ARTIFICIAL INTELLIGENCE - TRANSFORMS THE BUSINESS OF KNOWING AND SERVING YOUR CUSTOMER SRINI NEDUNURI
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JANUARY/FEBRUARY 2020 www.PublicGaming.com LOTTERIES RESHAPE THE ROLE OF RG IN CORPORATE SOCIAL ARTIFICIAL RESPONSIBILITY INTELLIGENCE SARAH TAYLOR TRANSFORMS THE BUSINESS OF KNOWING AND SERVING YOUR CUSTOMER SRINI NEDUNURI SMALL-BALL VERSUS THE NEXT BIG THING GORDON MEDENICA
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CONTENTS JANUARY/FEBRUARY 2020 Publisher & F E A T U R E D I N T E R V I E W S Chief Executive Officer Paul Jason pjason@publicgaming.com 10 26 30 President Susan Jason sjason@publicgaming.com Brand and Design Dan Eggers Design Honored Founders Doris & Duane Burke Contact Information T: +425.449.3000 10 Lotteries re-imagine their role as leaders in Corporate Social F: +206.374.2600 Responsibility For email address changes, Sarah Taylor, Executive Director of Hoosier Lottery in Indiana subscription requests and requests to be placed on 26 Reimagine Play™ our e-Newsletter distribution Patrick McHugh Executive Vice President & Group Chief Executive, list, contact: sjason@publicgaming.com Lottery, Scientific Games Corporation PGRI, Inc. 218 Main Street, #203 30 One Connection that Changes Everything Kirkland, WA 98033 JCM FUZION® unleashes the power of “what if…” PublicGaming.com David Kubajak Senior Vice President of Sales, Marketing, and Subscriptions Operations at JCM Global Annual Public Gaming International magazine subscription rates: F E A T U R E D A R T I C L E S United States: $145 USD Canada & Mexico: $160 USD 14 Small-Ball versus the Next Big 14 All other countries: $225 USD Thing: Traditional Lottery thrives Public Gaming on incremental improvements International Magazine and “small-ball” wins – Gordon Published six times a year and Medenica, Director, Maryland distributed to readers all around Lottery and Gaming Control Agency the world. Electronic version is e-mailed and is also available on 30 our news website: 20 Harnessing AI to Benefit PublicGaming.com Lotteries – Srini Nedunuri, Vice President - Play Digital, IGT January/February 2020 Volume 47, Issue 1 ©2018 all rights reserved. 24 Should Powerball Go Global? – Public Gaming Research Institute By Simon Jaworski President of cISSN: 1042-1912 the U.S. Office, Leger the Research Intelligence Group 4 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
F E ATU R E D A R TI C LE S C O NT. Visit Our Family 32 20/20 VISION: With Ever 38 Of Websites Expanding Global Business, Future is Bright at Scientific Games – Scientific Games Corporation PublicGaming.com industry news & information 36 New Opportunities Ahead: Harness the Power of the PGRITalks.com Curiosity Gap – Pollard Banknote videos of conference presentations PublicGaming.org 38 Self-Service Payment Stations PGRI conference information and Convenience for Retailers and Consumers – Grover Gaming PGRIDigitalLibrary.com 45 magazine archive of past issues 45 CX: Unlock the Exceptional Asia PGRIDirectory.com Pacific Lotteries Association listing of lotteries and vendors Annual Conference, PGRIAwards.com Oct. 14-18 in Brisbane Showcase of industry honorees Scenes from the New Years Rockin' Eve Extravaganza Announcing the First Powerball® Million dollar winner of 2020! recognized by the D E P A R T M E N T S The partnership between dick clark productions and Powerball® started in early 2019 with a series of second chance drawings in partic-ipating jurisdictions to win a VIP trip to New York City. It culminated in the early morning of January 1, 2020, with the awarding of $1 million - live on ABC's New Year's Rockin' Eve with Ryan Seacrest national broadcast. Following are photos from the 3-day Extrav-aganza. The highlight of the trip was New Year's Eve and the Powerball Party at the Crowne Plaza Hotel in Times Lottery Industry Hall of Fame PGRI Lifetime Achievement Award Square. Just after midnight, country music star Jessie James Decker announced the First Powerball Millionaire of the Year live on TV. Congrats to lucky winner, Blaine Marston of Maine! 8 From the Publisher Sharp Award for Good Causes 42 Paul Jason Lottery Industry Statesman and Stateswoman Award 42 Scenes from New Years Rockin’ Eve Extravaganza: First Rebecca Hargrove Mentorship Award Powerball Millionaire Collaboration Award 46 Scenes from the Asia-Pacific Lottery Association (APLA) Annual Conference – October 14 Subscribe To Our to 18 in Brisbane, Australia Free Digital Newsletters Receive our daily newsletters at no 48 Scenes from the African charge, published 5 times a week Lotteries Association Annual Scenes From African Lottery Association Congress July 2019 in Casablanca, Morocco to bring you the latest breaking Conference – July 1 to 3 in 1 2 3 48 news in the global lottery industry. Casablanca, Morocco Send an e-mail to: sjason@PublicGaming.com 52 Pulse of the Industry 4 5 6 with “add to Daily Digest list” Synopsis of Recent Industry News in the subject line. 58 AI : The Lottery community’s pathway for both protecting 7 8 players and enhancing the player experience – Philippe 9 Vlaemminck, Managing Partner 11 & Beata Guzik, Director EU Public 10 Affairs 1. Rhita Lahlou, Yannis Stathis 2. Amadou Samba Kane 3. Jean-Luc Moner-Banet 4. Ndéyé Fatou Sylla Samba 5. Younes El Mechrafi 6. Sylvère-Hen- ry Cissé , Amadou Diaw, Thierry Gabarret, Giancarlo Sergi 7. Stanislas Zeze 8. Alexandre Qader 9. Andreas Kötter 10. Susan Jason 11. Rhita Lahrou, Rebecca Hargrove 6 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
