrace, The Villages, FL 32162 PublicGaming.com T: +425.449.3000 F: +206.374.2600 Public Gaming International Magazine Published six times a year and distributed to readers all around the world. Electronic version is e-mailed and is also available on our news website: PublicGaming.com March/April 2023 Volume 52, Issue 2 ©2022 all rights reserved. Public Gaming Research Institute cISSN: 1042-1912 10 Reflections on a period of major transition Sarah M. Taylor, Executive Director, Hoosier Lottery (Indiana) President of the North American Association of State and Provincial Lotteries (NASPL) 12 Blue Ocean Strategy Applied to the Government Lottery Sector Jeff Anderson, Executive Director, Idaho Lottery 14 Lottery Professionals discuss opportunities in times of crisis Executive Summary of the EL/WLA Marketing Seminar London CONTENTS M A R C H / A P R I L 2 0 2 3 F E A T U R E D I N T E R V I E W S 10 12 F E A T U R E D A R T I C L E S 14
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6 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 Visit Our Family Of Websites PublicGaming.com industry news & information PGRITalks.com videos of conference presentations PublicGaming.org PGRI conference information PGRIDigitalLibrary.com magazine archive of past issues PGRIDirectory.com listing of lotteries and vendors PGRIAwards.com Showcase of industry honorees recognized by the Lottery Industry Hall of Fame PGRI Lifetime Achievement Award Sharp Award for Good Causes Lottery Industry Statesman and Stateswoman Award Rebecca Paul Mentorship Award Collaboration Award Subscribe To Our Free Digital Newsletters Receive our daily newsletters at no charge, published 5 times a week to bring you the latest breaking news in the global lottery industry. Send an e-mail to: sjason@PublicGaming.com with “add to Daily Digest list” in the subject line. D E P A R T M E N T S F E A T U R E D A R T I C L E S C O N T . 38 37 18 28 22 30 19 19 A Growing Body of Evidence Demonstrates Why State Legislators Should Consider iLottery: a White-Paper Explanation Mark Hichar, Shareholder of Greenberg Traurig, LLP, Boston office 22 Advancing the Science Inside Traditional Lottery Retail Scientific Games 26 The Challenge of Effectively Acquiring & Leveraging Player Data – Building and Reinforcing Player Lifetime Value, IGT 28 Family Ties: Getting the most out of a family of games Pollard Banknote 30 A Leap Forward in Instant Ticket Security IGT 38 Lottery Winners in Space! Experiential Prizing Redefined. Alchemy3 40 What causes us to choose one game-ofchance over another? Understanding the motivational drivers of each generation of consumers Simon Jaworski, EVP, Lottery & Gaming Division, Leger USA 8 From the Publisher Paul Jason 16 Powerball is off to the races with NASCAR partnership MUSL NEWS (Multi-State Lottery Association) 44 Spotlight on the Leaders of the Government-Gaming Industry Corporate Profiles of the sponsors of PGRI SmartTech Miami 16
8 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 From the Publisher The Problem with “Problem Gambling” The legalization of sports betting is exploding across the U.S. Next up is online casino-style gambling. And yet legislatures continue to drag their feet when it comes to authorizing their own state lotteries to make lottery games available online. What is wrong with this picture and how can we fix it??? Some thoughts, just some personal opinions which can be ignored as you like: The National Council on Problem Gambling (NCPG) states that “As sports betting expands, the risk of gambling problems does as well. Between 2018 and 2021, NCPG estimates that the risk of gambling addiction grew by 30%. NCPG has also seen significant increases in calls, texts and chats to the National Problem Gambling Helpline — roughly a 45% increase in calls between 2021 and 2022.” Notice, they did not say that Lottery is the cause of the problem. They did not say “As irresponsible gifting of lottery tickets expands, the risk of gambling problems does as well.” Ever see High Noon with Gary Cooper? There was a problem – the bad guys were going to arrive the next day and the sheriff needed everyone to band together to defend the little town. The only right thing to do was to join hands with the sheriff to defend their town, but everyone wanted to talk about other ways to deal with the problem, or excuse their lack of action by hiding behind the shield of being “neutral”. The sports betting sector did not allow themselves to be distracted by their many differences and the fact that they compete with each other. They recognized the need to work together and in unison to promote their shared goal of getting sports betting authorized. I just wonder how productive it is to focus on something like the gifting of lottery tickets when consumers are being routed to sports betting and online casino-style gambling instead of playing the lottery. Seems a pretty irresponsible approach to Responsible Gaming. I am not arguing for gifting lottery tickets irresponsibly. I am just submitting that even the NCPG points out that the real problem is not about Lottery. It is about the proliferation of sports betting and online casino-style gambling over against Lottery. More specifically, it’s not that sports betting and online gambling should not be legalized and regulated. It’s just that iLottery represents a much more benign and less harmful form of gaming than sports betting and online casino-style gambling and so should clearly be authorized at least as readily as sports betting and online gambling. Flogging the consumer over gifting of lottery tickets implies that lottery-playing is the problem and distracts from the real issues of how to protect vulnerable consumers. The cause of Responsible Gaming would be much better served by shining the light on how Lottery is much less a threat to vulnerable consumers as these other