Paul’s Wall February 21

Paul’s Wall February 21

The theme of SMART-Tech 2011 is "We can Change the World".  The reason for this rather breathless call to action is that it is going to take an ambitious mentality to achieve our full potential and to repel the impending threats to our business model.  The gulf separating the winners from the losers is increasing, leaving very little space for the also-ran who runs a good operation but doesn’t acquire clear and distinct competitive advantages.  As the information which drives consumer decisions becomes instantly accessible to everyone everywhere, the percentage of consumers that gravitate to the business with the superior product and value will increase.  The time when anyone other than the very best offer can still grab 20% of the market is gone.  Companies like Google, Facebook, and now possibly Zynga, can enter a dynamic marketplace with a better product and completely vanquish scores of competitors in a shockingly short period of time. 

Of course, government lotteries have monopoly protection.  But as Andrew Grove (former CEO Intel) said, “Only the paranoid survive”.  It’s useful to imagine war-room scenarios, not to wallow in negativity but to stimulate the creative, and competitive, thinking that will help us be more successful.

Traditionally, we have never thought of ourselves as being in competition with other forms of gaming.  Government lotteries have monopoly protection and lottery players don’t go to casinos, etc.  Then, perhaps as a way to get our competitive juices flowing, the idea was put forth by industry leaders that we are competing for the “entertainment dollar”.  That is certainly a step in the right direction towards thinking bigger.  But we still did not perceive our 100% market share of the lottery market to be vulnerable to major business disruptions from anyone offering a seriously competitive product.  Some of the premises for that conviction may need to change.  First came the ubiquitous expansion of casinos.  Even then we remained confident that lottery players don’t go to casinos, which is true for the most part.  Then there is the introduction of Internet poker and other i-games, mostly illegal in the United States, but still we can rightly expect that lottery players are not migrating en masse to illegal internet gaming.  But what about when the number of gaming options continues to increase, making a wider and wider variety of gaming and gambling experiences instantly accessible to consumers wherever they reside?  Even though no single option may have significant impact, won’t there be a tipping point where the combination of many could in fact become a major disruptor of the lottery business? 

Add to that the possibility that gaming operators might create games that are similar to the lottery playing experience.  There is a story in the accompanying report, titled “An iPad for $2.82? Or is this a form of gambling?”  It goes on to say “It’s an auction, it’s a game of chance, and it’s taking the internet by storm.”  Basically, the auctioneer takes 650 bids of $1 each for the chance to win a $600 i-Pad, making a profit while delivering a 90%+ prize payout.  Makes a fun gaming experience along with an attractive value proposition.  The notion of this opens the mind up to an endless array of possibilities.  Why couldn’t Zynga (founded just 3 years ago and now valued, based on their upcoming IPO, at over $10 billion!) or other gaming operators build in a system of rewards that would integrate a gambling component into their killer app’s of entertaining community games?  What exactly constitutes a ‘game of chance’ and how will regulators possibly keep up with the infinite variety of concepts that are likely to spring up? 

The exciting thing is that Team Lottery is in the catbird seat to dominate this brave new world.  SMART-Tech is all about finding the course of action that will defend the interests of lottery stakeholders, increase funding to Good Causes, and do all this by delivering superlative products and value to the players.  Our speakers are the industry leaders who are taking proactive action to make it happen.  But nobody presumes to have all the answers.  It’s an ongoing dialogue that depends on input from everyone dedicated to the success of Team Lottery.  See you in NYC!  

Check out the four interviews we’ve posted this week.  Jaymin Patel, Friedrich Stickler, Dr. Gerhard Rombach, and Risto Nieminen share their insights into what makes our industry tick and what we need to do to dominate the world of Gaming 2.0.