George Parisot,  Director, Montana Lottery

Jeri Duran, Director Sales & Marketing, Montana Lottery

With limited opportunities to expand the types of games and distribution channels, where’s the growth going to come from?  Montana Lottery gets creative at leveraging each and every success into as much residual impact as possible.  Fantasy Sports ropes in a whole new category of retailers to the expanded portfolio of lottery products.  World Poker Tour bumps sales for the entire Scratch line.  Every small jackpot winner is an important public relations opportunity.  Facebook and text-messaging become low-cost ways of reaching new demographic targets.   

Paul Jason, Public Gaming: Let’s just start with a description of the games that you offer and the channels that you distribute through.

George Parisot: The lottery offers both lotto and scratch games in Montana.  We have Powerball, Wild Card, Hot Lotto, and our own in-state game, Montana Cash.  We also offer a variety of scratch tickets from the $1 to the $10 prize point.  We just completed our Montana Millionaire raffle game, which ended December 31st.  We felt like it was pretty successful, since we sold 97% of the 150,000 tickets, and that was a $20 game.  I think just under 150,000 tickets for a population of 945,000 is a pretty good amount of tickets to be sold.  So we’re pretty happy with our Montana Millionaire game. 

You said that the price point on Scratch games range from $1 to $10?

G. Parisot: Yes. The raffle was $20.  And that was the highest price point ticket lottery game we’ve sold.

Are you thinking you might want to test a $20 scratch ticket?

Jeri Duran: Absolutely.  But we really just launched our ten dollar price point last year.  So we’re really trying to work on getting that a little more accepted in the market place before we do a $20.  But we’re definitely looking at that within the next year.

It seems like a little more than a year ago there was kind of a rediscovery of the potential of raffles.  Then the enthusiasm on the part of the marketplace seemed to change so that the initial great performance diminished with each subsequent raffle game.  Is there a life cycle to the game?  Do you have to “rest” the market for a period before running too many raffle games?

G. Parisot: You know, I think in Montana the game has been very well received.  We’ve only done it for two years, and in these two years we’ve sold 97% of the tickets on both occasions.  So we feel that there’s significant interest in the game in Montana, and we plan to continue it in the future.  In fact, I think we’re going to run it again basically in the same version as we have this year, starting in November of ’09.  From our perspective it’s a very effective game for Montana.  I know other states have seen a decrease, and I think that may be just overuse of the game in some markets, running too many raffles or having too many tickets available for sale may be the issue.  But Montana is kind of a different state.  Folks like the kind of raffle type game that we have and find it fun. In Montana, clubs and organizations do games called 50/50 Raffles.  The raffle benefits an athletic association for the university or other organizations and the pot is basically split 50/50.  I think our Montana Millionaire has even better odds than that, better pay off than that, but Montanans are used to those kind of raffle games.

Is there anything that you’re planning to give special attention to in the next 12 months?

J. Duran: There are a couple of things.  One, we were a bit concerned about doing the raffle style game with a $20 price point in this kind of economic environment.  We found that just keeping people informed about the great odds of the game, making it a well-run advertising campaign and doing more promotion with the winner, than what we’ve done before, made the game really successful.  It was equally successful last year in spite of the economic challenges which we thought might make a bigger difference than they did, so that was really positive. 

Another thing most lotteries are looking at is that younger demographic. We are working on a program with the World Poker Tour scratch ticket and really trying to take advantage of a lot of new media, more technology-based advertising like Facebook. We’re starting to do text-messaging that includes advertising messages and winner alerts.  We are really trying to reach that market through the channels where they get their information.  That has been a really fun thing to do because we haven’t really explored those media channels and venues up till now.  It’s really changed how we do business in a lot of ways.  We’re starting to look at doing more retailer training via the Internet. Things like that require us to really look at and understand our retailers and players and how they use technology. We’re finding new ways to make it more convenient for our players to interact with us. So that has been a really exciting initiative and has really opened doors and created new ideas and impacted us more than as just another advertising campaign.  We’re really looking at a lot of things that we could do better or differently to reach these new markets and demographic profiles.

We all seem to be searching for the ways to update traditional games and distribution to get the attention of the younger demographic.  Your website invites the player to sign up for text-messaging. 