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From the Publisher Adoption of new technologies and at managing our gaming assets for by thinking of them more as a portfolio business process rarely happens in a steady long-term sustainable growth than are our of games to be integrated for optimal predictable continuum, but rather in counterparts in the other gaming sectors. synergies. Presentations to complement discontinuous ebbs and flows in the long Gordon Medenica puts some of these this session will focus on portfolio runup to wide-spread acceptance. For themes into proper context. To be sure, management, and how we might integrate instance, many people were relegating the Team Lottery faces some major challenges. the marketing and promotion of games to internet to the status of over-hyped fad just What Gordon’s presentation (re-cast appeal to the broadest spectrum of play- twenty years ago. And just fifteen years as an article) at PGRI’s last conference styles and preferences. ago, Google was losing money and had did, though, was put into context the I want to congratulate dick clark fewer website visitors than MySpace. It’s nature of our issues, how we have faced productions for producing the most hard to grasp just how quickly everything challenges in the past, and how we might fabulous New Year’s Rockin’ Eve changes and who will be the innovator chart a course for ongoing success in the Extravaganza ever. The first Powerball with staying-power. future. For one thing, there have been Millionaire of the year and the decade was I am not clear on exactly how AI will some home-run innovations that bumped announced after a series of high-profile affect our industry, or how to apply AI to the Lottery growth curve up in a big spots on ABC’s national broadcast from positive effect. But at this point, hopefully way. Many of those have come from the Times Square. It was magical. the fact that we don’t understand effective collaboration of the community something doesn’t cause us to under- of U.S. lottery directors. But what keeps estimate its impact. We can observe how Lottery on top as the most popular game- We look forward to seeing you all at AI powered Google and Amazon into of-chance in the world, with the largest PGRI Smart-Tech and WiLL Miami dominance, and we can expect it will player-ship, revenues, net profits, longevity, Eden Roc Miami Hotel do the same for those who figure out and probably any other measure … is how to apply it to their own businesses continuous, incremental improvements. March 3 to 5 going forward. The line from AI to This disciplined approach towards Check in at PublicGaming.org for transformative value for the customer in shepherding this $85 billion industry in conference updates and more specific our own business may not be crystal clear. the U.S. has been criticized as not being info about the venue and conference But successful application of AI will be innovative enough. Some mantras that program. reshaping entire competitive landscapes describe the new-age approach include just as the internet has done over the And Visit WomenInLotteryLeadership. “move fast and break things”, and “you com for more info about WiLL past twenty-five years. And it won’t be gotta allow for mistakes”. What might twenty-five years, or fifteen years. It’s now. work in a start-up with little to lose and Srini Nedunuri and Philippe Vlaemminck a mission to disrupt an industry is not get the conversation started for us in the the recipe for success in an established lottery industry. business, in fact the dominant business in Predictions of Lottery losing “relevance” its industry, and with stakeholders who in a world enamored with the Next Big appreciate a risk-management calculus that Thing have proven to be misguided. We does not jeopardize their equity position. can be thankful for that. But instead We will be exploring What’s Next at PGRI of breathing a sigh of relief, we might SMART-Tech Miami on March 3-5. consider how to leverage our strengths into The theme of the conference is "Store of a more defensible platform that will serve the Future" which includes integration us well into the future. The consumer of the online and off-line connection to Paul Jason, Publisher now enjoys a huge variety of options and the consumer, iLottery and digitization Public Gaming International Magazine that certainly affects our market-place. of the in-store shopping experience as MMOG (Massively Multi-Player Online well as innovative POS, cashless options, Games), “e-sports” and Fantasy and sports merchandising and promotion to comport betting, and Fortnite may be carving with changing consumer shopping out their share of the consumer market- behaviours and market trends. We will place. But we now know that Lottery has also explore ways to improve the combined a resilience and longevity that no other performance of multi-state games, and the game has ever had. And we know that two national jackpot games in particular, we are more resourceful and effective 8 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
The Lottery Center™ is a dynamic modular unit that turns counter space into an attention-grabbing, clutter free lottery space. Lottery Center™ shown with Indiana Lottery merchandise.
