COVID-19 AND THE LOTTERY INDUSTRY FROM LOTTERIES TO VENDORS, PANDEMIC PROVIDES CHALLENGES, OPPORTUNITIES By Jim Acton Lottery Industry Consultant

INTRODUCTION

As the lottery representatives who attended the PGRI n What will be the revenue expectations for the new Lottery Expo in Miami parted ways in early March, no one fi scal year and beyond? could have imagined it would their last in-person meeting The passage of time will provide context to all these for many, many months. By mid-March, many of us had issues. While many lotteries saw little revenue impact retreated to the safety of our homes; handshakes and (and many, in fact, have enjoyed sales boosts as the hugs were replaced with Zoom meetings. lottery provided the only available source of entertain- With the nationwide spread of COVID-19 and the ongoing ment), others were hit hard and the pain will continue. stay-at-home/safe-at-home orders given by many Gov- Some lotteries had to make the diffi cult decision to lay ernors, life was turned upside down across the country. off employees. The fortunate amongst us were only dealing with barking As the lottery industry slowly returns to normalcy, it's dogs during video conferences. So many others have helpful to look back over the past few months, review been either battling the COVID-19 virus themselves or what has taken place in the industry, and discuss worrying about friends and loved ones. where the events surrounding the COVID-19 pandemic For those in the lottery industry, the concerns were multi- have left us. layered and the impacts were both small and large: In this special section, we will take a look at how the n How would employees deal with working from sudden shift in lottery sales due to pandemic-related home, many for the fi rst time in their careers? stay-at-home orders has renewed the push for iLottery n Do daily drawings continue with staff operating ball in many states. We will examine how some of the lot- machines? tery industry's most important retail locations, deemed as "essential businesses," are working to streamline n Is it safe to allow lottery retailers to continue to sell and speed-up lottery purchases. And we’ll look at lottery products? how lotteries have used social media and other online n How will the vendor-lottery relationship change communications tools to stay in touch with critical with few or no in-person visits? constituencies.

18 PUBLIC GAMING INTERNATIONAL • JULY/AUGUST 2020 Is iLottery the Key for States Needing to Fill Budget Shortfalls?

n 2014, the became states laid o workers, including from the ranks of the envy of the lottery industry when it lottery employees, including 60 at the Oregon Lot- launched its iLottery e-instant platform. tery alone (13% of the lotteries workforce) Lotteries watched, inquired and strategized In a radio interview in April, NY Governor said about how they could add a similar platform that the state might have to cut education funding in their states. Since then, other states have to address the state's budget shortfalls. come on board, oering either eScratch tick- ets or single day draw game sales - Georgia, "I said kiddingly to a legislator, ' is is the easiest Kentucky, Pennsylvania, New Hampshire, Illinois, budget we've done. ere's no option. e num- INorth Carolina and North Dakota. On July 1, ber is zero," Cuomo said. “We have no money." Virginia launched eScratch and single ticket/same- When we look at iLottery during these dicult day draw game sales. times, we might just be seeing the future of the But what happens now? Will states continue to lottery put on hyper-speed. slow-walk iLottery, even as they fast-track the process of licensing sports-betting operators? Will GEORGIA, KENTUCKY iLOTTERY lotteries be handcued as they look to modernize SALES SOAR; RHODE ISLAND their operations, broaden their customer base and LAUNCHES FULL iLOTTERY increase revenues? Or now, after months of vary- For both the Corporation and ing degrees of “stay-at-home” orders to help stop , the stay-at-home orders associ- the spread of coronavirus, have we arrived at the ated with the COVID-19 outbreak has been a fur- tipping point where states realize that retail habits ther opportunity to leverage their digital oerings. were already changing such that lotteries must Both lotteries enjoyed an excellent year for digital oer alternative purchase options that no longer sales in 2019 but by mid-May 2020, respectively require an in-person retail experience? were performing year-to-date +62% and +57% As state budget chiefs and lottery directors have in digital sales vs. the prior scal year. is growth nervously monitored there week-over-week sales, had accelerated through the end of 2019, when there is one critical point – iLottery sales, where both lotteries invested more on digital advertising available, never faltered. In fact, they skyrocketed and focused on player acquisition. in most metrics, including new customer sign-ups Both Georgia and Kentucky lotteries excel with and overall sales. draw-based-game digital oerings, particularly Will it take ongoing sales challenges, prot goal Keno, for which the digital channel represents stresses, and continuing revenue gaps across state 23% of total sales in Georgia and 15% of total budgets to nally push more states to expand lot- sales in Kentucky. Oering the same Keno game at tery oerings? If you consider where many states retail and digitally, rather than having a Keno-style nd themselves as the country steps forward and e-Instant game at a signicantly higher payout, back with economic re-opening, this certainly allows those lotteries to benet from the higher looks like the nal straw: prot margin with a prize payout of 65%, and to promote more cross-selling opportunities between - New York state is forecasting a $15 billion rev- core players. Given all that has happened since the enue decline across the state start of the COVID-19 pandemic, with many peo- - West Virginia has been losing $9 million/week ple not leaving their homes, the long-term strategic from its closed casinos alone planning of both lotteries and their well-timed choice to focus more on the digital channel at the - New Jersey, Pennsylvania and Ohio announced beginning of 2020 resulted in positive momentum limited spending and hiring freezes and a strong rst half of 2020. - Virtually unheard of in the past, a number of