J. Duran: We actually just started it two weeks ago, so it is a little too soon to comment on the results.

As just mentioned, we also advertise via Facebook, promoting the Montana Millionaire raffle game.  Facebook is targeted to geo-locations so that the ad only shows up to people who are in the Montana area network, so that works especially well.

G. Parisot: I think Facebook is going to be an effective tool for us, too, especially when it’s a $20 purchase and it’s kind of a special purchase.  Facebook is an interesting place to build awareness for our brand with younger people and remind them that it’s time to go out and buy a ticket.

Facebook would seem to be a really powerful selling tool, a low cost target market approach that’s more relevant since you’re reaching the exact player profile you want.

J. Duran: A lot of technology-based services are like that.  It gives people much more of an opportunity to opt-in to your method, so they have more buy-in when they do accept it, and it’s really quite affordable so you can try more things.  So that’s been really, really fun to explore.  We just started Facebook advertising in November so we’ll have more to report in a few months.

What do you have planned for 2009?

J. Duran: We have started doing some web advertising, like banner ads on some of the major daily newspapers in our state, and with that there’s a new opportunity now to do something called Spongecell on those. With Spongecell, if you click on the banner ad, it gives you an opportunity to email a friend with it or put a reminder on your Outlook calendar to check your winning numbers. Right now we’re using Spongecell to talk about the new Powerball with Power Play, so when players read that message can say, ‘oh, yeah, Powerball, I want to remember to check my ticket’ or tell my mom to buy one.  So there is new technology available which is creating a whole lot of new potential for banner advertising and text-messaging, much more exciting and innovative ways to use those channels.

These are some very interesting strides towards adapting new channels and new media to the younger demographics.

J. Duran: It’s working out for us.  Some of our campaigns are really geared towards everyone, like Powerball, so they can continue to use traditional media like being in a place in the paper where anybody reading the paper could see it. But we could also target: for instance, for our Montana Sports Action game, we can do things directly on the sports page. It really allows you to be more specific to the audience you’re trying to reach.  It would be a great place to advertise anyway, but you could take it a little bit farther and let customers get a little more information than what they could get from just the regular ad.

Anything interesting or important in terms of important product initiatives going forward?

G. Parisot: Well, obviously for us, the Powerball matrix change.  The game change and the addition of Florida is very important and critical to seeing those increased jackpot sizes and increased interest in the Powerball game. That’s our bread-and-butter game, and we’re very excited about the addition of Florida to Powerball and the positive changes that will create. Now folks buying Power Play will be guaranteed to win a million dollars if they match five white balls.  That’ll create a lot more winners and a much higher likelihood that some of them will be in Montana.  Our sales are doing better, plus we’re in a big jackpot run right now so we’re excited about that.  Beyond that we also have the addition of our new fantasy sports games, called Fantasy Racing.  That starts February 8^th and is a follow up and an improvement on our first game which was Fantasy Football.  At some point in the fall both auto racing and the football games will be running at the same time, and we expect to see interest from new players who are playing this game. This game is designed more for fantasy sports players, but anybody can play the game, and we think that’s going to be a good move for us as well.  This game opens up new markets, new retailer groups. Our other products were not in retail locations such as bars and casinos in Montana.  We’ve added 175 retail locations since the startup of the first fantasy sports game in locations that we had not been in before.  This is a very important aspect of the Fantasy Sports initiative.  And sales of our other products in addition to the fantasy sports game in these locations have been pretty significant as well.  So we think it’s an important move for us, and I think the players are learning more about the game and are interested in what we have to offer. I expect to see the fantasy racing game do pretty well.

Describe Fantasy Sports, how it works etc.

G. Parisot: Legislation was passed in 2007 to allow the Board of Horse Racing to run a game based on fantasy sports.  The game concept is very similar to what’s played in bars and casinos right now.  Folks get together for weekly picks, pick their teams and they compete on a weekly or season-long basis.  This is just an electronic version of that kind of concept, so it’s very focused on fantasy sports.  Our first game was Fantasy Football, in which a player would select a number of fantasy team members from the official roster from professional football and would wager on a weekly basis to see how their players performed based on statistics from the end of each football game. 