games-of-chance categories. As an industry, we need to find ways to bring this proper perspective to the attention of our legislators, our stakeholders, and the general media. And we need industry leaders like NCPG to promote real insight and understanding to these issues and not be distracted by issues which are not irrelevant but should not be elevated to top-of-mind. We need the NCPG and others to explain how and why continuing to prohibit iLottery while legalizing sports betting and online gambling is an abomination to any pretense of Responsible Gaming. “The National Council on Problem Gambling (NCPG) is neutral on legalized gambling ... NCPG seeks to minimize the economic and social costs associated with gambling addiction.” Neutrality when faced with misguided policy-making that conflicts directly with the stated mission of upholding RG is not a virtue. The NCPG has the power to actually have an impact. We need their help. We need the help of all lottery stakeholders to pull together to represent the interests of the people to empower their own state lottery at least as much as the goals of commercial gambling operators. And let’s please stop hiding behind the shield of “neutrality”. Slight change of focus but still on the sore subject of state legislatures failing to authorize iLottery when they are legalizing sports betting and online gambling – check out the Mark Hichar article on the financial impacts of continuing to prohibit iLottery. Not only is iLottery much more RG-friendly than sports betting and online casino-style gambling, it generates far more income for the benefit of the people than these other tax-and-regulate game categories. A special thanks to Sarah Taylor and Jeff Anderson for our wonderful interviews; and to all our editorial contributors and advertisers! I hope everyone has jumped off to a most productive first quarter of 2023, that we see you at PGRI Smart-Tech Miami March 28-30; and then at the EL Congress in Šibenik, Croatia. Has there ever been a more exciting time to be in the government-lottery business! Paul Jason, Publisher Public Gaming International Magazine
10 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 PGRI INTERVIEWS Paul Jason: What an interesting year this is for everyone as we navigate a transition into a future that has been so changed by the pandemic experience. What would the short list of things that are undergoing most dramatic change and those things that surprisingly are remaining the same? Sarah Taylor: Paul, it is great to be back to “normal” even though our post-COVID “new normal” world is so different from three years ago. Many of you reading this interview will be joining us in-person for PGRI-Miami. Others recently gathered for WLS in Vancouver after a two-year absence. It was good to be back together with my industry peers. One of the most dramatic changes I’ve seen is with consumer behavior. For me, I had used Amazon maybe once prior to COVID. Now packages arrive at my house weekly. I also look at my 85-year-old father who knows how to pull up a restaurant menu on his phone by using a QR code. Consumers of all ages have gone digital. This change goes hand-in-hand with a more contactless and cashless society. In Indiana, for instance, we have one retailer who is transitioning stores to smart-checkouts, without the need for a clerk. Lottery tickets, alcohol, and tobacco are still age-verified by a retail clerk. Many states have self-service lottery vending machines, which allow a contactless purchase of all games. In Indiana, we’ve seen an increase of 68% in the use of our digital play slips since the start of the pandemic and an almost 75% increase in mobile app downloads. As consumer behavior continues to evolve, we must communicate with our players that new consumer-friendly and contactless options are available. Likewise, remote work schedules have seen a very dramatic change post pandemic. Many of our traditional downtown areas have transitioned to fewer in-office workers than they had just three years ago. As an industry, we must take into consideration all of these factors when determining product development and placement, retail expansion and support strategies, and other operational issues as well as big-picture strategic planning. When players weren’t enjoying other forms of entertainment, consumers moved up in price points. $5 and $10 price points are still popular and so they continue to be developed in a similar manner. But REFLECTIONS ON A PERIOD OF MAJOR TRANSITION Sarah M. Taylor Executive Director, Hoosier Lottery (Indiana) PGRI Introduction: Sarah M. Taylor is an accomplished leader with more than twenty-five years of public service experience. Sarah’s career in public service includes twice being elected as the clerk of Marion County, Indiana, the state’s largest county and home of Indianapolis. She served as the Director of Constituent Services under Indianapolis Mayor Greg Ballard. In October 2013, then-Indiana Gov. Mike Pence appointed Sarah as the Executive Director of the Hoosier Lottery. She has since been reappointed by Governor Eric Holcomb. In her 9.5 years as lottery executive director, she has moved up the ranks in lottery industry leadership. She has served as president (two one-year terms), vice president and secretary for the Multi-State Lottery Association, and as region director, secretary, 2nd vice president, and 1st vice president before being elected president of the North American Association of State and Provincial Lotteries. Sarah and her husband, a retired law enforcement officer, have three children. Continued on page 43
Science Inside The © 2023 Scienti c Games, LLC. All rights reserved. Scienti c Games’ enterprise gaming platforms deliver the industry’s most engaging games and promotions, and rich data that can be used to connect digitally with players and responsibly foster growth.
