Public Gaming Magazine Sept/Oct 2021

31 PUBLIC GAMING INTERNATIONAL • SEPTEMBER/OCTOBER 2021 would benefit them. But lotteries have always valued their partnership with retailers and will always be committed to the success of their channel partners. The retailers must be part of the solution and when they are, it’s been very successful. Pennsylvania is a great example. Here you have a market which in just over a year went to a billion dollars in online sales. Their retail sales also increased because of the affiliate and partnership programs that tied everyone into the success of all channels, retail and online. Retailers are commissioned on the sales of the customers they bring to iLottery. That flips the whole equation such that the retailer becomes focused on giving the players what they want which is choice: options to play whenever, however, and wherever they want. Now that retailers have a stake in online sales, they become invested in the ability of lottery to attract and retain the players. They may start out as skeptics, but when they see how it works to everyone’s advantage, they become supporters. That’s what happened in Pennsylvania and Michigan, and that’s what happens in other states where iLottery is successful. Is Tribal Gaming opposed to iLottery? H. Glaser: Tribal and commercial casino interests share the same concern and it is somewhat straightforward. They just want to be confident that iLottery will not cannibalize their business. There is no evidence that it ever has. And there is a lot of evidence to suggest that whatever cross-over play there is results in an expansion of the market as opposed to dividing a static revenue base. Casinos have continued to run very well even in states like Pennsylvania where iLottery took a fast running start. Casino revenues are bouncing back to all-time highs in many places. At the same time, mobile gaming has also grown exponentially with a boost from the pandemic when other forms of gaming were shut down. We expect mobile gaming to level off a little bit, but play continues to be up and now casino revenues are rising again. So the cannibalization of existing commercial and tribal casinos is very much a myth that has to be dispelled. The casinos are acknowledging this by being the first to support iGaming, right? They know it doesn’t cannibalize their business. More consumer touch-points only reinforce their bond with the players. We believe that the expansion of gaming options supports the whole market and reinforces each of the participants in that market. How should the discussion with legislators and political stakeholders be framed? H. Glaser: We encourage legislators to appreciate the incredible asset that is their own state lottery. They have invested a great deal of money in lottery. Good causes are receiving a lot of funding from lotteries. They are already in the business; all they have to do now is turn on the digital channel. Everybody else is online, so there is no longer any reason why anyone would choose to remain on the sidelines. And the longer you wait, the more market-share you will lose, and it will be hard to gain that back. We need to make the case for iLottery consistently and persistently within the industry and throughout the entire country. Another aspect of this picture that should be emphasized: the amount of revenue generated for the state by iLottery and lottery is significantly higher than the net revenues generated by sports betting. For instance, New Jersey is an example of sports betting performing extremely well. The money it generates for the state, though, is a tiny fraction of the net funds generated by lottery. We believe the net funding potential of iLottery is in the $5 billion a year range. That’s huge. States that do not participate in iLottery are leaving their share of revenues on the table. You discussed how retailers are thinking defensively, as in how they are going to defend their market-share from the competition from online merchants. Similarly, don’t lotteries need to consider the need to defend their position in the market-place against the migration of players over to online gaming and entertainment options? H. Glaser: States that do not implement iLottery sooner than later will very quickly find that their current lotteries are the Sears and JC Penny of the gaming sector. There is a window of opportunity which may close at some point when online gaming operators consolidate their hold on the players. Look at what Amazon did and how difficult it is now for other retailers to carve out a role for themselves in the online general merchandise space. States that authorize sports-betting, and then possibly iGaming, will likely experience an erosion of their lottery player-base if they do not implement iLottery at the same time. The increase in lottery revenues over the past 18 months may have masked these realities. but we need to recognize that the trend-lines towards eCommerce are quite entrenched, and the gaming sector is not immune. Consider how movies, music and even video gaming are now primarily an online experience. Video on-demand is an estimated $16 to 20 billion a year market. The iGaming and iLottery markets are each estimated to be in the neighborhood of $20 billion. We estimate around $27 billion in a mature market. Some project even higher potential. Of course, the revenue potential depends on more states enacting legislation to regulate iLottery and iGaming, and the higher projections are based on most of the states adding the online components to the lottery business that they’re already in. We expect iLottery and iGaming to both ultimately eclipse the video-streaming Netflix market. So that’s the scope of what we’re looking at right now. During the pandemic, we all watched Netflix instead of going to movie theatres. On the content-creation side of the business, we see distributors like Netflix, Amazon and Apple producing more and more original programing themselves. They had to create the technology and the content. Now, look at online lottery in this context. The pieces are already there. The technology exists. No one has to develop the technology and games for iLottery. The game content is there. The consumer interest is there. There’s only one thing missing: government authorization. By contrast, Netflix does not have to get a law passed when they want to do a new series. And Apple doesn’t need governmental approval to put a new song online. But iLottery typically needs the approval of two legislative houses and a governor to sign the bills before they can get online. I do think we are nearing the tipping point at which states will look around at their neighbors who have online lottery and feel pressure to do the same just to keep the customers they have, to keep their players from being unhappy. They may even lose business to their neighbors if they don’t offer the same kinds of products and services. I Continued on page 34