PUBLIC GAMING INTERVIEWS Sarah Taylor Executive Director of Hoosier Lottery in Indiana LOTTERIES RE-IMAGINE THEIR ROLE AS LEADERS IN CORPORATE SOCIAL RESPONSIBILITY revenue and corporate social responsibility PGRI Introduction: Hoosier Lottery earned WLA Level 4 are not mutually exclusive, is an ideal that the Lottery industry can embrace. We CSR Certification four years ago and was re-certified late in need to identify and codify best-practices, 2018. Sarah Taylor, member of the World Lottery Association and establish CSR/RG/Sustainability markers against which to measure results. Corporate Social Responsibility (CSR) Committee, discusses Let’s utilize our role as the leader in this the transformative impact of expanding Responsible Gaming space and inspire others to think bigger as well so that everyone is working together (RG) into the broader vision of CSR. to raise the standards of CSR. Not all lotteries are members of the WLA. Paul Jason: It seems like a natural before the EL WLA Marketing Seminar But NASPL, the EL, APLA, Cibelae, evolution for Team Lottery to be leaders that Lynne Roiter was kind enough to and African regional associations are all in the more expansive space of Corporate invite me to join. It was interesting to working towards many of the same RG/ Social Responsibility (CSR). hear the passion from the EL members for CSR goals. Oregon Lottery Director the vision and the impacts that expanding Barry Pack is leading the NASPL CSR/ Sarah Taylor: The new vision for RG committee. NASPL has its own Responsible Gaming is about how we, the focus of RG (Responsible Gaming) to include CSR and Sustainability certification program in partnership how all of us, and the enterprise in which with NCGP, and has developed a set we work, can serve the broader interests should have. Many organizations in both the private and public sectors, of responsible gaming guidelines for of society. How can we reshape the sports betting. We all learn from each corporate mission, and the underlying for-profit and non-profit alike, are integrating this broader vision into their other and apply best-practices from culture that supports that mission, to wherever they can be sourced - overseas include a long-term focus on making this corporate missions. In addition to the central purpose of maximizing revenue or within the U.S; within our industry world a better place? or outside of our lottery gaming sector. for shareholders or even good causes, For those of us in the government lottery corporate culture now includes the larger NASPL participates in the Responsible sector, service to good causes is in our impact of the business on its community Gambling Collaborative, which brings DNA. Most of us derive significant value and society at large. While the principal together gaming operators, academics from the knowledge that our mission is to business strategy is to produce the best and treatment and prevention advocates generate funds that our state governments product or service for the customer, issues to align around best practices related allocate for various good causes. I was like creating a diversified and empowering to responsible gambling. We are all introduced to this larger vision of RG work environment are critical as well. working hard to create the tools to support at a CSR committee meeting with the This holistic approach, where maximizing our dedication to the RG/CSR mission. Independent Assessment Panel held just 10 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
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PUBLIC GAMING INTERVIEWS Government lottery has always played a is highly engaged in this more expansive Segueing over to the sales side of the leadership role in RG and CSR. I realize view towards RG, CSR, and the positive business … What product categories or we do that because it is the right thing impact that our organizations can have on even specific games represent the most to do. But wouldn’t society be better off society. exciting potential for growth over the next if our political stakeholders recognized In your experience with the different trade 18 months? Lottery’s dedication to serving society, to associations - are there things that the S. Taylor: For the Hoosier Lottery, RG and CS, and were quicker to reward WLA does differently from NASPL and scratch-off games generate about 75% of Lottery with authorization to operate more vice-versa? How do the different CSR, RG revenues and 25% comes from the draw games of chance and distribute online and groups differ in the service they perform category. We’re continuing to focus heavily provide cashless options and otherwise or the way they perform it? on the scratch portfolio and in creating support the expansion of Lottery? innovative games and prize structures. For S. Taylor: The WLA has a longer history Paul: It would be best for me to not of focus on these issues and therefore has example, we are developing more games respond to this question. a more robust structure and certification with stronger middle and lower tiers for Is there a trade-off-between pushing hard program. NASPL put together a wonderful secondary and tertiary prizes. I think to maximize sales and pushing hard to program that, among other things, helps we’ve seen a shift in how we design the minimize problem gambling? and supports lotteries which want to matrix and prize structures. We have participate fully but may not have all the produced measurable improvements from S. Taylor: No, there isn’t. You just do both. And they work together quite resources to allocate towards RG and CSR. changes to the prize structure. And just The Hoosier Lottery has been a member introduced our second $50 ticket late well. You maximize sales responsibly for in 2019. We are also assessing the ways the long-term sustainable growth of the of WLA for many years. We have always pursued excellence in every component of in which consumer shopping behavior is business. evolving, and especially how technology the business and so we wanted to elevate Sales and Marketing-focused enterprises the performance of the organization in RG is enhancing the variety and consumer- like lotteries typically have at least one and CSR in particular. Seeking higher appeal of point-of-sale options - self-service all-employee meeting a year. For us, that levels of RG certification is a process that in particular, and how we might allocate has always included a big emphasis on sales. causes you to be better. It shows you what investment towards modernizing the whole We want to engender a passion for the can be done to improve and teaches you lottery-playing experience at retail. On industry, for the service we perform, and how to do it. It has been such a rewarding the draw side, IGT’s new Cash Pop™ game for the funds generated by our organization experience for us that I want to do what I has been introduced in New Jersey and for the benefit of good causes. Sales is can to give back and share with others. Georgia. We are keeping a close eye on the part of the business that readily lends their performance for a possible future itself to the goal of creating high-energy excitement for our mission and purpose. But over the past several years we have We need to identify and codify best-practices, increased our discussion on CSR issues and establish CSR/RG/Sustainability markers like responsible gaming/positive play and our community service initiatives. A against which to measure results. couple of years ago our executive team led a recovering problem gambler panel launch here. We have decided to launch conversation that included a recovered There are different levels of certification Double Play for