12 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 PGRI INTERVIEWS Paul Jason: Most U.S. states, like Idaho, are still not allowing their state lottery operator to make the games available online. How does Blue Ocean Strategy apply when our freedom to innovate is being restricted in these ways? Jeff Anderson: An article in the WLA/ NASPL issue of PGRI magazine reminded me of Blue Ocean Strategy. The article was about a keynote speech at the World Lottery Summit in Vancouver. As the producer and director of Cirque du Soleil-Kurios, Michael Laprise wanted to modernize the traditional circus performance, sans animals, their trainers and rail cars. And boy, did he, overlaying a contemporary hero-quest story onto the performance. He drew inspiration from all quarters. Street performers who showed the way you can generously share your talent in new and fascinating ways. He leveraged a spirit of collaboration between everyone – performers, support teams, and audience ¬– to blow up the distinctions between merchant, partners, and audience. He inspired excitement by turning the impossible into the possible. And he talked about the rich framework that lotteries have to craft a story that moves the audience. It reminded me of the BLUE OCEAN STRATEGY APPLIED TO THE GOVERNMENT LOTTERY SECTOR Jeff Anderson Executive Director, Idaho Lottery PGRI Introduction: In their classic book, Blue Ocean Strategy, Chan Kim & Renée Mauborgne coined the terms ’red ocean’ and ‘blue ocean’ to describe the market universe. This was cutting edge stuff in 2005 when it was introduced. Given the explosion of games-of-chance options and the reshaping of consumer perceptions of gambling, Jeff Anderson and I think it is a good time to revisit this classic model for understanding the ways in which new markets are created. We also explored Daniel Burris’ Anticipatory Trend Modeling, Steve Jobs’ Thinking Different, and Simon Sinek’s focus on effective story-telling. And why it all comes back to the Blue Ocean mentality. And how this all applies to Lottery. Blue Ocean Strategy is about reimagining our business model, product/service differentiation, and unorthodox collaborations to open up uncontested spaces and create new demand. It is about creating value for the customer instead of focusing on the competition. It is based on the view that market boundaries are not a closed system and that industry structures are not cast in stone. Doing the same thing and expecting a different result is not the path to innovation and success. Those boundaries and structures must be reshaped by the actions and beliefs of the industry players who are creating our future. Red Oceans are the industries, the competitive landscapes, the consumer market-places, the business processes and strategies, all as they exist today. In red oceans, industry norms and boundaries are accepted, the conventional competitive rules of the game are followed, and the goal is to outcompete rivals in the known space to grab a greater share of existing demand. As the market space gets crowded, margins are squeezed and growth stymied. Products become commodities, leading to cutthroat competition. Hence the term red oceans. Continued on page 50
14 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 EL/WLA MARKETING SEMINAR RETURNS TO LONDON AFTER THREE YEARS The following article captures the spirit of this fabulous event held every year in London during the first week of February. The Keynote speeches and panel discussions were as forward-looking as ever. PGRI has had the pleasure of participating in every EL/WLA Marketing Seminar held over the last 20 years and wouldn't miss it for anything. And this is only one of a host of highlevel educational seminars and conferences produced by EL and WLA. Last October we had the WLS in Vancouver and now we invite you to mark your calendars for the EL Congress & Trade Show in Šibenik, Croatia from 4-7 June 2023. Everyone will be there for the first EL Congress since 2019. Visit european-lotteries.org and world-lotteries.org to stay updated with all the latest Association news, to check out the upcoming calendar of events, and to access other informational resources. LOTTERY PROFESSIONALS DISCUSS OPPORTUNITIES IN TIMES OF CRISIS After three years apart, 200 lottery marketing professionals from around the world came together for the EL/ WLA Marketing seminar in London from 8 - 10 February 2023. This was a chance to reconnect, exchange, share experiences, lessons learnt and look to the future. There is no doubt that the world has faced, and continues to face, challenging times. This event was a moment to take stock of the latest marketing trends and the opportunities that can be found during turbulent times – from the pandemic and war to inflation and climate change. As the event was taking place, horrific scenes continued to unfold in the aftermath of the earthquakes in Turkey and Syria. Our thoughts are with the people of these countries at this difficult time. UNLOCKING MARKETING TRENDS Over one and a half days, participants heard from experts inside and outside the lottery world on new marketing trends, changing consumer behaviour and how to seek and use opportunities in times of crisis. Keynote speaker Rory Sutherland, Vice Chairman of Ogilvy, brought his thinking in psychology & behavioural science to lottery marketers, emphasizing the unseen opportunities in consumer behaviour. Rory highlighted that too often than not we use quality of reasoning to judge the quality of a decision. Several case studies looked at how to change customer behaviour without changing anything physically - fundamentally it is all about perception which is contextually driven. For example, you can’t make a train journey shorter, but you can make the quality of a journey better and more comfortable. Rory's key takeaway is to exploit what you already know and explore what you don’t - to look at the proportion of resources that you exploit and how much you need to explore what you don’t know. After a pandemic or crisis, it is natural that the explore-exploit ratio shifts and you explore more than you exploit. Continued on page 34
