Hoosier Lottery studying chances for online sales

in Lottery

Lottery studying chances for online sales

Indiana moves slowly as neighbor states embrace it 

INDIANAPOLIS – Hoosiers might someday be able to purchase a Powerball ticket from their phone or play an interactive lottery game at their desk.

Hoosier Lottery officials are tiptoeing toward the possibility while other area states – Illinois, Michigan and Kentucky – already have online lotteries, often called iLottery.

The goal is to attract a younger generation of players – those who do most everything online, from ordering groceries to paying bills.

A 2018 article in Insights – the magazine of the North American Association of State and Provincial Lotteries – found Michigan had overall growth of 7% in sales and 16% growth in the biggest retail product line, scratch tickets. Michigan has taken the largest jump into online sales of any U.S. lottery so far.

And with Indiana starting legal sports betting later this year, many think online or mobile lottery could be next.

“Is it good public policy to make games of chance more ubiquitous? My response is the toothpaste is already way out of the tube,” said Paul Jason, CEO of the Public Gaming Research Institute.

He said other parts of the world have long had online lottery options but elected officials in the United States have largely resisted the model. That is until fantasy sports and legalized sports betting began proliferating.

“Lottery is a much more benign form of games of chance. It's less addictive, less likely to cause a problem gambling situation,” Jason opined.

His organization supports the public policy of having governments run lotteries and channel the economic benefits back to society.

Indiana's net proceeds go to reducing excise taxes as well as helping police, fire and teacher pensions. Last year that amount was $313 million, but more than $5.7 billion has gone back to the state since the inception of the lottery in 1989.

The Hoosier Lottery has a mobile app, where players can learn about different games, find a local retailer to buy a ticket, check results, choose numbers and prepare a digital pay slip. But app users can't actually buy tickets.

Retailers are, not surprisingly, concerned about a change to the lottery business model. Customers who buy tickets at stores often also buy drinks, cigarettes or snacks.

Scot Imus, head of the Indiana Food and Fuel Association, said convenience stores account for 75% of the lottery's sales. And yet the association heard about a proposal moving forward only through third parties.

“Our members hope we will be consulted and they will value our opinion,” he said. “We are a big block of their customers' base. We've had a good relationship with them, but it's sort of a delicate balance.”

Imus noted that offering lottery is an investment – from large amounts of counter space to taking inventory of the tickets at every shift change.

“It requires a big commitment on our members' parts, and the margins are pretty razor thin.”

The Hoosier Lottery, in its latest business plan adopted in May, included an evaluation of whether an interactive product is viable. The lottery will assess technology requirements, game parameters and content, prize structure and payouts, legal and regulatory matters, capital investment, marketing strategy, staffing needs, and net income potential for interactive products and present an action plan.

Beyond that, lottery officials are keeping mum.

“We are really too early in the process to have any meaningful conversation about online lottery,” said Dennis Rosebrough, spokesman for the Hoosier Lottery. “Given where we are at this point, any discussion would be purely speculative.”

IGT Indiana – the private operator that handles much of the daily lottery process – said it's too early to say the company is advocating for the change but is evaluating other jurisdictions' performance. 

Illinois was the first state to move to an online lottery – back in 2014. It sells tickets and subscriptions to draw games on its website and mobile app.

“With the proliferation of mobile phones and online options in recent years, offering a digital alternative to play the lottery made sense. We had to go where our players were,” said Jason Schaumburg, communications director for the Illinois Lottery.

Illinois has seen steady growth since 2014. In fiscal year 2018, digital sales were $43.5 million, which accounted for about 1.5% of total sales. The estimate for the recently ended fiscal year is about 2% of sales.

“It's hard to deny that online/mobile is an integral part of people's lives today. We see iLottery as a way to grow our player base and as a key opportunity for revenue growth,” he said.

Jason, of the research institute, said initial evidence shows land-based retail sales going up – which means online sales aren't cannibalizing retail sales as feared.

“The reality is it expands the market and makes it more available and brings in more players that would otherwise not be playing,” he said.

Jason also noted that states are using online promotional techniques, such as special redemption promotions, to tie to retailers.

Kentucky offers online Keno, and Pennsylvania is looking at new products beyond scratch and draw tickets. “Think more like Candy Crush and Angry Birds than traditional lottery games,” the Pennsylvania lottery director told Insights. 

Jason acknowledged that younger generations have always been harder to attract to lottery and it's no different today. Hoosier Lottery has no demographic information on its players.

Some lawmakers this year cautioned that approving mobile sports wagering would inevitably lead to expanding the lottery. But Jason believes that casinos – within a few hours drive all over Indiana – are far more dangerous than a lottery ticket.

“It's no longer logical to restrain the availability of lottery when all forms of gaming are everywhere,” he said.

Chris Gray – executive director Indiana Council on Problem Gambling – said the organization is neutral on the discussion except it will push to put money aside to treat problem gambling.

She noted that 95% of people can gamble responsibly.

And it appears the Hoosier Lottery Commission can approve online sales without legislative approval as lawmakers have already given wide latitude to the entity to choose “the method to be used in selling tickets.”