Public Gaming International May/June 2020

37 PUBLIC GAMING INTERNATIONAL • MAY/JUNE 2020 JOHN WHITE, Deputy Director of Finance, New Jersey Lottery In New Jersey we already have experience with a recent event, Superstorm Sandy. So we have a general idea of what to expect in the not-too-distant future. In that event our retailer network was severely crippled. Retailers along the Atlantic coast and ood-prone areas were out of commission for some time and many never reopened. Sales fell o precipitously and were slow in recovering, particularly for the multi-state jackpot games. is environment, although similar to Sandy with its impact of reducing sales and the number of retailers, has another aspect that sets it apart from the natural disasters that many lotteries had to cope with in recent years and that is the social distancing necessary to control and eradicate the disaster. It is this factor that presents the greatest challenges to lotteries in recovering from the pandemic, especially given the prognostications of public health experts that COVID-19 will return in cycles multiple times in the next few years. e social distancing mandated in response to COVID 19 has compelled many employers to have more of their employees work from home. Many are nding that despite some initial logistical obstacles, that productivity has not been signi cantly hindered. at said, it is highly plausible that COVID 19 has accelerated many employers’ plans to increase telecommuting as a means of increasing productivity while reducing overhead (decreased facility and related utility costs). If this theory holds, there will be fewer people out and about on week days and these same people will be less likely to frequent brick and mortar establishments during their “business” day. In New Jersey and New York, almost everyone knows someone who su ered from or died from the pandemic. is factor alone will give lottery players caution about their purchasing habits, whether they minimize visits to retail establishments or how they socialize publicly. Both behavioral modi cations are of concern to lotteries. e former for the obvious reason, but the latter because of the increasing number of lottery products that lend themselves well to bars and restaurants such as keno. In New Jersey we are particularly concerned because as recently as Fiscal 2017, we had no social space games in our portfolio. In Fiscal 2021 we were anticipating very robust sales from our keno style game Quick Draw and its sister game Cash Pop which was successfully launched in September 2019. In view of all these factors, New Jersey will need to reassess its expectation. Lotteries are a business, but they are a government business. As such they must be managed in a way that foster positive externalities and public health is de nitely a positive externality. To be successful in the post COVID-19 world, lotteries must not only o er a diverse portfolio, but more importantly, diverse methods for players to play our games. At the start of the pandemic, New Jersey only had one registered courier. ere may be market opportunities for more couriers in the state. Increased competition will guarantee that players are not paying exorbitant fees to play the lottery without going to the store. Lotteries for some time now have been developing online or ilottery games and some are much further along than others in their deployment. Given the expectation that players are not going to leave their homes as frequently as in the past, the demand for such products is only expected to increase. Furthermore, the dearth of sporting events in this pandemic and the potential for further suspensions of professional sports in future pandemics, those lotteries with well-developed online portfolios will be better poised to bene t from a gambling option that should be immune from social distancing protocols. In the years prior to COVID-19, consumers have been using less and less cash and more plastic to pay for purchases. Younger consumers are more likely to carry no cash on their person and pay for all their needs through a credit or debit card. Faced with an aging player base, younger consumers are of course the most sought-after demographic for lotteries. COVID-19 is only expected to hasten the shift from cash to credit/debit as cash is seen to be an easy way to spread germs, whereas, credit and debit cards can easily be sanitized. us lotteries must work to make the use of credit and debit cards a viable option for players wanting to play their games. is will require working with banks and nancial institutions and possibly state regulators on the fee structure for such cards and determining who will bear the costs for such fees - retailers, players or lotteries themselves. is is a very important question, because lottery retailer networks are going to su er signi cantly from COVID-19 and may never quite recover from its impact. Historically, brick and mortar retailers have been the lifeline of the lottery industry and must continue to be an important part of the industry’s continued success moving forward. What lotteries decide to do with credit and debit cards will determine how successfully their retail network will be in the years to come. Depending on what lotteries decide to do with the associated banking fees may also help to put retailers on an equal footing with the courier services with whom they are in increased direct competition. In the short term from a state revenue perspective, the lottery is at least bringing in revenue where tax collections have been postponed and other state revenues such as motor vehicles fees have been slowed due to sta not being available to process receipts. With regard to the economy as a whole, New Jersey can again point back to its recent history with Superstorm Sandy. In a natural disaster and now a pandemic, consumers have to refocus their priorities. Ensuring they have the essentials of food, clothing and shelter take precedence to entertainment consumables such as lottery tickets. In the wake of Sandy, jackpots that previously sent casual and committed players alike running to stores were no longer that important. Games such as Powerball and Mega Millions saw sales decline. Under COVID-19, both games have already had to restructure top tier starting jackpots and mandatory increases downward due to insu cient sales. is will result in further declines when jackpots reset. Subsequent to Sandy, the matrixes changes enacted a few years later remedied the situation and generated the record growth in the period from 2016 to 2019. Continued at publicgaming.com VISION OF THE POST-CORONAVIRUS WORLD