16 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 Powerball® has shifted into high gear to cap off its 30th anniversary. The world-record jackpot game has entered its first partnership with a major sports league by becoming an Official Partner of NASCAR®, which includes Powerball being named the “Official Lottery Game of NASCAR.” The partnership is the latest progression in the game’s national marketing strategy, which over the last five years, has focused on finding partners that can create synergy with the Powerball brand and deliver unique Powerball-based content to national audiences. “We believe this partnership leverages what Powerball and NASCAR do best – deliver thrilling entertainment to our fan bases,” said Drew Svitko, Powerball Product Group Chair and Pennsylvania Lottery Executive Director. “Having NASCAR as a lottery partner only amplifies our mission of offering a premier product that supports state programs and services everywhere tickets are sold.” Svitko joined Daryl Wolfe, NASCAR Executive Vice President and Chief Revenue Officer, to announce the partnership at Daytona International Speedway on Feb. 15, 2023, as part of the events leading up to the 65th Annual DAYTONA 500 and the start of 2023 NASCAR regular season. This year, NASCAR is celebrating its 75th “diamond” anniversary. To highlight the celebration, NASCAR has rolled out new marketing and creative campaigns that honor the sport’s past, present and future – recognizing some of the most significant competitors, contributors and moments in the sport’s history while looking forward to the road ahead. “NASCAR and Powerball have shared in the goal of providing exhilarating excitement for decades while also giving back to the communities in which we are a part of,” said Wolfe. “Powerball creates millionaires every year, and we can’t wait to see the different winning opportunities this partnership will bring to our loyal fans throughout the country.” MUSLNEWS MULTI -STATE LOTTERY ASSOCIATION Daryl Wolf, NASCAR and Drew Svitko, MUSL/Powerball POWERBALL IS OFF TO THE RACES WITH NASCAR
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18 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 As part of the partnership, Powerball and NASCAR will launch a seasonlong promotion called the NASCAR Powerball Playoff, which will culminate with one lottery player winning a $1 million prize in a special drawing broadcast live from the NASCAR Cup Series Championship Race at Phoenix Raceway on November 5. In addition, Powerball branding and messaging will be integrated into race broadcasts, speedways and other NASCAR outlets throughout the 2023 race season. The promotion will begin at the state-level with participating lotteries randomly selecting entrants, by a method of their choosing, to form a national pool of semi-finalists. Sixteen finalists will be drawn from the national pool to go head-to-head in a series of drawings that coincide with the elimination rounds of the NASCAR playoffs. The top four finalists will win a VIP trip to the NASCAR Cup Series Championship Race Weekend and advance to the $1 million drawing. “This is a tremendous opportunity for us to grow the Powerball brand at the state and national level,” said Rebecca Paul, MUSL Marketing and Promotions Committee Chair and Tennessee Education Lottery President and CEO. “We are excited to see the exceptional Powerball content that will develop as a result of this promotion. We have the product, storyline, and a great partner to create dynamic television exposure for the brand.” Powerball is on track to achieve its highest year of recorded sales, with base game sales up 45-percent in Fiscal Year 2023 compared to Fiscal Year 2022. The primary sales boost coming from Powerball’s world record $2.04 billion jackpot run that ended last November with a single winning ticket in California, as well as game sales spurred by two Mega Millions® jackpot runs that each exceeded a billion dollars last July and January. Powerball’s add-on feature, Double Play®, has also expanded to sixteen jurisdictions, with Idaho and Nebraska becoming the latest lotteries to introduce the feature last February. “Powerball has experienced incredible momentum over the last year in terms of sales, promotions and overall brand awareness,” said J. Bret Toyne, MUSL Executive Director. “Our Association has a core value of entertainment, and we’re confident the NASCAR partnership will help us fulfill that value as we continue to strive for year-over-year revenue growth.” n
19 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 States have been allowed to enact legislation authorizing iLottery and online games generally (other than sports betting) at least since 2011, when the Department of Justice (“DOJ”) issued its memorandum declaring that the Federal Wire Act1 applied only to sports betting.2 While this opinion was reversed by the DOJ in a 2018 memorandum3, the 2018 memorandum has had little effect on iLottery and other forms of online gaming as a result of litigation in the first federal judicial circuit that declared the 2018 opinion “mistaken” and held the Federal Wire Act applicable only to sports wagering.4 In regard to sports betting, however, states have been allowed to enact legislation authorizing in-person and online sports betting only since 2018. In June of that year, the Supreme Court struck down as unconstitutional the Professional and Amateur Sports Protection Act – the federal law that made it unlawful for states to authorize sports wagering.5 Although states have been allowed to enact sports betting legislation for less than five years, in that short time 23 states have enacted legislation authorizing online sports wagering.6 On the other