PUBLIC GAMING INTERNATIONAL • JULY/AUGUST 2020 19 iLottery

ust prior to the COVID-19 outbreak, apps in the U.S. and most recently installed ity in just ve months,” he said. “ is is the IGT implemented plans to upgrade its latest advancements in player functionality leading lottery app solution in the market the Georgia Lottery’s digital platform for the . Alongside wagering and the rst to comply with Apple Guideline and increase the marketing support features, players can use the app to create play 4.7. We worked closely with the RI Lottery Jthe company provides to the lottery. e slips for retail purchases, store their favorites team to develop and launch an iLottery solu- results of that work played out March-May, numbers and identify themselves as player’s tion that provides a modern playing experi- as digital sales accelerated signicantly. In the club members. e app is fully compliant ence for RI Lottery players. It gives players early weeks of May, sales are at +155% in tra- with new Apple requirements regarding user the choice and convenience to now play ditional draw-based games, +115% in digital experience and native content for HTML5 Keno and e-instant games from their mobile Keno and +330% in e-Instant compared to games. Players have welcomed the new app, devices, consistent with how they engage the same time period in 2019. and it is number one among US iLottery mo- with other forms of entertainment and media as well as purchase goods and services today.” Built on the PlayCommand platform that also supports sports betting in the state, the IGT PlayDigital solution integrates the retail and digital lottery experiences together with a host of tools from purchase to play, and it can all be done in a few touches on the mobile app. Drago added, “Rhode Island players now have the added convenience of playing the lottery from their homes and personal de- vices. In collaboration with the Lottery, our expert marketing team has created promo- tions and loyalty campaigns to attract and retain players that will ensure a successful player engagement strategy to drive revenues for the RI Lottery.” All three Lotteries are powered by the IGT PlayCommand platform and sophisticated IGT’s iLottery mobile offerings for the GA Lottery, player account management system, which KY Lottery and RI Lottery enables lotteries to control all administrative functions such as payments, player account- “It’s exciting to see our team’s eorts making bile applications based on app store reviews. ing, marketing campaign management, a dierence in Georgia. From the new games Marty Gibbs, interim President and CEO of CRM and responsible gaming controls that have been developed for the market to the the Kentucky Lottery, said, “We are delighted for players. e team of digital marketing engaging promotions and loyalty campaigns to have launched our new mobile app. We experts help the lotteries improve results by our expert marketing team has rolled out, it’s expect the expanded functionality and ap- using the powerful reporting tools available rewarding that it has resulted in a positive out- pearance to help us continue to bring value, to analyze data that is turned into actionable come for our customer,” said Enrico Drago, convenience and the best entertainment to insights that drive the day to day digital busi- SVP, IGT PlayDigital. our players.” ness strategy. Similarly, the Kentucky Lottery had improved In late April, the Rhode Island Lottery “ ere is nothing more satisfying for the its focus on iLottery and had started launching launched a new mobile experience that IGT PlayDigital team than to help our new IGT e-instant games that oer increased enables players to register and play Keno along customers achieve greater results for good value to players through higher prize payouts. with a catalog of exciting e-instant games. causes through the addition of new prod- Sales have improved signicantly, from +37% Players can register for free, create a digital ucts and services,” explained Enrico Drago. in total year-to-date digital sales in mid-March wallet and have winnings under $600 auto- “Bringing modernized playing experiences to +57% by the end of May 2020 (comprised matically transferred into their accounts. is and solutions to market during this time has of +60% in digital draw-based game sales and enables the lottery to reach a broader range of further amplied the importance of a digital +260% in e-Instants). players and oer a convenient way to play. channel as a growth strategy for lotteries. We are committed to partnering with more and In early May, the Kentucky Lottery launched As SVP of IGT PlayDigital, Enrico Drago more of our customers to introduce and re- a new mobile wagering app built by IGT that leads the team responsible for creating and sponsibly grow the digital business over time delivers a completely redesigned customer ex- delivering the PlayLottery suite. “Our team set in order to drive new revenue growth.” perience. IGT has delivered 10 mobile lottery another record in delivering this functional-