Mega Millions this spring. problem gambler. Last year we invited a to complement whatever level of resources It’s important to stagger various launches sportscaster who is a recovered problem and attention the lottery is able to allocate to maximize the marketing impact of each gambler. He described his daily life being to the process. The important thing is just one. Moving Cash4Life to seven days a immersed in the very sports he used to to start somewhere and pursue the goals week has had a positive effect on sales of wager on. It was very moving because he that are appropriate and attainable for you. that draw game. And our local Daily 3 and is a public figure whom many may know. Be engaged in the process and you will Daily 4 games are performing quite well. We were surprised and touched that he accomplish your goals. It is important We are improving our Fast-Play offering was willing to be so raw and transparent to stay involved with your regional that prints instant-games directly off the in sharing his trials and tribulations. It association. NASPL has completed its in-store lottery terminal. is an important story and life experience building blocks and EL has a solid RG and and perspective for our team to hear and CSR programs. I will say, though, that the What modernization tools and strategies represent the most promising pathways to understand. It’s not just that we are paying WLA RG certification program is more drive sales growth? more attention to RG and CSR. As an mature and was the best route for us to industry, we are forging a more enlightened take. The development of its program is S. Taylor: We are very enthusiastic about and, we feel, more productive and effective informed by a long tradition of service to our self-service program. There are many approach towards problem gambling and its members across the world, along with a operational advantages to making the the broader CSR issues that will create global brain-trust and experience that the product available through self-serve kiosks, a sustainable future that really serves entire games-of-chance industry turns to and this is an area in which we will be everyone’s interests and minimizes harm. for guidance and leadership. Time and increasing our focus. The Hoosier Lottery I don’t think anyone presumes to have all participation continue to enhance all of still utilizes ITVMs in addition to the the answers. I do think the entire industry these available programs. IGT Geminis that sell both scratch and Continued on page 40 12 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
SMALL-BALL VERSUS THE NEXT BIG THING TRADITIONAL LOTTERY THRIVES ON INCREMENTAL IMPROVEMENTS AND “SMALL-BALL” WINS Gordon Medenica Director, Maryland Lottery and Gaming Control Agency Following is an edited transcript of the presentation by Gordon Medenica at PGRI Lottery Expo NYC on October 29, 2019 in New York. You can view a video of the complete panel discussion at I was originally going to speak about in the U.S. and it survives on direct PGRItalks.com. what lotteries can learn from other gam- subsidies from casinos. If you look at ing entities, and then talk about where New York, Pennsylvania and Maryland, What a difference a year makes. the lottery business stands in terms of those subsidies add up to more than the broader gaming industry. I’d like to $500 million, just in those three states. A year ago at this time, the jackpots start with the gaming industry and then Many other states support horse racing, were rolling like crazy. The $1.5 billion go through a number of more familiar but mainly for political and employ- Mega Millions jackpot hit in South topics, along with some concepts and ment reasons. Finally, there’s also a small Carolina, and Hogan Brown and I were analysis. category for miscellaneous that includes running around to all of the morning charitable gaming. TV shows – it was one of the most excit- In the United States, the lottery business ing times of my lottery career. That was accounts for more than $80 billion, and But then we come to sports betting, followed by the $700 million Powerball in terms of total size, the casino industry and everyone’s salivating at the notion jackpot. It just blew out everybody’s is very similar. While the casino business that the illegal sports betting market numbers; in fact, by the end of the is bifurcated into tribal and commercial may be $150 billion. That $150 billion fourth month of the fiscal year, we had properties, that distinction is really in- figure is pulled out of the air – nobody basically made our numbers for the year. visible to the player. There’s a real debate really knows what the basis of it is, on the question of how much we can but it seems to be accepted. Neverthe- But shortly thereafter, I starting thinking learn from what’s going on in casinos -- less, it’s really important – especially about how we were going to top those but maybe the casinos are also learning when we talk to our legislators – that numbers the following year. Of course, from us; it’s not clear which way the we distinguish between handle and the we’re living through that now and it’s creative inputs are flowing! Horse racing money that we actually take away from been sobering and quite an awakening. no longer has a viable business model it. Sports betting is very low margin, and the $150 billion probably doesn’t generate more than about $10 billion in profit. So that bar on the chart shrinks tremendously when you start thinking about the internal economics of how that number is generated. The reason I mention it is because we, as lottery people, are always looking for the next big thing. Historically, there have always been big things that drove this business. First, there was the shift from an illegal market to a legal market, and the daily numbers games were an impetus for the legaliza- tion of lotteries across the country. Then 14 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
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$80 billion that represents the whole indus- try. The next change came in FY2018 when Mega Millions went to the $2 price and there was a nice boost in sales of the two jackpot games, from $6.9 billion to $8.4 billion. Then, a year ago, Mega Millions had the $1.5 billion jackpot. It had been two and a half years between the $1.6 billion Powerball jackpot and the $1.5 billion Mega Millions jackpot, and as a category, the jackpot games jumped to $10.4 billion in total sales. If you weren’t an insider in this industry, you might look at those numbers and say, “Wow, look at those growth rates – this is a vibrant, healthy business.” But, of course, we know that it’s driven by these jackpots. A year later, we’ve all experienced jackpot fatigue, and as instant games became a big growth lever and Florida joined in FY2013, and at that our sales decline, we’re all trying to explain to through multiple price points and a ton of point all U.S. lotteries were selling both our legislators and others why the numbers distribution. The big jackpot games gave games. look so bad this year. But it’s not that differ- us another giant lever of growth. So, we’ve Mega Millions made matrix changes in ent from the volatility that we’ve always seen had these big concepts in the past that have FY2014, and there was some volatility, in this category. Of course, this is a category driven our growth, and now we’re starting to and sales dipped again in FY2015. Then in that’s important to us because high jackpots see the limits of that. FY2016 Powerball had the world-record are an entry point for infrequent players to Let’s concentrate on Mega Millions and jackpot of almost $1.6 billion. The jackpot jump