By Terri Markle

The last nine weeks since the United States and Canada went quiet and the streets stayed empty—as a result of “stay-at-home” state and provincial executive orders executed continentwide—has been eerie. In mid-March, residents stopped driving to work, eating in restaurants, attending sporting events and gathering in groups. For the $91 billion U.S. lottery industry, many products stopped being sold. A network spanning 121,000 video lottery terminals (VLTs) across the continent were turned off. Lottery retailer terminals sitting on counters in bars and taverns were unplugged.

For the first calendar quarter ended March 31, U.S. lotteries’ traditional sales declined 3% to $19.8 billion, while Canadian sales increased 17% to C$2.6 billion due to a major LottoMax jackpot. Only two of the 12 weeks of 1Q20 were threatened by the U.S. and Canadian governments’ measures to halt the spread of the coronavirus. But 1Q20 VLT net machine income fell 15% in the U.S. and 17% in Canada; U.S. table games plummeted 22%. An examination of any lottery organization’s weekly sales shows the deep drop in social-style lottery products, such as keno and monitor games. Bloc lottos such as Powerball and Mega Millions saw sales stagnate as jackpots were no longer guaranteed at minimum starting levels. And some lotteries delayed a major instant launch in April since many lottery retailers stopped selling products as their businesses were closed.

One bright spot was iLottery. In those U.S. lottery jurisdictions and Canadian lottery jurisdictions which offer online sales, player interest was off the charts. As one iLottery marketer quipped, lotteries have talked enough about the need to innovate. The reality is lotteries need to modernize their sales channels.

Stellar Results
On a storm-tossed horizon, iLottery was the proverbial rainbow. Regardless of the jurisdiction, lottery marketers saw revenues soar for iLottery.

In first quarter 2020 vs. 2019 (ended March 31), the U.S. lotteries reported a 47% increase in Internet revenues and a 50% increase in eInstant revenues. The Pennsylvania Lottery ranked first with a 77.4% increase in 1Q20 vs. 1Q19 total internet revenues.

Regarding April 2020 iLottery growth over March 2020, Shannon DeHaven, Deputy Director of Digital Operations, Michigan Lottery, reported “a 40% increase in online sales, or growth of $51.7 million and a 46% increase in net gaming revenue (NGR) from online sales, or nearly $7 million . . . It also may be worthwhile to mention that the lottery was already experiencing a 20%+ YOY growth prior to COVID.”

The Pennsylvania Lottery also reported a double-digit increase in online sales. “PA iLottery is breaking records and has more players than ever before because people are playing our online games, including internet instant games and purchasing Powerball and Mega Millions tickets, from home during this unprecedented time,” said Stephanie Weyant, Deputy Executive Director, Marketing & Products, Pennsylvania Lottery. “Our online play in April was up 35% compared to March. This figure does not include Powerball® or Mega Millions® online sales, which are reported separately, and are making up about 6% of overall Powerball and Mega Millions weekly sales, as compared to about 2% in previous months.”

The New Hampshire Lottery’s eInstant NGR increased 52.94% to $1.26 million. The lottery’s combined eInstant NGR and draw based game (DGB) sales rose 51.13% to $1.57 million from $1.04 million.

These three lotteries all sell the high payout eInstants, which typically offer an 85%-plus payout. As a result, they report the NGR (revenues after the payment of prizes and bonuses) as opposed to sales.

Kentucky Lottery Corp. (KLC) is also enjoying strong iLottery growth. “We’ve seen 81% growth in iLottery overall compared to this time last year,” said Lauren Walker, Director, Interactive Content & Customer Service, KLC. “We had a 30% increase in Instant Play in April compared to March, and overall on the platform, a 29% increase. Keno saw a 33% increase month over month.”

Other lotteries, such as the Illinois, North Carolina and North Dakota lotteries, only sell online draw games. But players were eager to bet online during the pandemic. “Our online sales are up approximately 35% since the beginning of the ‘stay-at-home’ order here in North Carolina,” reported Randy Spielman, Deputy Director, Product Development & Digital Gaming, North Carolina Education Lottery.