Auto racing is similar in that a player will select a team of drivers. The list is a roster of drivers each week. A player can select one driver from the top tier of drivers from the list, three drivers from the mid tier of drivers from the list, and one more driver from bottom tier of the list.  So you have this very diverse selection of drivers with all sorts of abilities. Then your team, your fantasy driver and fantasy racing team would compete against others in the pool on a weekly basis.  There is a selection of number of yellow flag cautions per race that you pick. You can wager from five to 100 dollars.  And at the end of the week after each race we calculate statistics of the drivers, how everyone placed and the number of cautions and other factors, and then we award prizes for first, second, and third place for folks whose teams come first, second or third.

It can also go pari-mutuel as well. Basically, 74% of the prize pool gets distributed to players.

All this information is on our web site, Montanasportsaction.com. 

The start of the season is the beginning of February, and we’re going to implement the game February 8th, starting sales on that date.  We’ve adapted what we’ve learned from our first version of the game, the first football game, into a new version for fantasy auto racing.  We have made some changes such as the roster being updated on a weekly basis. With our previous football game version we did not update on a weekly basis, so you had the roster from the beginning of the season and it never changed.  This roster will update on a weekly basis and I think that’s going to be more interesting for our players.

Some folks may follow football and some may follow auto racing. So what we’re trying to do is create a whole mix of different fantasy games available in these bars and casinos in Montana so that we have a game out there for everyone. Our first one is football, our second one is auto racing, and there are of course many other options. The only limit is it has to be within a professional sport and that’s what we’re focusing on right now.  But having both, starting up in February with auto racing and then in September with football, will provide a nice mix of products available in these retail locations.  Our traditional products will be there as well, so we’ll have Powerball sales, scratch sales, and other products. It gives these bar/casino/retailer owners just a whole different product mix to have available for their clients.

To what extent did Fantasy Sports contribute to the sale of other products? 

G. Parisot: We always felt that it was important to have our traditional products in these locations in addition to the fantasy sports game because we’ve seen a decline in other retail locations. Convenience stores and gas stations have been declining in numbers across the state, so I think it was important to have another avenue or outlet for players to find our products.  And I think it was folks who are interested in fantasy sports who may not necessarily be heavy lottery players, but now that the different games co-exist in the same location at these bars and casinos, we have people who are interested in Fantasy Sports, but then see the Powerball ticket and buy that as well.

Did your other products even have a presence in those age restricted places?

G. Parisot: For the most part, no. By adding 175 new retailers for Fantasy Sports, we’ve added 175 new retailers for our other products, too. It was about a 30% increase in retail locations for us, so that was important.  And Jeri may have some other comments as well.

J. Duran: The whole concept of the fantasy sports program was a very quick turnaround.  We didn’t really have the opportunity to plan the whole implementation and how the products would work together as much as anybody would like to.

There are certain things that are very different about the bar/tavern environment, especially with scratch tickets.  There are definitely different kinds of space issues, and the way that a bartender interacts with patrons is very different than a clerk at a convenience store does.  So really taking a look at how we can make that the most appropriate use of space and integrate into that environment has been something that we’ve really looked at, trying different kinds of dispensers and different game strategies than what we use in a typical retailer.  We are engaging the bar/tavern people in the process of figuring out what works best, how to optimize business in this new retail space.

When presenting Fantasy Sports to the bars and taverns, did you basically make it a package deal, insisting that they allocate floor space and sell a certain volume of traditional lottery games in order to have Fantasy Sports?

G. Parisot: It was a little more collaborative than that.  The big selling point was the fantasy sports game because then the retailer has a terminal in place. This terminal produces the other products such as Powerball, Montana Cash, Wild Card and Hot Lotto, and you can also sell scratch products at these locations. Then we show retailers how easy it is.  A  ticket checker is available so players can check their own tickets and not have to bother the bartender or the cage cashier person.  We’ve set in place concepts to make it easier for the retailer to sell our products. There are no minimum sales requirements placed on the retailer.  Just put in the terminal and see how it works for you. We’re going to come in and train your staff.  We’ll do some promotions in your retail location and we’ll provide point of sale material.  The fact that one terminal carries all the products is a benefit to the retailer.  We didn’t have to twist any arms to sell the other products because they’re all distributed from the same terminal, making it easy and cost effective for the retailer to sell more products.

So it was really a matter of explaining that and coming to an agreement with each individual retail location, bar, or casino.