hand, in the 21 years since states were allowed to authorize iLottery, only 13 states have authorized their lotteries to sell lottery products online.7 This difference in adoption rates cannot be due to the lack of success of iLottery or its ability to generate revenues for states. Considering the 12 states operating iLottery as of November 2022, total gross iLottery sales increased 19% year-over-year, representing approximately 14% of those states’ gross lottery product sales.8 Further, it is estimated that net iLottery sales (wagering less prize payout) increased by 26% year-over-year, “driven by a higher mix of Draw game sales as well as moderately higher hold rates among Draw games versus the prior year.9 Considering actual contributions to state revenues, in Michigan, while sports wagering has contributed approximately $26.4 million in taxes to the state since going live in 2020,10 iLottery contributed $241.8 million in “net win” (ticket sales net of discounts and prize expense) to the Michigan Lottery in fiscal year 2021 alone.11 Similarly, in New Hampshire, sports wagering has contributed approximately $24 million in taxes to the state in the 12 months ending June 30, 2022,12 and iLottery contributed $29.9 million in “net win” (ticket sales net of discounts and prize expenses) to the New Hampshire Lottery in that same period.13 In Pennsylvania, sports wagering contributed A Growing Body of Evidence Demonstrates Why State Legislators Should Consider iLottery: a White-Paper Explanation By Mark Hichar, Shareholder of Greenberg Traurig, LLP, Boston office hicharm@gtlaw.com | www.gtlaw.com 118 U.S.C. §§ 1081, 1084. 2Whether Proposals by Illinois and New York to Use the Internet and Out-of-State Transaction Processors to Sell Lottery Tickets to In-State Adults Violate the Wire Act, dated September 20, 2011 (issued December 23, 2011), 35 Op. O.L.C. (2011) (the “2011 Opinion”). 3Reconsidering Whether the Wire Act Applies to Non-Sports Gambling, dated November 2, 2019 (Memorandum Opinion (Slip Opinion) issued January 14, 2019), 42 Op. O.L.C. (2018). 4See N.H. Lottery Comm’n v. Barr, 386 F. Supp. 132 (D. N.H. 2019), affirmed in part and vacated in part by N.H. Lotter Comm’n v. Rosen, 986 F.3d 38 (1st Cir. 2021). See also Int’l Game Tech. PLC v. Garland, 2022 U.S. Dist. LEXIS 166590 (D. R.I. 2022). 5Murphy v. NCAA, 138 S. Ct. 1461, 200 L. Ed. 854 (2018). 6Eilers & Krejcik Gaming U.S. Online Gaming Report (March 2022), which shows 22 states have authorized online sports wagering. Massachusetts has been added as legislation authorizing online sports wagering was enacted in August, 2022. This report is available at https://mvbbanking.com/ wp-content/uploads/2022/03/MVB_Online_Gaming_Report___March_2022.pdf (last accessed on February 19, 2023). 7Eilers & Krejcik Gaming, U.S. iLottery Tracker – 3Q22 (November 17, 2022), noting that Connecticut was not yet operational. Eilers & Krejcik define iLottery “as a lottery product for which account funding and game play can be managed online.” See id., p. 4. 8Id., p. 6. 9Id. 10In Michigan, retail sportsbooks went live in March 2020, and online sports books went live in January 2021 and sports wagering has contributed approximately $26.44 million in revenue to the state in the aggregate since going live. See Legal Sports Report at https://www.legalsportsreport.com/michigan/#:~:text=Michigan%20officially%20legalized%20sports%20betting,over%20 %24100%20million%20in%20wagers and https://www.legalsportsreport.com/sports-betting/ revenue/ (last accessed February 19, 2023). (The second document is referred to as the “LSR US Sports Betting Report”). 11Michigan Bureau of State Lottery Annual Comprehensive Financial Report for the Years Ended September 30, 2021 & 2020, p. 43, available at https://assets.ctfassets.net/d6o62jwe1jlr/1FMFKX ch3le2hR9Tz4Fqwu/484c038cae9ac62381399b2f474bbcdc/FINAL_PDF_2021.pdf (last accessed February 19, 2023). 12See https://www.sportsbettingdime.com/new-hampshire/sports-betting-revenue/ (last accessed February 19, 2023). 13New Hampshire Lottery Commission Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2022, p. 47, available at https://www.nhlottery.com/Files/PDFs/FinancialReports/2022/NHLC_ACFR_2021-2022_Final (last accessed February 19, 2023).
20 PUBLIC GAMING INTERNATIONAL • MARCH/APRIL 2023 approximately $114 million in taxes to the state in the fiscal year ending June 30, 2022,14 while iLottery contributed $71 million in net gaming revenue (ticket sales net of prize payouts, promotions, bonuses and costs) to the Pennsylvania Lottery during that same time period.15 (Pennsylvania has a 36% tax rate – 34% to the state and 2% to local jurisdictions – on sports wagering revenues, which is particularly high.16) Later adopters of iLottery have been notably successful, perhaps being guided by lessons learned by early adopters, and likely also benefitting from increased consumer acceptance of digital commerce.17 Spectrum Gaming Group’s18 analysis of the iLottery implementations in Michigan, Pennsylvania, New Hampshire and Virginia, show that later adopters of iLottery have significantly greater first month iLottery revenue on a per capita basis. In Michigan, which implemented iLottery in 2014, first month per capita iLottery sales were only $0.24, while in Pennsylvania, New Hampshire and Virginia they were $1.69, $2.08 and $4.06, respectively.19 As stated by Spectrum Gaming Group: “Michigan started with a much more limited product selection compared to the other three states. However, the initial success of the three other states … indicates a changing consumer acceptance of digital commerce and a growing acceptance and knowledge of iLottery products, specifically digital instant tickets.”20 Finally, since its arguably modest start, in the five years since its 2014 launch of iLottery, the Michigan Lottery became North America’s first lottery to generate $1 billion in cumulative sales through online channels,21 and indeed, in its fiscal year 2021, sales were estimated to be $2 billion. 