How Far Will States Go to Raise More Lottery Revenue?

December 4, 2009

Last December I wrote a blog post titled “Does Lottery Revenue Rise or Fall during Economic Hardship?.” We now have our answer: Although it initially seemed to be recession proof, lottery revenue has finally fallen slightly. According to a report from the Rockefeller Institute of Government (PDF), state revenues from all sources of authorized gambling fell 2.8 percent in FY2009, and lottery revenue, the largest source of state gambling revenue, fell 2.6 percent. The revenue decrease comes at a time when some policymakers are more determined than ever to use state-run lotteries or other state-run gambling to help compensate for budget shortfalls.

This desire on states’ parts to fill coffers with gambling revenue could be a boon for the gambling industry, and the combination of desperate state treasurers and gambling companies looking tor more profit has led to a slew of new lottery products and marketing strategies. Of course it’s only normal for the gaming industry to try to maximize profits with innovative new products, as any private industry would do. But it’s a bit unsettling to see the zeal with which many state legislators are embracing these innovations as products for the government to sell and advertise. One must wonder how they can in good conscience encourage their constituents to spend more money on gambling during a recession.

The following is from the Feb. 2008 issue of International Gaming and Wagering Business (IGWB) magazine:

“The lottery industry is under tremendous pressure to continue to perform and provide ever-increasing revenues,” said Maryland Lottery Director Buddy Roogow. “The environment in which we work is becoming increasingly competitive because of the internet, because of the explosion of casinos and racinos around the country, and because of the interactive games that are available ….

In light of Roogow’s comments, lotteries can’t rely on the same combination of lotto and numbers games that have served them well over the years. …

“Monitor games are probably right now the areas of great interest and development potential …,” said [Vice President of Product Marketing and Design for GTECH Corp Matthew] Mansfield.

He envisioned a future where retail venues could offer monitor “walls” similar in concept to some of the instant ticket displays currently on the market. Multiple monitors would offer multiple games, and players would choose the games they want. …

Currently on the market are versions of poker, horse and car racing, and more are in the works. …

“We can now put virtually any game you ca think of on a monitor,” said Maryland’s Roogow. “Monitor games are part of where the future lies for us. … I think they allow us to penetrate the emerging market more effectively…young people who may go to bars and restaurants, places where they can congregate. “

“I think what’ important for the future of lotteries…is distribution—getting where the customers are … into more nontraditional outlets that in the past have been unapproachable,” said [Louisiana Lottery Vice President of Marketing Bonny] Botts. “These include places like drugstores, big box retailers, even the corner Starbucks.”

If this quote were simply describing the plans of companies in the private gambling industry, it would not be unusual. But some of the people quoted in the article are state government officials, and it’s a bit unseemly for elected officials to be so zealous about marketing lotteries at “drugstores and … the corner Starbucks” and encouraging “young people” to gamble at restaurants. Is there a limit?

More on state lotteries.


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