in. But it’s not that big a category in Powerball and look at their history since just category generated $9.2 billion out of the larger lotteries’ portfolios. Even in Mary- before the cross-selling agreement began in FY2010. Of course, cross-selling itself was a tremendous boost for the industry. It took a lot of work to get there, but obviously it did extremely well. It’s interesting to look at the events that have taken place over the past decade, which are noted in the boxes across the top of the chart. Cross-selling was done with a very explicit strategy. The entire industry came together and agreed that the first step was to cross-sell both games in all jurisdictions. The second step was to take one or both games to a $2 price point - that was already laid out back in 2010. The third step was to have a $5 national game. While we’ve explored that concept, it hasn’t happened yet, although it might still. Powerball began that second stage of the strategy by going to $2 during FY2012 and we had a nice boost. That same year, we also had a $656 million Mega Millions jackpot, which was a record at the time. So 2012 was a great year. Interestingly, when cross-selling started, two very large states – Florida and California – chose not to participate. California had a successful in-state lotto game that sold for $1, and they were afraid of the competition of selling too many lotto-style games. They explicitly said they weren’t going to join until Powerball’s price moved to $2. California 16 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
We have a bunch of little games, and, thanks to Drew Svitko, we tried something new with one of them. Drew pushed the Cash4Life consortium, which represents nine Cash4Life states, to think about going to daily drawings. He had done that with one of his games in Pennsylvania. The group was initially skeptical, but the argument that carried the day was, “What have we got to lose?” We made the change, and sales have been up 60, 80, 90% in various jurisdic- tions with very minimal cannibalization. We held a joint meeting with the Lucky For Life consortium, which is very interested in our success with going daily. We hope they will come along to do that, and down the road, land, a medium-sized state, the jackpot we may redesign the game with the objective 2016. Another way to think about the sales games only account for about 10% of our that it become an even bigger national game. slowdown is to look at how many more sales. If you’re a smaller state where jackpot draws it takes to get to the same jackpot This brings up other initiatives that are going games account for 40% or 50% of your sales, level. In Mega Millions, it takes about two on in the industry – there are tons of them. this is devastating, and your results are a more draws, and for Powerball, it takes about However, I would characterize them as “small giant rollercoaster. States where this category three more draws. We are still the dominant ball.” Baseball fans know that small ball is isn’t as important will survive as the other gaming entity in this field in North America, about hitting singles, stealing bases and bun- major game categories continue to grow. but do these numbers give any indication ting to advance baserunners and just eking that this is the beginning of the decline? out one run at a time as opposed to hitting Sales building up to the big Mega Millions Have we seen our best days? How do we go jackpot were off by about 40% from the sales forward from here? home runs. One of the big questions for building up to the big Powerball jackpot in our industry is can we develop another huge breakthrough concept – like the national Connecting. Listening. Partnering. WE HELPED YOU CONNECT WITH YOUR PLAYERS. We listened to you about your business wants and needs. And we are honored to partner with so many of you across the gaming industry. As we bring the connected casino of the future to the market through FUZION®, we will continue to listen to you, innovate for you, and bring you new solutions to make your operations more efficient and more profitable than ever.
fees. Now, we’ve become convinced that the bank fees shouldn’t be a barrier, and to the extent that lotteries have to absorb those fees, it should be more than offset by the sales increases that can be generated. Double Play is a little add-on game that Mega Millions has approved. We’ve got five states launching in April and a few more next fall. Mega Millions now has three add-ons, including Megaplier and Just The Jackpot, which is still out there. Maybe Powerball will choose to offer some of these add-ons as well. When it comes to sports betting, we have to be realistic that it may not be a game- changer, especially in terms of bottom-line profitability. It’s important for us, but it’s especially important for the casino business where they view sports betting as a traffic driver, not a profit driver. Hopefully many of us will be participating in sports betting very shortly, but I think it’s going to be ad- ditive, and not a game-changer. Our industry has had some talks with CVS about their business model, and the potential for adding lottery sales at thou- sands of CVS stores around the country. Retail expansion, of course, is critical for us and that could be another way to achieve growth. There are 18 states selling Fast Play, a draw game that has the characteristics of instants where players find out immediately if they’ve won. And how much of a role is jackpot games, instant games or price point insurance-backed prize pool in order to there for promotions? We’re all familiar with adjustments – or do we have to play small get us over the initial hurdle of the liquid- the New Year’s Eve promotion that Power- ball? And if we play small ball, can we ever ity problem at the early stages. All in all, ball is doing – is that something that we, do something as significant as one of those there was a lot of work put into big-concept as an industry, need to embrace and fund giant breakthrough concepts? international games, as a potential way of and pay for? We’re happy to see those types expanding significantly and of experiments and see if they can, in fact, quickly. Nobody really knows move the needle. how big it could be, and there are a ton of operational, finan- And there’s also iLottery online. We’ve seen in cial, tax and legal issues that are Michigan and Pennsylvania that if you’re will- being worked through. ing to go to the high payout instant model, Another initiative is in Texas, you can drive significant revenue in that where they are launching in-lane category. However, the states that are selling sales. It’s all well and good to existing products at existing payouts – allow- have Mega Millions and Pow- ing players to buy Mega Millions or Power- erball for sale in-lane, but selling instants in- ball online – that’s not a game-changer. I was lucky to be asked to join the Interna- tional Working Group, and in that group, lane is where the real money is going to come There are 10 ideas here, and we could we started by thinking of really big game from. Are we going to have the patience on probably add another 10 that several states concepts. We were thinking about inter- in-lane sales if initial results aren’t as spectacu- are doing. Even if each of these ideas only national Powerball, international Mega lar as we think they will be? Will we hang in generate 1% or 2% of growth, and if you do Millions, jackpots starting at $200 million, there and develop the rest of our portfolio to everything on the list, then you can add up and having $500 million or $1 billion jack- be relevant in an in-lane environment? to 10% to 20% growth. I would argue that pots regularly. We’re not afraid to take an Cashless payment is another option where in an industry of this size and maturity, that existing idea that we can use to our benefit. we’ve seen great results. For years, everyone may be where our future growth comes from. We looked at the Lottoland model of an was reluctant to do that because of the bank Thanks very much. 18 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