22 Thus, iLottery implementations have been successful and contribute significantly to state lottery revenues and those beneficiaries that benefit from them. In addition, based on a growing body of evidence gathered from U.S. states that have implemented iLottery, it appears that the sale of lottery games online does do not cannibalize traditional retail lottery sales. Among other examples, Spectrum Gaming Group cites the following: From FY 2017, the year before iLottery launched in Pennsylvania, to FY 2021, retail lottery sales grew by 33%. A similar experience is shared by the Michigan Lottery, which grew by 91% at retail from 2013, prior to iLottery’s launch, to FY 2021.23 Spectrum maintains that iLottery reaches a younger demographic not reached by traditional lottery retail channels, and that this is a reason that iLottery and traditional retail sales have increased simultaneously. They note: A survey conducted by the US Bureau of Labor Statistics noted that for the 12-month period ending June 2018, the average annual spend on lottery tickets was nearly $70, but adults under 25 spent less than $8, and for adults between 25-34, the average spend was slightly more than $40. The growth of iLottery has demonstrated an ability to reach younger generations. Data gleaned from the participating iLottery jurisdictions of Michigan, New Hampshire, North Carolina, Virginia, and the Canadian province of Alberta, show that, in Fiscal Year (“FY”) 2021: • 25% of those who played digital drawbased games were 35-44 years old, an increase of 3 percentage points over FY 2016. • 27% of those who played digital Instant games were 35-44 years old, an increase of 5 percentage points over FY 2016. The data also showed that the average age of adults who played iLottery on mobile devices was 47. That data point makes clear that the willingness of consumers to purchase lottery tickets via a mobile device cuts across all age groups. This creates an opportunity to capture a younger demographic, while also making inroads into older age groups. Finally, problem gaming in regard to iLottery can be addressed via methods not available in regard to traditional lottery. Traditional lottery games (physical draw and instant tickets) are sold anonymously. The consumer is not required to provide any identifying information, and thus historic game play volumes and trends are not ascertainable. Consumers cannot play iLottery games anonymously, however, and play history and trends are detectable. Opportunities therefore exist to identify and address problem gaming behavior, and regulations and/or consumers themselves may establish deposit and play limits, as well as self-exclude entirely. While the convenience afforded by iLottery - i.e., making lottery games more accessible – makes more urgent the need for effective responsible gaming policies and procedures, the available options, and the ability to implement such policies and procedures is greater with iLottery products. In short, iLottery can be a significant contributor to states fiscal health and to the good causes served by state lotteries. A growing body of evidence demonstrates that iLottery can co-exist with traditional retail sales channels without cannibalizing traditional retail sales, and effective responsible gaming policies and procedures can be implemented with respect to iLottery which cannot be implemented in regard to anonymous traditional lottery play. Consumers increasingly acquire their information, entertainment, goods and services, and do their banking and investing online. The success of state lotteries requires that they have a robust online presence, and a failure to offer lottery products online could result in lotteries not being relevant to the growing demographic that shops, learns and plays online. This does not mean offering lottery products exclusively online, as traditional sales channels continue to be the primary means of state lottery sales. However, there is an increasing body of evidence demonstrating that iLottery contributes significantly to state revenues. Accordingly, iLottery should be included in the discussion when state legislators consider the appropriate mix of gaming for their states. n 14See Gambling Industry News at https://gamblingindustrynews.com/news/usa/pennsylvaniagambling-revenue-fy-21-22/ (last accessed February 19, 2023). 15Pennsylvania Lottery Annual Report FY 21-22, p. 2, available at https://www.palottery.state. pa.us/PaLotteryWebSite/media/PA-Lottery-Reports/Annual/PAL_Annual-Report_FY21-22.pdf (last accessed February 19, 2023). 16See Gambling Industry New, cited in footnote 14 above. 17Spectrum Gaming Lottery Group, Future of iLottery: Analyzing, Developing Multi-Channel Strategy, Prepared for NeoPollard Interactive, March 15, 2022 (the “Spectrum Paper”), p. viii - x. The Spectrum Paper is available at https://www.spectrumgamingcapital.com/wp-content/ uploads/2022/05/spectrum-report-on-future-of-ilottery-3-15-22.pdf (last accessed February 19, 2023). 18Spectrum Gaming Group “is a non-partisan consultancy that specializes in the economics, regulation and policy of legalized gambling worldwide.” https://spectrumgaming.com/ (last accessed February 19, 2023). 19 Id., citing NeoGames, S.A. Form F-1: Preliminary Prospectus, November 16, 2020. 20Id., p. ix. 21Testimony Scott Bowen, Senior Vice President of NeoPollard Interactive before the Senate Government Oversight & Reform Committee, of file:///C:/Users/hicharm/Downloads/SB269_ Proponent_Bowen.pdf. 22Spectrum Paper, p. 33. 23Understanding iLottery: Growth Through Expansion, not Cannibalization, by Michael Pollock, Managing Director, Spectrum Gaming Group, in NASPL Insights, May/June 2022, available at https://www.spectrumgaming.com/wp-content/uploads/2022/06/naspl-insights-magazine-mayjune-understanding-ilottery-pollock.pdf (last accessed February 19, 2023).
