NEW TECHNOLOGY- OPPORTUNITIES AND THREATS FOR LOTTERIES
Presentation Notes
Jan Stewart Lotteries Commission Of Western Australia
Paper presented at the conference Gambling, Technology and Society: Regulatory Challenges for the 21st Century, convened by the Australian Institute of Criminology in conjunction with the Australian Institute for Gambling Research and held in Sydney, 7-8 May 1998
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INTRODUCTION
[Note: these are speaking notes and should be read in conjunction with the slides attached]
Last weekend I attended a very different conference. It was a Rotary conference, which had as its theme the role of service clubs in a rapidly changing Australia. One of the speakers referring to the dispute on the docks quoted the Prime Minister describing this as one of the defining moments in Australia’ history. It seems to me that we will look back at this period as a defining s moment in the history of the gaming industry. In the segment in which I work, there has been a number of defining moments in relatively recent times, one of which was the invention of Lotto and more recently going what we call "Online" in the mid 80’ [ie selling from terminals in the s Retail outlets rather than by the old manual system].
Today the word "Online" has taken on a whole new meaning for our industry.
Lotteries has traditionally been a highly regulated industry, in most parts of the world operating as a state run monopoly to raise funds either for State coffers, or more often for special causes, almost all being some kind of community benefit [eg education, hospitals, arts sports etc].
Many in the industry internationally still appear to be coming to grips with the changes rapidly coming towards us. But if a recent survey on the general readiness of Australian business for the changes electronic commerce will create for every business we are not alone in our tardiness in our response.
I need to make clear that I don’ pretend to be an expert on these new developments in our t business. Like most of us, I’ here to learn and to expand my understanding. I also need to make m clear that I not a spokesman for the Australian Lotteries industry. In the time I have available, I plan to describe the place of Lotteries in the overall gaming market and to outline the threats and opportunities as I see them for our part of the gaming business.
TERMINOLOGY
The word "interactive " has been used a good deal of late, often apparently interchangeably with 2
the word "Online". As I said before, Lotteries has been delivered Online for over 12 years and more lately checking facilities for scratch tickets have been "Online".
It seems to me that the word interactive is currently being used to refer to various means whereby gambling products can be delivered directly to the players home, whether by phone, personal computer or in the not to distant future by television with the convergence of the PC, television and the Internet.
In my opinion many of the products which can be delivered by these methods are not what I would call interactive in that they do not require any participation in the actual game by the player. Lotto being a prime example. For the purposes of this presentation, I plan to use the term to refer to methods of delivery of both existing gaming products and future products rather than the kind of product.
SLIDE 1 - WORLD TRENDS
This slides shows the size of the gaming market and the relatively small but significant [especially in terms of return to government] part of the Lotteries segment
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SLIDE 2 - GROWTH IN AUSTRALIAN LOTTERIES TURNOVER
Shows the rapid growth since the introduction of Online Lotto in the mid 80’ and more recently s with the launch of Oz Lotto in 1992 when NSW joined the National Lotto Bloc. Of late sales have flattened as a result of increasing competition from other sectors of the industry and the maturity of the products.
Lotto in Australia is managed as a "Bloc" arrangement whereby all the States work as a business partnership to create an attractive prize pool. Recent changes in National competition policy and the increasing commercialisation of the industry has created new challenges for Bloc relationships
SLIDE 3 CHANGE IN MARKET SHARE
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Lotteries share of the gambling market varies from State to State, with NSW having the smallest share of the market as a percentage [5%] and WA the largest [12%]. This slide shows very clearly the impact of the introduction of gaming machines on market share. Needs to be noted that the overall market has grown and that Lotteries turnover has increased every year until 1996\97 but that as proportion of the market it has deceased.
The Lottery industry as a whole has some real challenges if it is to maintain, let alone increase its turnover and return to government in the next few years. Little growth can be expected from the existing product range so either new products or new methods of distribution will need to be found.
The new technology presents some interesting opportunities:
• New and more entertaining games • Delivery of existing products direct to the players home • Use of smart cards in retail and as player loyalty programs • Digital TV 5
SLIDE GAMBLING POLICY - ISSUES FOR LOTTERIES
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WA’ S
Expansion of the gambling industry has to be undertaken within the parameters of government policies. In Western Australia, government policy is very clear. Despite the example of Victoria [or perhaps because of it] our government has made very clear that they will not allow the expansion of the industry in WA and in particular will not allow the introduction of gaming machines outside the existing arrangements with the Casino. Currently, unlike Queensland where the interactive [player protection bill was recently passed] and other States Western Australia does not plan to introduce legislation to license gaming into the home. While it seems likely that Lotteries will be permitted to deliver existing products [other than scratch tickets] via the Internet competition from other forms of gaming which may be licensed in other jurisdiction will be a challenge.