20 PUBLIC GAMING INTERNATIONAL • JULY/AUGUST 2020 PENNSYLVANIA ENJOYS support the ’s iLottery pro- gram, with e ective use of powerful CRM tools AN ONLINE BOOST and bonusing programs that engage and retain While the Pennsylvania Lottery just launched players. e growth of the iLottery program its iLottery platform in May 2018, it has been in Pennsylvania since the program launched an eventful two years – two RFPs for operators continues to surpass expectations. Based on total (as mandated by the Commonwealth’s legisla- wagers, the $1 billion milestone reached just tion) and more than $1 billion in revenue. e prior to its two-year anniversary makes Pennsyl- Lottery has o ered internet instant games from vania the most commercially successful iLottery the start, and has added draw games to its online launch in North America to date. lineup, including and , During its  rst full  scal year of iLottery, which have been available on that platform since Pennsylvania traditional lottery sales grew 7.2% January 2020. over the prior  scal year and Scratch-O s alone It has been a busy, eventful two years for the PA grew 5.9%. But the month of April is where the Lottery. Lottery truly saw the potential of this technology start to ramp up. iLottery play was up 35% com- Add in the past few months, when at one point pared with March, with $89.2 million in topline about 30 percent of the PA Lottery's roughly play and $11.4 million in gross gaming revenue 9,800 retailers closed because of COVID-19, PA (play minus prizes and promotions/bonuses). Lottery executives were certainly happy to have e number of  rst-time players in April was iLottery available to players. also up 45% over March, with nearly 15,000 “During this unprecedented time, we have new online players.

The PA Lottery’s iLottery platform is available on most devices

With stay-at-home orders still in place in PA been seeing incredible growth in PA Lottery for most of May, that month then broke new online play,” said Pennsylvania Lottery Deputy records. Online play in May was up 7 percent Executive Director of Marketing and Products compared to April with over $95 million in Stephanie Weyant. “We are setting new records topline online play and $12 million in gross for play and  rst-time depositors, and breaking gaming revenue. May was also a record month them just a quickly.” for deposits, with over 44,000 depositors. Weyant added, “While we are happy to see a Powerball and Mega Millions sales online, which growth in our online play, a majority of our sales are reported separately, are making up about six still come from our traditional games. Further- percent of overall Powerball and Mega Millions more, the increase in online sales is not enough weekly sales, as compared to about two percent to o set the sales the Lottery has lost on the in previous months. traditional side of the business since Mid-March. Just to put it in perspective, an estimated 70 per- ese numbers can be largely credited to the cent of our business comes from our Scratch-O management of the entire game portfolio, sales. So, it’s our traditional products that remain delivery of exciting iLottery content to the mar- the foundation of our business.” ket, and tools to enable retailer support, while continuing with the strategic management of all Behind the scenes, there are cross-functional traditional lottery products sold at brick-and- teams of lottery, systems, marketing and digital mortar retailers. experts at Scienti c Games working together to

