Online Lottery Proponents Beg Massachusetts To Move Into 21st Century

[toc]On Wednesday, the Massachusetts Joint Committee on Consumer Protection listened to testimony from supporters and opponents of online lottery.

Lottery Executive Director Michael Sweeney was one of the people who spoke during the hearing. Sweeney, along with Massachusetts State Treasurer Deborah Goldberg, is a vocal proponent of the state authorizing online lottery sales.

Scott Bowen joined Sweeney at the hearing. Bowen was the director of the Michigan Lottery when that state authorized and launched its online lottery.

The duo spent their time making the case for online lottery.

“The Massachusetts Lottery should position itself to be where the consumers are,” Sweeney said. “Increasingly, the consumers are online and mobile.”

Sweeney went on to add:

“I am confident that working with you, our elected state representatives and senators, that we can construct an online presence for the Lottery that will safeguard consumers and protect local aid while also continuing at full strength the valued and long-term relationship that we have had, do have currently and will continue to have with our retail agents and their physical locations.”

Cannibalization still a point of contention

Sweeney and Bowen also did their best to counter the claims of online lottery opponents. At one point Sweeney told the committee that online is not a substitute for “physical retail location.”

The notion that online lottery will replace physical lottery retailers, thereby cutting down on foot traffic, is the key argument of online lottery opponents. That list of opponents includes the typical anti-gambling crowd. There is also a powerful consortium of retail association groups comprised of:

• New England Convenience Store & Energy Marketers Association
• Retailers Association of Massachusetts
• Massachusetts Package Store Association
• New England Service Station and Auto Repair Association
• Boston Convenience Store Owners Association
• Massachusetts Food Association

The groups combined to form Save Our Neighborhood Stores. The organization sent the following statement to the committee:

“The introduction of iLottery will decimate foot traffic in their stores and present numerous other challenges to the already struggling business owners. Convenience stores are the heart of communities.

“Convenience owners develop strong and unique ties to their customers and to their neighborhoods. However, the reality is that these retailers will not be able to sustain any more hits to their profits and dark, empty store fronts could soon replace our friendly, familiar neighborhood store.”

Why online lottery can help brick and mortar retailers

Unfortunately, these groups may be causing self-inflicted wounds.

As Bowen said at the hearing “iLottery is not a threat to retail lottery sales, in fact it enhances it,” by attracting younger customers, most of whom don’t currently play the lottery.

Bowen went on to explain that Michigan agreed to keep some scratch-off games exclusive to retail locations. The state also offers a $25 online gift card for $20 at brick and mortar lottery retailers. These policies were put in place to quell concerns that online sales would cause foot traffic at brick & mortar lottery retailers to decline.

So far, Michigan lottery retailers have not been impacted. In fact, as Bowen intimated, a December 2016 study conducted by Digital Gaming Group found online products beneficial to existing retailers:

“The reality of player channel preference has been consistent with focus group results obtained prior to the launch of iLottery in Michigan. During those interviews, many existing retail players were opposed to the idea of registering online, didn’t like the requirement to provide banking information, didn’t always trust that iLottery games would be fair, and preferred the game play experience (i.e. scratching) of retail games over their digital counterparts.”

“… a better argument can be made in support of iLottery increasing overall player engagement and driving cross-channel sales. Programs such as the Online Game Card, purchased at retail and redeemed online, have helped to bridge the two channels while providing added traffic and commissions to retailers.”

Online lottery omitted from special commission

A special commission green-lighted by the Massachusetts legislature spent most of 2017 studying online gambling, daily fantasy sports, and esports. The special commission then submitted its findings in July. It recommended making Massachusetts’ temporary DFS laws permanent. The report also suggested putting online casino and online poker legalization in a holding pattern.

Not included in its recommendations was online lottery.

When it authorized the special commission, the legislature decided to decouple online lottery from the other online gaming products the commission was studying.

Ostensibly, this was done because the issue was already on the legislature’s radar.

Including online lottery in the special commission’s agenda would have sidelined online lottery legislation until after its final report.

That proved to be unnecessary.

Online lottery bills were introduced, but that’s about as far as the issue got during the 2017 session, at least formally.

Instead of building on the momentum from 2016, when an online lottery bill passed the State Senate, people on both sides of the issue drew their battle lines. This sets the stage for a 2018 clash.

Tuesday’s hearing seems to be the first salvo of that fight.