Because of the unique relationship Western Australia Lotteries has with e community expanding gambling opportunities creates even more difficult policy dilemmas.
SLIDE 5 HOW OUR FUNDS ARE DISTRIBUTED
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As can be seen from this slide the WA Lotteries makes grants directly to many community and charitable groups in WA. This means that those who are the most likely to be critical of expansion in the industry are also highly dependent on us for funding and are some of our closet allies.
SLIDE 6 GAMBLING AND COMMUNITY BENEFIT
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SLIDE 7 MARKET RESEARCH
Shows people do not see Lotteries as gambling at all. Seen as having a bit of a flutter with a clear link to community benefit. This has important implications for the positioning of Lotteries in the community, particularly in Western Australia as the distinction between "hard" and "soft" forms of gambling become increasingly blurred.
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SLIDE 8 IMPACT ON RETAIL DISTRIBUTION
Lotteries are currently sold through an extensive network of owner operated small businesses. This has been deliberately fostered in the industry with emphasis on well presented outlets in key locations. Many of these businesses are reliant on Lotto, if not for the major part of their profit [although this is the case for Lotto Kiosks] but certainly to bring the foot traffic into their stores. If interactive gaming is to succeed the question must be asked where is the profit to come from? Will it result in a shift from traditional buying habits or will the market expand? If the latter is the case where will the spend come from if not from existing forms of gambling? So far no one seems to be able to answer this question. But if there is to be a change in current customer behaviour then it will inevitably impact on these small businesses.
SLIDES 9a, 9b, 9c COMPUTER USE IN AUSTRALIA
In considering the likely impact and the timing of the impact of the new forms of gambling, we need to have some idea who is using the Internet and for what purpose. Many claims are made about the penetration of the Internet and the increasing use of the Internet but there still seems to be little hard data on its use for our business despite all the hype primarily it seems to me by potential operators.
This recently released survey by the ABS shows some interesting trends in usage, as does the attempts by www.rgtOnline.com to relate this to potential gambling users. 9
It concludes with a quote suggesting that in home gambling market is a lot smaller than many would have us believe.
What to make of all this I am not sure. What is clear is that at present there is a marked discrepancy between the profile of a Lottery player and the profile of an Internet user and that we 10
can confidently expect that our players will continue to frequent Retail venues for some time to come.
The challenge is to pick the moment when this will be a viable option for the delivery of our products and be there when that occurs.
SLIDES 10a, 10b 10c USE OF LOTTERIES WESTERN AUSTRALIA HOME PAGE [www.lottery.wa.gov.au]
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These slides give us some clue as to the increasing use of the net as method of information. While we do not as yet sell our products on the net we do have the site with the first lotto results in Australia [www.lottoresults.net] which might account for the number of hits.
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One of the most interesting features of this slide is the frequency of use of the site on Monday morning at 9am suggesting checking Saturday lotto results is the first thing people do when they arrive at work after the weekend!
SLIDES 13
11a,
11b LOTTERIES ON THE INTERNET
Most Lotteries in the world like us have an information site on the Internet. Very few are actually selling on the net. These slides show the current situation with sale of lottery products by this method. You will note that other than the Red Cross Lottery which operates out of Liechtenstein, all the other state operated Lotteries sell only to players in their own licensed jurisdictions. How long this will be maintained is another interesting question. While State operated Lotteries may be willing to abide by a voluntary code of practice which respects each others borders, competition policies both in Europe and Australia may make it increasing difficult to maintain this position.
The decision of Australia to regulate Internet gaming compared with the stance taken by the USA with Kyl Bill before the US senate to ban Internet gaming completely presents a most interesting challenge for international trade relationships which only the federal government appears to be in a position to resolve.
Of course the other question is one for the technical experts to answer which is even with the will to do so, will governments be able to control the Internet?
SLIDES - 12a, 12b PREDICTIONS FOR THE LOTTERY INDUSTRY
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These two slides are a summary taken from The Whole World Lottery Guide 1997. They outline in many of the points made earlier in this presentation. What is clear is that change is occurring rapidly in all aspects of the business and is likely to continue at even more rapid a rate.
SLIDE - 13 GAMING INDUSTRY PREDICTIONS
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This slide contains some further predictions which appear to be in contradiction to the earlier material on predictions about in home gambling. I must admit with so many varied opinions it’ s hard to know on what possible evidence the prediction by Arthur D. Little could be made. He may of course be absolutely correct in what he says but who will ever know until the time comes.
SLIDE 14
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And a final word which suggests that while we may not be able to predict the ultimate size of the market, that there will certainly be a market for Internet gambling.
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