PUBLIC GAMING INTERNATIONAL • JULY/AUGUST 2020 21 iLottery

As North America’s  rst $1 billion iLottery operator, the Michigan Lottery has achieved results that show that sustainable growth and performance is available through the iLottery channel. States like New Hampshire, which launched its iLottery program in September 2018, are proving that this model for success can be replicated. ough New Hampshire is a state with a population of only 1.3 million, its per capita iLottery sales in its  rst year of operations exceeded the standard set by the Michigan Lottery by 75%. During these past shutdown months, these lotteries have shown the potential of iLot- tery. Comparing April 2020 to March 2020 performance, both Michigan and New Scientifi c Games off ers a variety of games to PA Lottery iLottery players Hampshire Lotteries saw improvement across Amy Bergette, Vice President, Digital Con- o er full iLottery to it players, the company all major program KPIs. e Michigan Lottery tent Studio at Scienti c Games which oper- has since expanded its customer base to experienced a 40% increase in bets, or growth ates the PA Lottery iLottery program, said, include lotteries in Virginia, New Hampshire of $51.7 million. Net Gaming Revenue was " e past few months have seen a big uptick and North Carolina. Working with a diverse similarly improved with an impressive 46% in online/mobile playership, but it has actu- range of lotteries has provided the company uptick over March. e New Hampshire ally been an incredibly busy two years for all with a holistic view of what is happening in Lottery’s April 2020 results posted 49% higher of us. iLottery brings game entertainment the industry. in terms of bets. is translated to a $580,000 increase in net gaming revenue – the single directly to a player's computer or mobile de- " ere is a pent-up demand for iLottery that highest grossing month-over-month change vice, so the ability to o er digital play has al- has been building among U.S. lotteries for a since the launched in lowed the Lottery to maintain a level of sales number of years,” said Scott Bowen, SVP of September 2018. Player acquisition has seen continuity during the global COVID-19 Government A airs and Business Develop- highs that have only been outpaced by billion- crisis and provide vital funding for programs ment for NeoPollard and former Commis- dollar jackpots, with 105% and 45% increases bene tting older Pennsylvanians.” sioner of the Michigan Lottery. “Considering in  rst-time depositors in Michigan and New Bergette explained, “Our iLottery platform the continued impact of the COVID-19 Hampshire, respectively. is built to handle an enormous volume of pandemic and the economic pressures facing activity so we are equipped for the level of lotteries as a result, the need for iLottery has Across NPi’s customer network, overall per- engagement we have seen in Pennsylvania. never been greater. Not only does iLottery formance at the close of May drew signi cant It also provides the  exibility to integrate give players more options, U.S. lotteries with increases as compared to February, before the powerful tools to enable important a liate iLottery have experienced no negative impact impact of shutdown orders. ere has been a programs that incentivize retailers to partici- on retailers. In fact, the growth of iLottery signi cant in ux of new players – growth, on pate in the iLottery program by signing up in Michigan has occurred alongside a 45.5% average, of 227% since February. Similarly, new players. Combined with highly e ective increase in retail sales since iLottery launched bets grew by over 95% and Net Gaming marketing campaigns that leverage today’s in 2014." Revenue saw tremendous improvement, with best practices for player retention and en- an average of 120% higher returns. gagement, this ensures continued growth for NPi’s iLottery programs for the MI and “ e recent and signi cant impacts of the NH Lotteries off er mobile capabilities the program.” global COVID-19 pandemic to the way which expand its accessibility to players lotteries traditionally operate and market NPi’s CUSTOMERS SEE their products has emphasized the need to accelerate digital HIGH ACTIVITY LEVEL transformation and diversify how Powering the most pro table iLottery lotteries engage players,” said programs in the industry in terms of per Doug Pollard, Co-CEO, NeoPol- capita return to state, NeoPollard Interactive lard Interactive. “As the industry (“NeoPollard” or “NPi”) has certainly seen begins to focus on economic an array of new players of all ages and back- recovery and rebuilding successful grounds join the ranks of play-from-home retail partnerships, state lotteries customers. While the Michigan Lottery was and governments will be well- the  rst lottery to partner with NeoPollard to served to advance discussions on