Science Inside The PlayCentral® and SCiQ® are registered trademarks of Scienti c Games, LLC. © 2023. All rights reserved. Scienti c Games’ ecosystem of innovative retail solutions ensures that the right products are in the right place at the right time, exceeding the high expectations of today’s retailers and players.
The $346 billion global lottery industry has grown to one of the biggest consumer products on the planet. With lottery games driving retail tra c and market baskets, retailers are focused on delivering the in-store experiences consumers expect and it's reshaping how lottery products are marketed and sold. At Scienti c Games, data continues to be a constant in developing solutions that help lotteries and their retailers stay in step with consumers, and those experiences can reinvigorate brand engagement. "Our global teams understand consumers. We use consumer data to continually make the physical lottery retail experience better, we listen to retailers and collaborate on solutions to support what’s happening in their stores—because it’s already di erent from last year. Brick-andmortar is just one part of the lottery ecosystem, but it’s currently the core of lotteries’ revenues," said Michael Martin, VP of Retail Solutions at Scienti c Games. For retailers, connecting with customers in extraordinary times means it is not business as usual. Consumer behavior is moving in a divergence of directions as – despite a challenging economy – people get back in their stride. And they are not looking back at the world as it was before the global pandemic. Finding Consumer Connections On-the-go purchases and out-of-home experiences are making a strong comeback – a top 10 consumer trend this year. As consumers establish new routines, 39% of those surveyed globally by Euromonitor said more of their purchases would be in person. “Our digital menu boards help lotteries meet shoppers in the moment. The boards are now using real-time information to adapt to what’s Michael Martin VP of Retail Solutions selling, what’s not selling, and lotteries can refresh what’s on the digital screen so it doesn’t become wallpaper in the store,” said Martin. Creating brand connections with a dynamic, digital board featuring lottery games is an attractive, modern touch that also meets the here-and-now top 10 trend of “sparking joy” when the shopper spots their favorite game or licensed brand.
Automation is Part of the New Journey Retailers are reimagining the customer journey, and in 2023 automation plays a leading role behind the scenes creating organizations with fewer out-of-stock rates and a better-trained and trusted workforce empowered by real-time data. Automation also enhances the consumer experience. Although most customers like a blend of automation and human interaction, Retail Dive’s 2023 Future of Retail report shared that 73% of consumers actually prefer that local retailers use automation in at least one area of their shopping experience. At lottery retail, that automation is SCiQ. Now in the top seven North American convenience store chains, the company’s revolutionary SCiQ technology helps create a retail ecosystem developed in response to consumer and retailer demand. Always using data as the backbone to modernize the lottery category, the technology provides real-time inventory tracking both at the individual store level and chainwide – an industry rst. SCiQ’s digital menu board keeps games visible to shoppers and the auto-dispensing bins keep them secure from theft. Retailers bene t from easy shift reportingandautomated out-of-stock alerts. Kevin Howell, Director of Lottery for Par-Mar Stores, said “I really like the visual aspect of the dispensers. They are eye-catching and customer friendly. I also like the reporting so we can see where the out-of-stocks are because tickets aren’t sold out of empty bins. I am pleased that all managers in the stores where SCiQ has been installed love them, and visiting managers want one in their store.” Retail Dive’s report indicated that 44% of consumers want an automated tool to check product information or inventory. SCiQ lets them know if a game is in stock without asking a retail sta member, who would then have to stop what they are doing and manually check. But to engage players, digital menu boards require more than just displaying 4x4 game artwork. The board should be dynamic so it updates regularly, and it should feature large, clean game images, colorful backgrounds, and movement on the screen. “Digital menu boards are currently being utilized in 12% of our retail network. Having our products displayed on these boards has provided a dynamic and seamless experience for our players and retailers while also providing a substantial lift in sales at each location,” said Abby Morgan, Director of Marketing and Product Development for the Oklahoma Lottery. “With the modernization of our approach on display, we are positive that we’ll see continued success as we are able to add more digital menu boards throughout the network.“ It also allows the customer to experience lottery their way and at their own pace. Larry Vertal, North American Age Restricted Product Manager for Circle K, said, “SCiQ gives us the tools to be a best-in-class lottery retailer. We now use analytics to track our lottery sales and inventory, while also creating friendly competition within the business to drive improvement. Circle K has seen the successes of SCiQ through a faster and e cient sales process, which paired with inventory management, has led to greater customer satisfaction.” Expanding to self-service, SCiQ’s performance is also proving a signi cant opportunity to increase pro ts. Partnering with multiple lotteries and retailers, Scienti c Games has deployed a total of 4,500 Powered by SCiQ ecosystems in the U.S. with more than 125,000 camera-based instant game dispensers and fully integrated digital lottery displays. “With the enhanced player attraction, ease of use and actionable data; our SCiQ ecosystems o er, we have noted sales increases ranging from 15% to 50% in the rst 90 days compared to stores without the solution,” shared Martin.
