Upbeat NCLGS Lottery Panel Exudes Calm Confidence

The four panelists on the Committee on Lottery at the National Council of Legislators from Gaming States (NCLGS) Summer Meeting Friday in Louisville, Kentucky, discussed a gaming vertical that is healthy on multiple fronts.

Subjects included the co-existence of retail lottery and lotto couriers as both sides look to meet the changing needs that come with trying to reach new demographics. There was also a nod to healthy, double-digit profit margins and the benefits that lotteries are offering states.

‘We’re in the future right now’

Mary Harville, president and CEO of the Kentucky Lottery, discussed the importance of being connected to the paying public and touted the benefits of her agency. She highlighted that the Kentucky Lottery is projected to transfer $384 million toward scholarships and other programs in the commonwealth this year.

“We’re going to focus on the good causes that we support because no one else supports college scholarships for Kentucky colleges,” she said. “We’re very proud of that.

“And people love knowing that when they buy a Kentucky lottery ticket, they are funding a college scholarship for a Kentucky college student.”

Larry King, vice president of Corporate Public Affairs for Brightstar Lottery, picked up on that vibe. He noted that 32.5% of lottery money in fiscal year 2022-23 went toward what was labeled “good causes,” which includes scholarships. That was the second-largest allocation of ticket sales behind the 58.9% returned to players as prizes.

“We’re in the future right now,” said King, “because the future is visible. The transformation has already begun. … The culture today, the younger demographic, they don’t want to walk into a store, buy a ticket on Monday, wait until Wednesday for a drawing. They want instant play.”

He also mentioned the healthy profit margin lotteries enjoy at approximately 30%. King cited Tennessee as an example of revenue-generating efficiency with its two gaming verticals — lottery and sports betting. The latter generated approximately $100 million in tax receipts with $5 billion handle in 2022-23. The lottery, meanwhile, produced more than $500 million with $2 billion in ticket sales.

Ferhan Hamid, chairman of the Virginia Lottery board, expressed the importance in strengthening the legal underpinnings of the state agencies. While he veered slightly to talk with pride on how the lottery was also able to license three casinos with unanimous votes, his overriding theme was about good leadership.

“When you get people together in a reasonable manner of staying on board with the right objectives and the right type of leadership, good things can happen,” he said.

Courier and retail co-existence

Lotto.com CEO Thomas Metzger echoed King’s sentiments, calling the lottery “an overlooked form for raising money for good causes” while producing the 30% profit margin. He stressed lotto couriers are not in competition with retail locations but rather serve as an additive.

Metzger pointed to three jurisdictions — New Hampshire, West Virginia, and Washington D.C. — where couriers predated iLottery. Lotto.com’s demographic breakdown showed nearly half of its players were ages 18-44. It also skewed slightly more to men at 53%, but the biggest takeaway was that the average annual income of a player who utilized Lotto.com couriers was $120,000 compared to $45,000 for retail users.

He also cited New York as another example of where couriers are not cannibalizing the retail market. The three licensed couriers generated $215 million in sales, which was roughly 6% of all sales. Metzger pointed out couriers and retail outlets had roughly the same 6% year-over-year increase in sales for 2023, with courier-based players bringing an average spend ranging from $40 to $140.

Metzger said the convenience fee that lotto couriers charge has a hidden benefit for retailers when the player steps out of the digital environment.

“When we bring in a new customer who’s digitally native, the next time that customer is in the 7-Eleven or in a convenience store, they are now a lotteryist, and they weren’t before,” he explained. “And so now they’re in that store, they say, ‘Hey, I can go buy that scratch ticket’ or ‘I can buy that Powerball or Mega ticket’ and avoid the convenience fee.

“So we really have seen very strong correlation between the couriers launching growing sales and retail sales growing simultaneously.”