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Harnessing AI to Benefit Lotteries If you don’t plan to implement some form of Artificial Intelligence in the next three years, By Srini Nedunuri, you might be left behind. AI has arrived, and Vice President IGT here’s how lotteries can benefit. PlayDigital™ Platform J ust as the steam engine and electri- fication once revolutionized whole What is AI? sectors of the global economy, Simply put, AI is a collection of technologies so are the internet, robotics, data that, when brought together, allow comput- analytics, and Artificial Intelligence ers to compile and analyze digital data and (AI) beginning to dramatically alter today’s make automated decisions or provide insights industries. that previously only human intelligence could perform. Once merely a buzzword, AI now offers the powerful means to solve real-world problems, While computers are still a long way from resulting in an array of enterprise-level tools “thinking” at the level of a human being, the and processes. Globally, as many as three- enormous amount of data and computing quarters of businesses expect to implement power now available has made it possible for some type of AI within the next three years. machine learning and AI capabilities to excel, Will the same hold true for lotteries? Let’s take particularly in the areas of pattern-detection a closer look. and problem-solving. 20 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
Applying AI in the improving responsible gaming Lottery Space efforts, as well as security and fraud protection. IGT’s solution, Uses of AI Across Humans learn from experience, Play.AI, is focused on these major Industries but computers learn from data, so areas (see sidebar: Taking the Dif- Many of us already experience ficulty Out of AI Implementation). data is where AI starts and finishes. forms of AI today in applications Today, our industry relies on human There are countless potential AI such as virtual assistants (e.g., experts to analyze lottery data and applications for lottery. Wherever Alexa and Siri). Amazon’s produce meaningful insights. AI harnesses technology to automate there’s a spreadsheet and ana- product pricing system updates lysts looking at data today, there’s this process for massive amounts of as many as 2.5 million times potential for AI to help advance data. AI can do it faster and more our understanding. In the United per day using AI to analyze efficiently, and can recognize and States, for instance, a lot of time customers’ shopping patterns, highlight correlations that humans and effort is spent on plannogram- competitors’ prices, profit might not be able to find. ming the allotment of instant margins, inventory, and a IGT’s exploration of AI began tickets. What if there were an AI ap- dizzying array of other factors, with a goal of helping lotteries plication for that? AI can constantly and to choose new, competitive gain deeper insights into player monitor activities like sales or even prices that maximize profits. preferences and behaviors — for the number of requests for sold-out items, and then provide data sug- Travel agencies, insurance instance, how players react to the gestions to improve how and what companies, and other retailers content offered, how frequently they play, why they play, and how is offered. also use AI for dynamic pricing. to personalize offerings to them In the health care industry, AI AI offers the potential to help with while maintaining a responsible less obvious applications as well. is involved in everything from and safe gaming environment. In For example, when there are roll- pharmaceutical research to fact, AI can play a central role in ing jackpots, the demand for play medical imaging analysis to slips and ticket stock suggest the best treatment. increases consider- Common business uses include: 72% of businesses that have ably. Today, humans implemented AI say it will be source, plot, and Sales forecasting the business advantage of manage the data to maintain those paper- Credit scoring the future. (PWC.com) supply lines. A current Optimizing marketing Approximately 75% IGT trial is using AI and our own data to campaigns of businesses plan to implement AI in the next 3 map this process in Predictive maintenance parallel with tradition- years. (Accenture) al, manual processes, Identifying new market making it possible to opportunities Worldwide spending on AI correlate the accuracy systems was forecast to reach of the two and create Enhancing the customer $35.8 billion in 2019 and a practical, proven experience double to $79.2 billion in 2022. application for lotter- Optimizing processes Most of this investment ies that manage con- will be in Decision Support/ sumables at a large Reducing operational costs scale – for example, Augmentation to maximize Mitigating risk in Europe – to opti- profits. (Gartner) mize the process and Fraud detection save money. 21 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020 PUBLIC GAMING INTERNATIONAL • NOVEMBER/DECEMBER 2019
AI can also track player choices in it’s even more difficult to keep them. 2. Improve Your Content the digital and retail realms and look IGT built a model to make it possible Offering for patterns — whether related to the to look at players’ Play Characteris- To learn more about how our own time of day people play, or the topic of tics and, combined with responsible content was performing, IGT began games they choose — to enable better gaming models, identify appropriate feeding content data to our Play.AI overall marketing and game-offering offers to send to individual players. system and taught it how players were decisions in retail and digital. The two In effect, AI enables personalized consuming the games. We first cre- worlds are no longer separate. 1:1 campaigns. Personalization is the ated a model to predict consumption holy grail for any marketer, because based on 150 days of performance — How AI Can Benefit relevant content most often generates nearly six months. We then reduced Lotteries the best user engagement. the period to 90 days, then 30 days. AI can also be used to build a con- Now, with 15 days of game activity, we Here are some of the ways IGT’s tent transactions matrix, enabling can predict with up to 97% accuracy Play.AI solution can be applied to lotteries to predict the propensity how a game will perform. In addi- benefit lotteries, based on trials with of consumption for different types tion to allowing lotteries to improve IGT’s Lottomatica over the past three of content. The probability of play- their content offering, this application years in a highly competitive gaming ers moving from one kind of game to of AI gives lotteries great insight market with more than 260 operators. another is different for different kinds into their potential revenues for the 1. Better Understand of games. Therefore, if a player favors next three months. AI can be used Your Players and Their one type of game, there’s an opportu- for retail games, too, provided they Engagement nity to suggest other games that the can access the data to support the AI It’s difficult to acquire players, and player might like to try. models. This is possible particularly if 22 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