There are no immediate plans to launch eInstants. “We, along with our Commission, are evaluating the viability of an eInstant program in North Carolina,” observed Spielman.

Player Registrations Soar

With lottery players confined to their houses and apartments, it was difficult to purchase a scratch card or draw ticket. Only essential businesses stayed open during the sheltering—grocery stores, drug stores, convenience stores, gas stations and big boxes. While it varied by state and province, many lotteries reported 10% to 25% of their retailers could not sell tickets as their businesses were closed.

But for lotteries which sold online, players could easily set up accounts and deposit funds. “Comparing the last 45 days to the previous 45 days, our registered players increased by 58%,” said Kelley-Jaye Cleland, Chief Product & Program Officer, New Hampshire Lottery. “For the same comparative period, our first time depositors (the player not only registered but also made a deposit) were higher by 111%.”

Pennsylvania’s Weyant reported “the number of first time players in April was also up 45% compared to March, with nearly 15,000 new online players.”

DeHaven said the Michigan Lottery saw “a 105% increase in first time depositors, or just over 10,000 new depositing players online” in April 2020 compared to March.

KLC saw a double-digit increase in registrations. Walker reported a “15% increase in playership compared to February; 12% registration increase in March compared to February; and 6% increase in April compared to March. May is also showing great growth.”

Spielman said NCEL added approximately 40,000 new registrations in the past two months. “The encouraging metric behind that number is that 18,500 (46%) of those new registrations made a deposit to play online. This represents the highest conversion rate we have experienced since the beginning of the program.”

Canadian Growth

Similarly, Canadian lotteries reported record online sales in April. “eInstant sales were on a strong growth trajectory before the stay at home orders, but it really exploded during COVID-19. In the past two months eInstants have averaged $3.9 million in weekly sales which is a 134% increase compared to before the stay at home orders. And it keeps growing. The past month we’re up 183%,” said Joey Cormier, Director, iGaming, Atlantic Lottery Corp. (ALC).

ALC has enjoyed YOY increases for iLottery since the portfolio was revamped. “The investments we made into our new gaming platforms are paying off. The new iLottery platform we installed in 2017 has performed very well despite massive increases in traffic, registrations and transactions,” said Cormier. “The fact we had a robust iLottery platform in place and a fairly large established customer base online helped the corporation to mitigate some of the sales loss as a result of the retail challenge due to stay at home orders. Overall our lottery sales have only been down by 10% so the alc.ca performance certainly helped buffer the impact.”

B.C. Lottery Corp. (BCLC) has been selling lottery products online for more than 15 years. “Online lottery sales through PlayNow.com continue to see strong growth with every fiscal year. COVID-19 has highlighted this trend as well as the enormous potential for further future growth on this channel. eLotto sales have seen double-digit growth over the last fiscal year, while lottery sales at bricks and mortar retail locations have remained high,” said Kevin Gass, VP, Lottery Gaming, BCLC.

“Sales online account for 6-10% of lottery sales depending on product; since the onset of COVID-19, eLotto sales saw a cumulative increase of more than 58% against the previous benchmark,” said Gass. “The shift in player behavior happened in the first six weeks of COVID, during which the percentage of online sales went from six to 15%. Then from post-COVID, weeks six to nine, the shift plateaued at 15%.”

As of October 2019, approximately 515,840 players have PlayNow.com accounts, which is approximately 18% of the British Columbia adult population. “Registered players can access more than 600 lottery, casino, and sports products and games on desktop or mobile,” said Gass. “Since the onset of COVID-19-related restrictions, daily new registrants have increased by more than 120% against normal benchmarks.”

In Québec, the government ordered Loto-Québec to stop selling at physical lottery retail outlets from March 20 to May 4 as a result of the pandemic. Only internet sales were permitted.

“The impact of having halted lottery retail sales was substantial since they accounted for roughly 95% of lottery sales, with only 5% being conducting online. So, as would be expected, the May 4 relaunch of retail sales has already had a positive impact on revenue,” said Lynne Roiter, President and Chief Executive Officer, Loto-Québec.