The number of cashless purchases at retail continues to increase, and the average lottery basket size is more than 50% higher than cash purchases. Cashless is also bringing new players to the games. And it is the reason Scientic Games has continued integrating cashless solutions across the company’s entire line of retail technology “We are ensuring that our products for brick-and-mortar retail are built to adapt to the current environment while looking to the future,” explained Martin. With more consumers joining the ‘cashless’ economy, in less than a decade the number of Americans who go cashless has increased by doubledigits according to the Pew Research Center. Today, 41% of Americans say none of their purchases in a typical week are paid with cash. And with consumers glued to their mobile phones – sometimes even while shopping in-store – it is no surprise that 79% of consumers make purchases directly from their mobile devices. Most recently, the Pennsylvania Lottery reached $1 billion in retail cashless sales since cashless launched in the state. “The Pennsylvania Lottery recognizes that the world is evolving into a cashless society,” said Pennsylvania Lottery Executive Director Drew Svitko. “As part of our modernization eorts, all our vending equipment and point-of-sale terminals are expected to oer cashless options within 18 months. Cashless payment options provide great convenience and player engagement, but also drive responsible growth, which drives prots to support programs that benet older Pennsylvanians every day.” Cashless is King In 2016, when Scientic Games introduced PlayCentral, it was the lottery industry’s rst payment card industry (PCI) compliant player selfservice technology. At the time, the National Association of Convenience Stores reported that 40% of convenience store transactions were credit and debit card purchases. Today, it is more than 73%. PlayCentral self-service machines initially launched in Pennsylvania, winning the company Walmart Services Division’s 2019 Supplier of the Year Award. Today, there are more than 13,000 units at lottery retailers across the U.S. The technology recently debuted in Canada to serve Atlantic Lottery players and it is being piloted in Germany. Now the company has added SCiQ technology to these powerhouse self-service machines, bringing all the advantages of SCiQ to PlayCentral. Oering both draw and instant scratch games in an online shopping cart purchase experience, the agship machine features up to 40 instant games – and now, advanced software that helps connect data. Always aligned with its players, the Pennsylvania Lottery has deployed PlayCentral Powered by SCiQ at retailers throughout the state. Locations with the advanced machines saw 19% sales increase 90 days after installation vs. the previous 90 days. In Step with Consumers
Scientic Games’ tech innovations in the physical retail space have empowered the company’s ability to create a more informed, data-backed information loop for lotteries – and for future innovation to stay in step with consumers. “Our analysts make recommendations that help determine things like whether a specic store should have more $10 and $20 games and less $1 and $2 games,” said Martin. “We’re using the data to inform what products should be oered and how games should be displayed. Conversely, it informs key products that could potentially hurt business if they were unavailable.” As an example, Scientic Games analyzed market basket data from approximately 70 million purchases from SCiQ and PlayCentral Powered by SCiQ to better understand which games are purchased together – or not, as many baskets include only one game – and in what order purchases are made. This helps guide, not only merchandising tactics but launch planning and the ideal number of games in the market by price point. And since this level of market basket data is analyzed by specic game, the interaction of game attributes such as playstyles, themes, or specialty prize structures can also be assessed. This kind of data can also be applied to a loyalty program, allowing the lottery to connect with players interested in specic games or combinations of games, and oer extra loyalty points. "As business intelligence practitioners, we see great value when multiple datasets from our dierent systems are integrated. This leads to insights that can inuence stakeholders at retail and enables the systems to work smarter," said Cameron Garrett, VP of Analytics and Insights for Scientic Games. "Connective data creates somany opportunities, but the major opportunity is optimizing product at retail." Empty instant scratch game bins result in disappointed players and a direct, quantiable reduction in potential retail sales revenue for lotteries. “We estimate that lost sales are approximately 5% of total retail sales at the counter, and more than 10% at self-service machines due to out of stocks,” explained Garrett. “We as an industry have a real opportunity to re-capture multibillions of dollars in lost sales annually. As selfservice continues to ramp up, ensuring healthy inventory levels and focusing on product mix becomes increasingly important.” The future represents a world where lotteries must have smart, integrated and actionable ecosystems. Benetting from this data may come in many forms tied to such an ecosystem but should consider all of the retailer touch points—from inside telesales to the tools that lottery sales representatives use for guidance, to the behind-the-scenes algorithms that empower logistics decision-making. The quintessential retailer greeting is service-focused, but advances in the use of data have propelled customer relationships and brand interaction to new heights. Anticipating consumer behavior – mining data for purchasing patterns and combinations of products – helps increase protability through cross-selling, promotions or even the placement of games on digital menu boards and self-service machine screens. “It’s all about connecting with consumers, convenience and speed of checkout, and it’s our job to bring the most modern experience to players at brick-and-mortar retailers. Again, this is just one part of the ecosystem, but from a lottery revenue standpoint brick and mortar is the most critical,” shared Martin. Scientic Games is committed to the science inside lottery retail. More than a high-level view of consumer connectivity, the company is digging deep into data from all areas to help lotteries and their retailers sustain success. Where Data Comes into Play How Can I Help You SOURCES: Convenience.org Euromonitor International’s Top 10 Global Consumer Trends 2023 Report; Pew Research Center; Retail Dive PlayCentral® and SCiQ® are registered trademarks of Scientic Games, LLC. © 2023. All rights reserved. Cameron Garrett Analytics & Insights For more information, contact Retail@scienti cgames.com
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