22 PUBLIC GAMING INTERNATIONAL • JULY/AUGUST 2020 iLottery iLottery, which has seen tremendous growth and the online sales of those across all major key performance indicators games have increased more during this period.” than 400% since Fiscal Year While many lotteries have been forced to 2017. Last  scal year sales postpone or cancel game launches, reach new were up 68% compared to  nancial settlement terms with their retailers, the prior  scal year, and sales or even shut down distribution points to this year are tracking 20% protect the health and safety of players, the higher. iLottery channel has continued to  ourish It will be a new world in with few operational impacts. Virginia this summer as One of the most signi cant performance eInstant tickets are now a part of the Commonwealth’s indicators regarding player adoption of the A recent game release from IWG iLottery channel is through the share of online online o erings. Lottery sales as compared to retail. In North America, One common thread across all of the US o cials are excited about what that will mean online lotteries typically reach 1-3% of their lotteries currently o ering eScratch games for revenue to their good causes. retail sales volumes through draw-based game is Instant Win Gaming (IWG). In fact, (DBG) sales online. With its intuitive e-com- IWG supplies eScratch games to every single merce purchase  ow, NPi’s lottery partners are North American lottery that sells eScratch. accustomed to achieving a 10% share of DBG As Rhydian Fisher, CEO of IWG, explains, sales through the online channel. In fact, dur- “it is now standard practice for lotteries o er- ing the COVID-19 shutdown in March, the ing eScratch to contract with an additional percentage of online sales compared to retail eScratch game provider for content to supple- doubled to nearly 20% of sales. ment their system provider’s games. No single games studio is capable of providing Doug continued, “As an industry, we’ve long the complete range of content to engage the since understood that the ability to maximize entire spectrum of players.” sales through alternate distribution channels, such as iLottery, is a sustainable growth strat- Many players will maximize play on a new egy. Channel diversi cation and the ability to game when it is released, and this focus will adapt to volatile economic circumstances is tail o over a 7- to 14-day period. For this customers can now vital to protecting future revenues as competi- reason, best practice, as shown in Michigan, purchase eInstant tickets along with draw games on the new mobile app tion for ‘share of mind’ and ‘share of wallet’ Pennsylvania and others, is to launch one supplied by NeoPollard. encroach upon lottery player bases. While we game every two weeks. Players will learn to couldn’t have predicted that iLottery would expect this pattern of launches, so consistency “When the General Assembly passed the iLot- prove to be a solution to softening the rev- is critical. For selected periods of the year (i.e. tery legislation earlier this year, they obviously enue impact during a global pandemic, this the holiday season), introducing games on a had no idea what was about to happen with has been an eye-opening experience, and the weekly basis is a good lever to support peak the pandemic,” said Virginia Lottery’s Director time to act is now.” demand. Further, the release cycle must avoid of Digital Rob Wesley. “But because of their back-to-back launches of games from the actions, Virginia will be able to o er our play- same play category. ers an expanded alternative to in-person retail. eSCRATCH IS DRIVING ey will be able to purchase a variety of lot- GROWTH “It’s common for a game developer to claim to tery products from their homes and anywhere As iLottery emerges as a highly successful have a large library,” explains Fisher. “What is else within the Commonwealth using their sales channel, eScratch is the game category not common is for a developer to frequently computers or mobile devices. that is leading the growth. Lotteries work invest in new play mechanics. is requires a much high degree of commitment. But regular “Lotteries are working hard to adapt to closely with their system providers and their consumer behavior, which includes making marketing partners to attract and acquire release of new mechanics is fundamental to driving the eScratch category forward.” purchases on the internet,” Rob said. “Our players. But then it’s up to the games to en- plans have been in motion for many months, gage. First-time players must be immediately and the restrictions around the pandemic able to  nd games they love to play. Return- WHERE FROM HERE? simply highlight yet another positive bene t to e results seen by the Virginia Lottery are ing plays must consistently  nd new games to meeting our players where they already are – indicative of what a new entrant to the online try. Quickly, lotteries learn that their eScratch online. e current circumstances have led us sales arena might see. Virginia has allowed the portfolio needs to be a systematically evolving to accelerate our scheduled launch of iLottery.” mix of game types and play mechanics. A online purchase of draw game subscriptions wide variety of visual skins overlaid on just since 2005, converting to NPi’s platform Across the country, there are many lotteries a limited mix of game mechanics is not the in 2016. Mega Millions, Powerball and which, like Virginia, will look to quickly push n same and does not su ce. are the games currently o ered, iLottery to the top of their “to do” lists.

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