To what extent was the main obstacle to the launch just getting the retailers to carry the product or creating awareness and understanding on the part of the player?  Does it take awhile for the consumer to respond to a new game concept? 

G. Parisot:  I think there were several things we had to tackle.  First was that the fantasy sports game is really to benefit horse racing in Montana through the Board of Horse Racing.  And we had to create an interagency agreement with the Board of Horse Racing to assist them in doing that and then allow us to carry the game on their behalf.  Then we obviously have game design, implementation of the game design, and as Jeri mentioned, we had a very short timeline to get this all completed.  From start to finish we did it in about four months, and we had zero retail locations.  Basically a mini start-up of another kind of lottery system.  Because we used a different terminal, we used INTRALOT’s MicroLot terminal for these fantasy sports locations because it’s a smaller terminal and it takes up less space in the retail location.  We thought that might be a good selling point for bars and casinos in Montana.  And so we had to design and develop software, deploy terminals and satellite communication systems.  INTRALOT really stepped up to help us complete that task, and we’ve been appreciative of their work in getting all those things done in a very short period of time.  At start up we had 120 new retail locations, and by the time the game ended in the end of December in 2008 we added another 60 more so we’re about 175 retail locations.

Is there still a lot of potential left to add more?

J. Duran: Well, part of that statute requirement for the sports action game through the Board of Horse Racing is that it has to be at an establishment with a gaming license.

There are a large number of those in Montana, so right now we’re out there signing new retailers up, but it does take a while. We’re analyzing to determine the best type of retail environment for this game.  Perhaps it is a sports bar that happens to have some gaming machines instead of a full-on casino that doesn’t even have a bar.

It’s really about finding the right types of retailers and how to make sure that the players are aware of it, that people know they can buy the products there.  Taking the time to figure these things out has slowed us down a little bit.  But we’re getting a lot better at profiling the retailer, predicting who is going to sell it well, and using that as a guideline to target our efforts on those that we know will be most successful.

I would think that the sales per location would still have a lot of potential for improvement, just because it is new and takes time to get traction.

J. Duran: That’s right.  That is certainly happening.  For some folks it really took off right away because they were excited about the game and also saw the benefit of selling all the other lottery products. Certainly we’ve seen the top 20 percent of retailers really just improving week by week by week.  And we expect the new retailers to see the value of the other lottery products and the great success their peers are having with the other products.  So it’s been a learning experience for us, and we’re taking a look at that more and focusing more resources on some of the places that are like-minded to places that are being really successful now.

You mentioned that the raffle had greater odds and that you also made the extra effort to publicize the winners and create a little more public relations excitement around that.  How aware do you think the player is to the prize payout and the odds of the games that they’re considering playing?

G. Parisot:  I think Montana players are very keen on the Montana Millionaire game because the odds were the best odds to win a million dollars, one in 150,000. So that certainly is part of their mindset. And they looked at it as also an opportunity for them to be involved in a game that is unique to their state of Montana.  The Montana Only game is only sold in Montana, it has the ability to win a million dollar top prize, and the state pride theme seems to have resonated with our players.

We feel that the million dollar prize is a magical number that causes the player to decide that it’s worth the time to go into a store and buy a ticket.  And that million dollar jackpot also gets the attention of the occasional or lapsed players.   So yes, I do think that prize payout percentage, jackpot size make a difference.  But the state specific theme is also an effective way to capture peoples’ imagination and make it more fun to play.

It’s important to have the PR boost of having winners in your own state.  With the smaller population of Montana, that it would be important to have more small winners to increase the likelihood that some of them would be a Montanan.

J. Duran: Exactly.  And that’s where the Power Play with the match five prize winning a million dollars comes in.  Just like in Montana Millionaire.  In Montana, a million dollar prize is phenomenal.  That really draws almost as much attention as a Powerball jackpot winner does in a really high population state that has had it several times in one year.  So we really have focused a lot of attention on that. And we had one. We had a Power Play match five winner who won a million dollars. That did a lot for our sales, and she was a fabulous winner who did a lot of advertising for us after that fact.  So we’ve really put a lot of attention into that Power Play, getting a higher percentage of sales from folks who buy Powerball and also attach that extra dollar sale. That’s been a continuous driver of revenue growth for us. We certainly appreciate having the big jackpots.  It brings in a lot of new and big sales at the time of the jackpot run. But we’ve also consistently focused on trying to bring up that week in and week out draw, trying to build a higher percentage of people who play Power Play all the time.  And we’ve really seen a huge increase.  We were sitting at about 5% of people who played Powerball also playing Power Play, and now we are consistently over 20%.

