The Massachusetts Lottery Wants to Play the Expansion Game

The Massachusetts Lottery Wants to Play the Expansion Game

  • Ken Adams
July 13, 2016 9:43 PM

Lotteries have been in the news a lot lately.  First a lucky winner hit Mega Millions for $540 million after thirty-five consecutive drawings without a winner.  And now Powerball is back on the prowl. The Jackpot is now at $311 million after only eighteen drawings.  Powerball grows much faster than Mega Millions and if it does not hit at one of the next two drawings, it will also be in the $500 million range; thirty-five drawings would put Powerball over two billion dollars.  Those big numbers always capture the national imagination and the attention of the media.

The large jackpots drive lottery revenues and put millions and sometimes billions of dollars to work for good purposes. Lotteries have become big business and important to the forty-four states with a lottery.  Only Alabama, Alaska, Mississippi, Nevada and Utah do not have a state lottery.  The use of the proceeds changes from state to state.  For example, Arkansas lottery ticket sales reached $455 million which translated into $85 million for college scholarships.  California, the granddaddy of state lotteries had $6.3 billion in sales; those tickets translated into $1.6 billion in funding for education in the state.

A new report says the Arkansas lottery enjoyed record-breaking sales over the past year that funded an increase in college scholarships in the state….total ticket sales during the fiscal year that ended June 30 were $455.6 million, up 11.5 percent over fiscal 2015…Net proceeds available for scholarships were $85.4 million for the year, $6 million more than lottery officials had projected for the fiscal year and an increase of about $13 million over the prior year’s proceeds. Associated Press, 7-11-16

The California Lottery says it collected a record $6.3 billion in the last fiscal year, up nearly 15 percent…profits totaled $1.5 billion in 2015-16. That money will be divided among schools. The bulk of the lottery’s revenue comes from scratch-off games, which comprised about $7 of every $10 the lottery collected.  Associated Press, 7-11-16

A billion dollars for education is a great deal of money and it is critical to education in California.  Other states also generate billions in lottery sales; the Massachusetts lottery generated $5 billion in sales providing $985 million for public services and education in 2015.  There are only 6.7 million people in Massachusetts as opposed to 38.8 million in California.  The people in Massachusetts on average are spending a lot more than those in California and trying their best to fund social services, but it apparently is not enough.  The lottery is asking the legislation to allow for online games.  If Massachusetts does approve online lottery games it would join Illinois, Georgia, Minnesota and Michigan with online lotteries.

In response to declining sales among digitally savvy young adults, the Massachusetts State Lottery is calling on lawmakers to open a new gambling frontier — lottery games offered around the clock on mobile devices and computer. Lottery Post, 7-12-16

Massachusetts will not be the last state to consider putting its lottery online; in time all states will consider it; indeed Pennsylvania and West Virginia are currently debating the issue.  The reason is simple; lotteries compete against all other forms of gambling for the consumer’s attention and dollars.  Except when the multi-state mega jackpots are over $300 million, lotteries are not really competitive.  They are convenient, but not competitive; horse racing has better odds and higher payback.  Lotteries have another major disadvantage – the profits go for good public causes and the costs of those increase continually, while on average lottery revenues decline.  That sends lottery directors to the legislature to beg for permission for new games, including in this case, online games.

Taking the lottery online is only the next move in the endless chess game that is the expansion of gambling.  The final move, the checkmate, as it were, will come after all states have online lotteries and all of the states have expanded other gaming offerings to the limit of the market.  At that point each lottery will be where it is today. The revenues will be declining and the demand on those funds will be increasing.   The final move will be online video lottery terminals, the infamous slot machines.  With online VLTs, the lotteries will dominate the gambling market.  It will spell the end of many of its competitors; however it is a dead end for everyone.

Once the lotteries have online VLTs, there will be no more moves of expansion and growth left.  The state treasurer in Massachusetts said the internet is the way of the future and now is the time to embrace that future.  He is probably right on both counts, but it does not guarantee that future will be one of successWhen that final move is made to online slot machines, the lotteries will have reached a point from which there can be no more growth and will enter an era of long, slow decline.  The Massachusetts lottery wants to make the penultimate move.