SHOULD POWERBALL By Simon Jaworski GO GLOBAL? President of the U.S. Office, Leger the Research Intelligence Group leger360.com discussions first-hand, your humble scribe from renowned lottery and gaming research experts Leger, decided to take a stand, and ask some questions relevant to this very issue on their December 2019 U.S. Omnibus. 80% of Past Month players will remain loyal The first, and perhaps most important question simply defines whether Joe Recent players see the Public will continue to support Powerball benefits, lapsed players if sales occur across borders. When asked less so A whether ‘we the people’ would still play mong key U.S. Lottery personnel, Among the recent players, 62% of past Powerball if it expands its selling base to there are two distinct camps of month Powerball players claim the extension other countries around the world, 42% of thought as to whether the current of the game is seen as positive, compared to the U.S. population say they will still play, U.S.-only branded Powerball game only 29% of lapsed players. In fact, 43% of which translates to 80% of past month should be sold in other countries. However, those lapsed players argue the move would Powerball players. unlike the Brexit debacle over in my home be a negative for the game. country of England, and the widening of Lapsed players are split When you combine the fact that lapsed the political spectrum in America, there Perhaps more interesting are results from the players, Americans who have played does appear to be potential for some middle lapsed players (these are former Powerball Powerball in the past year, but not in the ground. Imagine that. People working players who have not played Powerball in past month, are unsure of the positive effect together towards a common goal of greater the past month, but have played in the past and half already claiming they will not play success for all. year), where opinions are almost evenly an international version of Powerball, how divided on their future purchase intent. easy is it going to be to win back this key The difference in this case is that the 52% of lapsed players state they will play if market with statistics like that. internal controversy over Powerball strategy Powerball expands, with the remaining 48% emanates from one simple conflict. Team Key positives of an saying they will not. To Leger this seems A is crying out for Revolution, while Team expanded Powerball to be the tipping point. Can U.S. lotteries, B simply wants Evolution. Two opinions, “Bigger prizes and jackpots” are the with their current monopoly, grow sales just one simple letter of difference. Both key factors among those who favor the internationally, to compensate from losing paths are qualifiable and quantifiable, Revolutionary option, stating “It’s a good 20% of their recent players and potentially and yet both teams have the same goal… opportunity, positive all around”. However, half of the casual players? to increase revenues to help the townsfolk those against the new plan simply shake of Lotteryville. What was once a relatively So, is it seen as a ‘positive’ their heads, with a dose of patriotism simple task, sitting back and watching as step? attached. “Our chances to win would be rolling Mega and Powerball jackpots ensured One third of Americans feel the expansion diminished, with much lower odds” and financial returns satisfied even the meanest to an ‘internationally extended’ Powerball “it’s an American game, it should stay of Governors (think Headley Lamar from will be a positive step, with almost the American”. Blazing Saddles), has become more onerous same proportion (30%) believing it to be as the years have worn on. negative, with the remaining third neutral. Player benefits track with The ‘positives’ are driven by those ‘aged recent jackpot games Into the new decade, a 300 million bean 30-39’ (48%) and families with children Leger’s survey also asked respondents the jackpot win seemingly can’t guarantee (42%), while the ‘negatives’ lean heavily potential benefits of a newly expanded happiness for the average person in the on those ‘65+ year olds’ (46%). These facts Powerball. The past month players were very street. A billion (or even half a billion) with would seem to indicate that the greatest vocal, with a number of critical attributes its “B” has more of a ring to it, but when opposition to change, are the oldest age hitting the 50% + level. Players want ‘Bigger was the last time either jackpot game hit group, which is by no means a negative, jackpots more often’ (63%), ‘Better odds of that magical mark? Not recently enough, given the fact older Lottery players tend to winning’ (58%) and “Higher prize levels for according to leading lottery directors. drop off a little in terms of play following hitting just the Powerball number” (51%). So how will another single letter swap help From one side of the fence it could be retirement. the current situation? After following these Continued on page 29 24 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
Reimagine Next 2020 isn’t just a new year – it’s a new decade, a new beginning. So look for us as we work with our lottery partners to reimagine the future. 25 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
PUBLIC GAMING INTERVIEWS Patrick McHugh Executive Vice President & Group Chief Executive, Lottery, Scientific Games Corporation REIMAGINE PLAY™ PGRI Introduction: 2019 was a year of celebrating success channels expand, the need for integration at the systems level for Scientific Games. Instant games retail sales surpassed becomes mission-critical. Innovation at the operational level, the $50 billion mark in the U.S. The world’s largest provider excellence at execution, and collaboration with customers to of instant games announced a manufacturing expansion on ensure best-in-class at every level have always been a part of two continents, and several major domestic and international the company’s culture. instant games and technology contracts including Florida, Turkey and Italy, plus the announcement of the first national Supporting the U.S. industry with iLottery, players clubs, instant ticket lottery concession in Brazil. Much of the global player account management systems and second-chance marketplace is still emerging in the instants product category promotions, Scientific Games continues to analyze consumers with large markets like Brazil poised for explosive growth, and and follow how and where they want to play. The company’s mature markets continuing to represent a huge opportunity to digital sports betting solutions are powering more than 35 apply proven best-practices that can expand the player base markets around the world. Retailer innovations like the SCiQ® for responsible entertainment. The category is reinventing instant game ecosystem, PlayCentral® 54 self-service ma- itself for the digital age – poised to grow at rates faster than chines, and Scientific Games Enhanced Partnership (SGEP) ever. Scientific Games is integrating the games with a cross- programs are revolutionizing the way lottery products are sold channel entertainment experience for players, and a modern- at retail. The technologies to drive success are all in place ized technology approach to retail. and innovating peak-performance for many lotteries. And Scientific Games’ Reimagine Play experience is informing Scientific Games provides over 70% of instant games a reimagined operational ecosystem for an ever-expanding worldwide, serving over 150 government lotteries globally portfolio of games distributed through multiple channels. with games, technology or services. As gaming distribution Paul Jason: How is