It’s an understated sports bar on the outskirts of Portland, a low-slung, brown building that sits in a suburban strip mall surrounded by car dealerships. Inside, it’s dark. TVs everywhere, video poker, betting odds.
But The Pit Stop Sports Bar & BBQ Grill is at the heart of a growing business that appears to be taking market share from The Lottery Corporation, which was spun off onto the ASX out of Tabcorp in 2022. With a market capitalisation of $11 billion, The Lottery Corporation is one of Australia’s most profitable gaming groups.
The Pit Stop Sports Bar & BBQ Grill on the outskirts of Portland, Oregon.
The Pit Stop, according to Oregon gaming data compiled by analysts at E&P Capital, is by far the biggest retailer of lottery tickets in the state. Most of that is to The Lottery Office, a Northern Territory-registered private operator marketing offshore lotteries to Australians.
The Lottery Office is owned by Queensland businessman David Kennedy. It markets overseas games like Powerball and Mega Millions to Australian customers and sells tickets to a replica local lottery that gives people the same money prizes. And it is going big. It has dramatically increased its spending on television and stadium marketing to try to take market share from The Lottery Corporation, Australia’s monopoly provider.
The Lottery Office doesn’t sell tickets to lotteries in the United States. Customers buy tickets to its “proprietary” lotteries in Australia, known as the USA Power Lotto and USA Mega Lotto.
The company purchases matching tickets in the American Powerball and Mega Millions lotteries at The Pit Stop, insuring the ticket. When a ticket wins in the US, The Lottery Office collects and pays identical winnings – it makes its money through a service fee that players pay the company to buy the tickets.
In Australia, it is difficult to avoid advertising for The Lottery Office. The group’s marketing strategy includes corporate partnerships with Venues NSW and the NRL’s Gold Coast Titans. It means visitors to Allianz Stadium or the SCG – or fans of the Titans – are bound to see an ad promoting the company, as well as in-stadium advertising QR codes to enter a first lottery for free.
The Lottery Office has also partnered with some 1500 newsagents, allowing punters to deposit funds over the counter.
“Their ability to offer promos at a decent scale is a distinct advantage that TLO has over TLC, given the regulatory constraints and significant margin differential,” E&P’s Paul Mason and Sam Bradshaw told clients.
In a 27-page research note, the analysts said that The Pit Stop was at the centre of this growth. It has sold more than $US20 million ($30 million) in lottery tickets last year – some 13 per cent of the total sold in Oregon. Its nearest rival, Produce Row Cafe in Portland, sold $US7.5 million. E&P estimates most of this revenue comes from The Lottery Office sales to Australasia.
It’s a win for the bar’s owner, Dani Rosendahl, who makes a commission on the sales and can also earn up to $US100,000 from a winning ticket. The Oregonian newspaper reported that The Pit Stop has been the source of $US4 million in winnings since July 2021. It hasn’t always been such a popular outlet for lottery tickets – in 2018, sales were just $US29,390, of which 85 per cent was from Keno.
E&P’s Mr Mason and Mr Bradshaw suggest The Lottery Office could eat into The Lottery Corporation’s earnings, in particular its lucrative Powerball product.
“We can see that the Powerball weakness that peaked at the end of [2023] does line up with a spike in The Pit Stop sales,” they wrote. “However, there were multiple other spikes of The Pit Stop sales that did not appear to show any material relationship with Australian Powerball … entries at all.”
According to The Oregonian, the man placing these bets for The Lottery Office is one Mike Platzer, who has made 104 winning claims in US Lotteries. All but one of those wins came from The Pit Stop, according to state regulators.
Lottery officials in other states prevent the purchasing of tickets through third-party services – Mega Millions has specifically banned the practice. But Oregon still sells tickets to international companies, partly because the state offers a high commission to retailers on ticket sales.
E&P said The Pit Stop printed roughly 10 million Powerball and Mega Millions tickets combined annually, or 1150 tickets per hour; the median retailer typically sells 0.5 tickets per hour.
The Lottery Office is still small in the Australian market: E&P estimates its share of digital lottery sales in Australia would be 4.4 per cent if The Pit Stop’s volumes were all attributable to the Lottery Office.
At The Lottery Corporation’s results announcement in August, its chief executive, Sue van der Merwe, said the advertising push by groups like The Lottery Office was concerning newsagents, but did not have a financial impact on its business.
E&P’s Mr Mason and Mr Bradshaw said that The Lottery Corporation is more likely to cannibalise itself, with some of its games affecting the popularity of its others.
“However, this doesn’t mean that we believe that there is no relationship between [The Lottery Office] sales and Australian like-for-like jackpot entries,” they wrote in their note. “It stands to reason that if [The Lottery Corporation] sales could impact overseas courier sales, then there is the potential for an impact the other way.”
The Lottery Office and The Lottery Corporation were contacted for comment.
https://www.oregonlive.com/entertainment/2024/04/how-an-australian-company-scored-48-million-in-the-oregon-lottery.html