So the change in Powerball is very good for us and we’re leveraging it to increase sales.  Even if the Power Play number’s only three, if you put that on and match five, you’re going to be a millionaire.  We decided that was going to be the most important for Montana about this change, and where we decided to put the most energy and resources into informing our public. We want to draw a lot of attention to that million dollar prize because that seems to be something Montanans really pay attention to.

Back to the World Poker Tour.  Jeri, tell us a little bit about the World Poker Tour, why it’s interesting and important.

J. Duran:  World Poker Tour in general is on TV now and it really attracts the younger demographic.  It’s something that’s really recognizable to everyone, and we think will be a good opportunity for us not to just sell the tickets but really put some recognition to our entire brand of scratch.  It’s a five dollar price point, and there is a second chance drawing available on the website.  We’re doing interesting advertising that is focused on putting on your best poker face. We’re going to be doing events and one-on-one ambassador style stuff. It’s also a good tie in with our new retailers, the bars and casinos,  because that’s a great environment to host some poker tournaments and really put a little life into our scratch brand in general by highlighting that particular game.  So WPT is exciting because it’s new, it gives us a new story to tell our retailers, it engages a player profile that wasn’t necessarily buying scratch tickets, it increases awareness of all the other products, and it offers a second chance drawing on the web site.  Getting people to interact with our website and become more aware of our presence on the internet is a very important aspect of all that we do.  So we do try to bring the most value out of a popular game, to promote and cross-sell all the other products.

What other games are hot?

J. Duran:  There’s another licensed property that no other state has done.  We just launched a game this week called Professional Bull Riders. Although we’re not doing quite as big of a promotion with it, professional bull riding is huge in Montana and a lot of people love watching it.  We actually even host one event in Billings in the eastern side of the state. It’s a two dollar price point.  We’ve worked hard to make it a really fun game for our retailers, creating sales contests with the retailers to promote the sales of this particular game. The retailer can win prizes to attend and backstage passes to meet riders at the event in Billings.  And we added a second chance drawing for players to go to the finals in Vegas.  They can only win this through a second chance drawing on our web site.

How did that brand collaboration come about? 

J. Duran: We implemented that through MDI Scientific Games. They listed the property, but no other state had yet taken advantage of it and so we really got to build our own program. They had the licensing, but one of the bull fighters is actually from Montana, so we put together a program highlighting him because everybody knows who he is.

How do you deal with the trade off between the pressure to hit your short term numbers and the goal of investing in the new products and innovations that will position you for long-term success?  It would seem this is a more challenging question than ever with bad economy combined with increased competition.

G. Parisot:  You just have to do both, of course.  We’ve laid the groundwork to be successful in the long run, but we’re also very cognizant of the idea of being flexible in the short term to move assets around, to do whatever needs to be done to meet and exceed our short-term forecasts.  It’s about balancing the two, but definitely includes allocating resources into areas that are important for long-term growth.  It is a good question, though, because in spite of the intention to invest in products with less short-term ROI than long-term potential, we do need to be flexible to move advertising money over to support a game that is not doing well or move quickly to respond to other needs that impact short-term results. 

You have managed resources prudently, really leveraging hot things like World Poker Tour and Fantasy Sports to sell the whole product line, and using Facebook and text messaging to reach out to new demographic targets.  Am I wrong in thinking these are not really huge investments, that it’s just a matter of being creative and taking the initiative to just doing some of these things that don’t necessarily cost that much money?

G. Parisot:  We have worked hard to leverage the resources that we have to get a certain outcome.  Technologies and media like Facebook and text messaging and other things that really have minimal cost compared to the benefits is an important part of that.  We’re very keen and focused on how we can use these different technologies to maximize our return on a limited budget.  We do need to be focused that way because we don’t have a large advertising budget.  It’s about being flexible, recognizing that different technologies have different impacts with different target groups, and exploring all the ways that different promotions, different games, and different media and distribution channels can be used together and integrated to create the maximum impact and results.