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September/October 2014 • Public Gaming International
diction, state or province. But the modern
digital-age consumer does not think this
way. Multi-state retailers do not think this
way. The media companies that are a part of
the firmament of all powerhouse consumer
brands do not think this way. And for all lot-
tery operators, future success will involve
working together with other jurisdictional
operators to build national brands as well as
the multi-national distributional, media and
promotional strategies that drive the success
of those brands. The integration with WMS
has given us improved scale, diversity of
capabilities and cross-jurisdictional reach in
ways that help our customers optimize their
business plans—and not just now but into
a future filled with new opportunities and
competitive challenges.
You said that it is the convergence in
the consumer marketplace that is driving
supply-side industry consolidation. How is
consumer behavior changing? More spe-
cifically, how is the behavior of the recre-
ational gamer and lottery player changing?
J. Kennedy:
Gaming options for the con-
sumer have become available everywhere,
through all varieties of distribution chan-
nels and venues. The notion that the lottery
player doesn’t play other games of chance
may have been true when they had to get
on an airplane to go to a casino. But that’s
no longer true. Now, well over a third of the
population of the United States lives within
25 miles of a casino. And research is mount-
ing that indicates the cross-over between
lottery and casino play, going both ways, is
increasing every day.
The modern consumer enjoys variety
and is much more willing than past gen-
erations to experiment with new forms of
recreational gaming. Their willingness to
adopt new devices and services, and to try
new shopping and entertainment options,
is completely reshaping the consumer
marketplace. This appetite for what’s new,
different and innovative will apply to rec-
reational gaming as well. The modern con-
sumer may not even go into c-stores, or be
satisfied with a limited network of land-
based retailers where they can buy lot-
tery games. This is especially true for the
younger demographic who grew up in the
digital age of non-stop change and fresh
alternatives to stimulate their interest and
engagement on a personal level.
The consolidation of operations to ad-
dress these trends is happening on the con-
tent side—the consumer wants to have the
option to play different games. And it’s
happening on the distribution side—the
consumer wants the option of self-serve
systems, to buy and engage via the internet,
and to buy in all varieties of storefront loca-
tions including restaurants, financial institu-
tions, as well as at Costco, Wawa, Walmart,
Walgreens and all the other big-box retail-
ers. C-stores will always be a major chan-
nel for lottery products. However, even they
are consolidating or being absorbed by large
chain operators.
Again, we are clearly seeing consolida-
tion happening on the media side as well.
Lotteries have collaborated with each other
to take full advantage of this media consoli-
dation—delivering promotional information
over the internet and other media, integrat-
ing with TV game shows that feature lot-
tery winners, and potentially collaborating
with the brand, messaging and promotional
strategies of other consumer brands. This
is smart customer marketing using today’s
best strategies.
It is partly a chicken before the egg sce-
nario. Marketers must adapt to trends in
consumer behavior. But the trends will gain
momentum as consumers adapt to advanc-
es in consumer marketing. As the industry
consolidates and as companies like Scien-
tific Games make it easier and easier for
the consumer to access multiple varieties of
games from more and more consumer ac-
cess points, this will drive further consumer
migration among game categories and dis-
tributional channels. This may sound like
a mixed blessing if a company thinks that
it has a monopoly over consumer behavior.
But there are three things to consider. First,
making life easier and more convenient for
the consumer is never a bad thing, especially
if you are the first-mover and stay close to
the consumer. Second, delivering more and
better game content along with easier access
for the consumer to buy the product will
absolutely expand the market. And third,
operators, traditional retailers and suppliers
don’t really have a choice. It is the consumer
who ultimately decides. The marketers who
give consumers what they want—ideally,
anticipating what they will want and making
sure it is already there waiting for them—
will succeed. Any strategy based on offering
the consumer access to lottery products at a
limited variety of access points will result
in lost market share, declining sales and de-
clining net returns to good causes.
Why is consolidation a positive thing for
those government lotteries that focus on
traditional lottery products and aren’t nec-
essarily interested in the digital realm and
iLottery games?
J. Kennedy:
Consolidation is a positive
thing for government lotteries because it
offers a more efficient system for creating
and delivering the games consumers want
and making the games available where and
when players want to play. Lotteries already
have scale in the one area that all businesses
strive hardest to achieve—they have lots of
customers. It is more important than ever
—and especially so for the lottery opera-
tor that focuses on traditional lottery games
sold through land-based retail stores—to
enhance the consumer connection, to maxi-
mize the brand power of lottery and create
relationships with players, and to turn anon-
ymous consumers into loyal, repeat custom-
ers. Consolidation is strengthening the im-
portant area of consumer insights which in
turn informs a lottery’s marketing strategy
to be relevant with its consumers.
It does seem like everyone agrees on the
importance of building national brands.
That would seem to mean that state lotter-
ies need to integrate a cross-jurisdictional
approach to everything from brand mes-
saging, to promotions, and to business pro-
cesses that facilitate cross-jurisdictional
distribution.
J. Kennedy:
At the end of the day, con-
sumers play games, whether they are Power-
ball
®
games, Jumbo Bucks instant games or
the new MONOPOLY Millionaires’ Club
™
national game. We are looking at how game
content can be shared and leveraged from
one category to another across all industry
sectors. Along with our WMS colleagues,
we are researching consumer behavior as it
manifests differently in various regional and
state markets, across game categories like
lottery and electronic games, and across dif-
ferent gaming venues and points of consum-
er access like retail stores, internet, casinos,
self-serve, etc. We’ve learned that the appeal
of different game concepts and popular li-
censed properties bridges game categories.
The content is shareable across all catego-
ries. Scientific Games is now in a position
to introduce concepts that are successful in
the electronic games environment to the lot-
tery player, and vice-versa. And even with
the addition of all the game content and ca-
pabilities of WMS, we are very open to col-