Loto-Québec sells both eInstants and traditional draw games online. “We have seen exponential growth in online lottery sales, with new accounts on Loto-Québec.com numbering in the tens of thousands. While the relaunch of retail sales has had a significant impact, we have not observed a decrease in the new higher levels of online sales,” said Roiter.

European Impact

European lotteries also reported brisk activity via their digital channel since consumers were under stay-in-home orders in March and April.

“In terms of digital activity during this period—due to the fact that we’ve been encouraging people to play and check their tickets online and on the National Lottery app, we’ve seen a significant increase in app downloads and traffic to our online channels,” said Neil Brocklehurst, Commercial Director, Camelot UK Lotteries. “We’ve also seen an increase in new online account registrations. To make it easier for these players, some of who will have traditionally only played in retail, we’ve implemented a number of measures— including lowering our minimum online deposit limit from £10 to £5 to ensure that people who just want to buy a ticket or two play online instead of going out to a shop unnecessarily to do so.”

Loterie Nationale in Belgium reports a very “solid” online platform with approximately 1 million account holders. “We noticed a growth in accounts and an increase in sales on our digital platform despite our very low communication investments,” said Loterie Nationale CEO Jannie Haek.

In Germany, the lander (state) lotteries all sell the draw games through the internet. WestLotto is the largest German lottery. “We are currently recording double-digit growth rates among online customers, especially the share of customers 65 years of age stands out, who want to be sure to play ‘their numbers,’” said WestLotto spokesman Axel Weber.

In Ireland, players can purchase draw and eInstant games. “The overall digital channel share growth in the last couple months with DBG channel shares nearly doubling what they were. While Instant Win Games were already experiencing strong YoY growth, we have seen month-on-month figures peak to record sales levels,” said Melissa Slevin, Premier Lotteries. “Registrations have risen to levels only previously seen during the capped EuroMillions roll period in 2019.”

In Hungary, Szerencsejatek Zrt. saw an increase in the use of online channels which significantly contributed to maintaining lottery sales figures. “Currently close to 400,000 people are using one of the digital betting platforms (internet, SMS-Lottery, Smartlottery application),” according to the communications department. “Digital lottery revenues increased by more than half within the entire portfolio since the beginning of the campaign that was launched within two weeks of the pandemic situation developing in order to promote digital betting.”

In Italy, SISAL S.p.A. reported strong digital sales. “We overall have seen a growth of +20% in sales during the lockdown period,” said Marco Tiso, Business Unit Digital Games Director, SISAL S.p.A. The lottery’s headquarters are based in Milan. “Even in terms of registration, [we saw growth of} +15% of new customers on these products.”

Similarly, Loterie Romande reported strong growth in digital sales and customers. “The increase is up to 50% on total digital sales, with a large number of new registrations,” reported Jean-Luc Moner-Banet, CEO, Loterie Romande.

In Ukraine, the closure of 70% of MSL’s network resulted in a 65% drop in lottery sales. “We definitely saw an increase in digital sales. We are also getting very positive feedback nowadays from those consumers who switched from offline to online,” said Pavlo Vaisero, Marketing Director, M.S.L. Ukraine.

Communication Vehicles

All the lotteries stressed the importance of players’ safety during the pandemic. Numerous lotteries stopped all advertising for their traditional products. Their chief vehicles of communication were lottery players clubs and social media.

“In addition to only advertising iLottery on digital, the only paid mass media ad that ran during our stay home order was a radio spot,” said Michigan’s DeHaven. It reminded its players to not “make special trips to the store for lottery purchases. Instead, play Lottery games online at michiganlottery.com, where you’ll also find information on how to mail winning tickets for prize redemption while Lottery claim centers are closed. Let’s all work together to protect our health, our families, and our communities.”

The Pennsylvania Lottery shifted some of its advertising spend to increase the focus on its online platform during this unprecedented situation. “Additionally, through our customer service, our website and other communication channels, we are reminding PA players that they have the option to take advantage of playing PA Lottery online games at pailottery.com,” said Weyant.

