Public Gaming International • September/October 2014
42
laboration with third-party companies when
it best serves our customers.
Are you responsible for integration of all
lottery functions?
J. Kennedy:
We are now in the process
of fully integrating our global lottery busi-
ness at Scientific Games. This includes our
systems business, our MDI licensed proper-
ties and promotional marketing, our instant
products business and our interactive busi-
ness. Going through this process has shown
us so many opportunities where we can best
partner with our customers to deliver in-
novation, creativity and operational excel-
lence. Working together in a single organi-
zation that’s solely focused on lottery and
our global lottery customers has been one
of the most professionally rewarding experi-
ences of my career. I am proud of this indus-
try, proud of our customers and proud of the
talent at Scientific Games.
There seems to be intractable obstacles
to cross-jurisdictional distribution of lot-
tery products. That is, making lottery
business processes acceptable for multi-
state retailers.
J. Kennedy:
Multi-state retail operations
are horizontally integrated. Efficiency and
streamlined logistics are cornerstones to
their business model. Placing product and
technologies into a large retail chain like
Walmart, Dunkin’ Donuts or Walgreens
with 37 different requirements from 37 dif-
ferent lotteries does not and will not work. It
is a barrier to entry. It just does not work for
the retailer because they want to deal with
a single supplier, or at least a common sys-
tem for accounts receivable, a common set
of metrics, standardized report formats, and
uniform sets of business practices on every
level. A very practical reason that lotteries
aren’t growing in their distribution footprint
is that distribution has become far more hor-
izontally integrated than their jurisdiction-
ally bound business processes.
I’m going to tie this back again to the me-
dia industry because I see many parallels.
It is no longer just about TV commercials
and billboards. Consumers of social media
and other forms of non-broadcast media
are far more horizontally integrated across
multiple platforms. Like land-based retail,
media is expanding horizontally to adapt
to the convergence of the consumer market
into all forms of new media. Players clubs,
loyalty programs and 2nd Chance drawings
are just beginning to tap the potential of a
multi-media, multi-platform approach. The
national TV game show and other promo-
tional strategies being applied to MONOP-
OLY Millionaires’ Club will take us further
in the right direction.
MONOPOLY Millionaires’ Club took
years to come to fruition. What can Lottery
do to put these great ideas onto a faster
track from concept to implementation?
J. Kennedy:
Create a path for everyone
to leverage their expertise, their specific
core competencies, for the benefit of the in-
dustry. Creating a national premium game
that resulted in MONOPOLY Millionaires’
Club was a tremendous learning experience
for everyone. And it ultimately came down
to doing what has always worked well for
lotteries and for the industry. Lotteries have
demonstrated a great capacity to come to-
gether to evaluate proposals and sort out
an action-plan to implement successfully.
It was actually less than a year ago that the
request was issued that specified what was
wanted, inviting the commercial industry to
respond with creative solutions. These solu-
tions were evaluated and we were all given
our marching orders. That’s a pretty good
turnaround time.
Still, a business with net margins of 25%
to 30% should be able to fund even more
innovation, more vigorous game develop-
ment, more initiatives that would meet the
needs of cross-jurisdictional retail op-
erations, and fund initiatives to penetrate
completely new retail sectors. With an ROI
on investment being so high and so pre-
dictable, why is it so hard to get funding?
For instance, why couldn’t you, the com-
mercial community, fund it and be paid
from future profits?
J. Kennedy:
I have been trying to solve
that puzzle for 20 years. The process of de-
ciding on and implementing MONOPOLY
Millionaires’ Club will hopefully provide
some answers and open some doors. Put
out a request for getting something done
across jurisdictions and invite the supply-
side to respond. I do think the industry is
evolving to respond to the needs of a mar-
ketplace that is more and more horizontal
and cross-jurisdictional.
The U.S. lottery industry is a $70 billion
consumer category. There is an enormous
amount of marketing and consumer prod-
uct presence that can be brought to bear if
we see ourselves as a $70 billion product
category instead of a fragmented collection
of smaller markets. MONOPOLY Million-
aires’ Club could be the breakthrough prod-
uct that lets the lottery industry see itself as
a national force instead of an affiliation of
individual jurisdictions.
Why is it so important to have a national
presence when each lottery actually only
sells within its own borders?
J. Kennedy:
One of the persistent chal-
lenges that we face in our industry is growth
in playership and growth in retail touch-
points. Those have been the two limiting fac-
tors in our business. By creating a national
presence that has the ability to leverage the
dynamism of a fully integrated, nationwide
marketing and promotional campaign built
upon a consistent brand messaging strategy,
lottery will become much more attractive
to a broader population. This scale enables
the funding for more creative game devel-
opment, higher-impact marketing, and the
resources to overcome obstacles to cross-
jurisdictional retail sales. It will change the
way that lotteries perceive themselves, how
consumers perceive the lottery industry, and
how retailers perceive the lottery industry.
That shift is going to translate into more
people playing—and more retailers and dis-
tribution partners wanting to be associated
with the good causes that lotteries support.
I keep coming back to the word “scale.”
We get scale now—nationwide consumer
buzz and engagement—when we have a
big Powerball or Mega Millions
®
jackpot
and the media jumps in to help us brand
and promote it. But we as an industry are
not actually creating scale; we are waiting
for scale to happen. And as we have seen,
this leaves us very vulnerable to changes in
consumer expectations and the willingness
of media to perform its part to help us pro-
mote jackpots. Why can’t we have that lev-
el of consumer buzz all the time? Lottery
as a whole needs to be proactive at creat-
ing that scale itself, at engaging the level of
consumer interest on an ongoing basis that
we now only see when the jackpot exceeds
hundreds of millions of dollars. The suc-
cessful consumer marketing powerhouses
don’t wait for consumer engagement to
happen. They take control and create it for
themselves. This is our opportunity, and
I’m excited to see our collective industry
leadership embrace this positive change.
u