technology changing to operate in together. Our approach Inside and outside our industry, expanding the player ecosystem? of integrated technology and products digital channels, the diversity of pop Pat McHugh: For Scientific Games, our creates a backbone that supports progress themes and brands, plus the impact of technology has allowed us to connect the in every corner of our lottery customers’ real-time entertainment – whether that entire lottery ecosystem to deliver the business to maximize proceeds to their be mobile sports betting or video games best games and player experiences across beneficiaries. Data analytics have become – is creating an explosion of consumer channels and product lines. Momentum™ a core function of all our systems, allowing choices that will shape our industry is Scientific Games’ enterprise ecosystem us to help our customers optimize game going forward. Technology is unlocking that connects our suite of value-add design, and diversify the variety of consumers’ ability to enjoy entertainment products and applications for effective use games and playstyles for the consumer. on demand. Scientific Games uses today by lotteries. Momentum creates a Reimagining retail, with products like technology to translate those capabilities framework that allows us to integrate sets SCiQ®, is modernizing lottery with into what we refer to as “entertainment of content, products, and data analytics business intelligence never before available. ecosystems” that allow our customers to 26 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
manage and analyze their game portfolios core players to increase their spend. channel environment, but they still want and associated products to entertain U.S. consumers now think of games-of- to integrate what they do have to sell players, seamlessly between online and chance like any other consumer product through the channels in which they are retail play. or service. They expect innovation to drive authorized to sell. And everyone wants a What do you think the government lottery new product; they expect multi-channel technology infrastructure that supports operator will look like five years from availability; and they expect a seamless, change, growth, the addition of new now in terms of the portfolio of games user-friendly player experience. Players products, new game categories and new that they are offering? expect operators to engage with them channels of distribution. The breadth across the whole spectrum of online and and depth of our global experience P. McHugh: I think we can expect the enables Scientific Games to customize need to increase funding for good causes off-line channels, and offer the widest diversity of games. That’s why we are the approach for the specific needs of to drive further expansion of game each jurisdiction that operates within its categories and distribution channels to focused on products, profit and programs for our customers. We are maximizing own unique set of dynamics, regulatory make lottery products more accessible to constraints and business objectives. consumers. The online market will grow sales growth in a responsible way with at the fastest percentage rate. However, technologies that allow lotteries to launch Scientific Games has developed the Scientific Games remains incredibly new games quickly and cost-effectively, systems technology and services that bullish on the ability to maximize profit and integrate those games into the existing supports not just instant and draw growth, in actual dollars generated, portfolio in ways that optimize the games, but integrates products across from the core business. a broad portfolio of games Scientific Games has that includes iLottery, sports betting, land-based casino, demonstrated that a strong partnership with For Scientific Games, our iCasino, digital promotions, our customers investing in innovative products technology has allowed loyalty programs, etc. These are all at the ready to deploy and game portfolio us to connect the entire for customers that are ready to expand their game management can generate double-digit growth lottery ecosystem to deliver entertainment, just as the Pennsylvania Lottery, Danske even for mature and high-performing lotteries. the best games and player Spil, Atlantic Lottery and In 2019, our SGEP experiences across channels other lotteries around the globe have successfully done. program customers saw year-over-year growth far and product lines. The European and Canadian ahead of the industry as markets are now heading a whole. While year- into a second generation over-year instant game of systems-enabled game performance for the entertainment. The first industry is 4.3% growth, we have eight seamless player-experience. generation had the functionality, domestic SGEP customers experiencing Are lotteries investing in the technology but it was not fully integrated. This from 5.8% to 13.7% growth year to date that enables modernization? next generation is fully integrated so (as of December 28, 2019). That is truly P. McHugh: Yes. Atlantic Lottery and consumers can migrate seamlessly across exceptional performance. Danske Spiel are examples of lotteries game categories, channels and media; and As Drew Svitko explained in his keynote that migrated completely to our multi- so the operator can sell across product speech at the PGRI lottery Expo in New channel platform, transforming a legacy lines and multiple media and channels York, the Pennsylvania Lottery leveraged series of separate platforms that served and use player loyalty clubs to promote its iLottery connection with consumers to all of the various product lines, but were a diversity of games and playstyles that drive performance at retail and vice-versa. not integrated to work together. Siloed engage players. The online connection is However, the Pennsylvania Lottery’s platforms are inefficient for the operator fully integrated with the retail channel to success isn’t just with iLottery. They also and clunky for the player. Now these drive the multi-channel relationship that added new retail game categories, expanded lotteries have one wholly integrated is more convenient for the player while the number of self-service vending kiosks, platform that supports all the products driving sales growth for the operator. launched cash-less payments and digital they offer – draw games, instant games, We want to make it easy for sports wallet funding at retail, and added new casino games and sports betting – all bettors to play e-instants and other retailers. This multi-channel model has operating seamlessly across retail and lottery games, so we are creating a path allowed Pennsylvania to experience record digital channels that include self-serve for younger adults who may prefer retail sales growth while launching the kiosks and land-based casinos as well casino games and sports betting, to try most commercially successful iLottery as traditional retail stores, iLottery lottery games. We think the traditional program in the industry’s history. Making and online casino games. The modern consumer lifecycle is more receptive to the games more accessible drives sales entertainment ecosystem pulls together Lottery game entertainment as they get growth responsibly because it increases the all those products and channels. Of older. Scientific Games is making sure player base by bringing in new kinds of course, many lotteries do not offer the the bridge is there for consumers to cross consumers – and it does not depend on the entire range of products in a multi- over when the time is right. 27 PUBLIC GAMING INTERNATIONAL • JANUARY/FEBRUARY 2020
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