KLC continued its digital advertising of its online product, but that was the continuation of a campaign, not a new campaign. “Some radio spots have highlighted iLottery. Our broadcast has focused on beneficiary awareness during this time,” said Walker.

ALC transitioned all its advertising to promoting alc.ca as a “play safe from home” alternative. “We increased our alc.ca advertising presence to make sure consumers were aware of this convenient and safe option. We have seen tremendous growth in the alc.ca share of lottery sales. Before the stay at home orders we were in the 8% to 9% range for lottery draw eCommerce sales. We’re now up to 25% of lottery draw sales occurring online,” said Cormier.

While BCLC didn’t run ads during the COVID-19 pandemic, “we consistently advised players and retailers to put their health and safety first, emphasizing that lottery tickets are conveniently available online at PlayNow.com or on the BCLC Lotto! app,” said Gass.

As the pandemic continues, BCLC is launching a “how to play safe” advertising campaign, which features safety tips and reminders for players about how to continue to play safely.
Loterie Nationale decided to monitor very closely the sentiment of its players towards the company and its products through its social media (SoMe) channels. “We responded very rapidly, one-to-one, with clear and transparent answers,” said Haek. “This was very much appreciated by our players. We now very gradually pick up the pace of sales communication with carefully considered creative. Again we can count on positive reactions from our customers. The approach of listening, responding quickly and adequately and communicating regularly with our players proved to be a very good communication strategy which further strengthened the image of the National Lottery in Belgium.”

In Ireland, Premier Lotteries upweighted its play online campaign to direct players to its website and its app. “The channels used were PPC, display and social to drive acquisition and plays. For first time online players, we also created a How to Play education series for our draw-based games. Above the line advertising across TV and radio also changed communications to play online,” said Slevin.

Camelot UK Lotteries stressed the ease of playing online. “In terms of getting the message across to players, we’ve adapted all of our current advertising where we’re promoting an upcoming draw or jackpot to include ‘Play online or via the app’ messaging. In addition, we’ve put all Scratchcard advertising on hold and removed big jackpot event draws from our short-term plans—to ensure people aren’t making a special trip into retail to play,” said Brocklehurst.

Market Channel, Not Brand

The big issue is that players do not see iLottery as a brand. But they do understand that during the pandemic that they could purchase lottery products via the internet. As advice to lotteries contemplating the launch of iLottery, the experts stress that the focus should be on ease of online play rather than trying to brand iLottery. Players don’t recognize iLottery as different from lottery. It is a “channel” choice and not a “product” choice. Major U.S. iLottery jurisdictions, such as Michigan and Pennsylvania, do not promote iLottery as a product. Similarly, Atlantic Lottery does not publicize iLottery as a brand. The lottery offers a consolidated website. There is no separate eCommerce website. A tab on the main page instructs players to “Play Online.”

The New Normal

The big unknown is how many players can lotteries keep as digital customers after stay-in-home orders expire.

Many marketers are bullish that customers will continue to play online. “Our players are enjoying the platform. In a recent survey, 70% said they planned to continue playing online even once life resumes,” said KLC’s Walker.

But they also see purchasing at retail as an ingrained practice. No one knows how shopping behavior will change.

“I think we will see some of the new online players continue to play online because they see how convenient and easy it is once you have gone through the registration process,” said NCEL’s Spielman. “We know that many will return to purchasing at retail as they did before because they enjoy the interaction and it is part of their normal routine. What we don’t know is just how impacted players’ routines will be as they begin to transition back to everyday life.”

What is clear is that more U.S. lotteries can be expected to add online sales in the next 12-24 months if permission is granted (see “Online Authorization” article, page 14). It is hard to ignore the benefits that accrued to the U.S. lottery jurisdictions where players had the option to purchase their lottery games online.

In May, Rhode Island Lottery launched eInstants and Keno. Virginia Lottery is scheduled to begin statewide iLottery sales on July 1, when it becomes legal. Other new iLottery jurisdictions are sure to follow.

The rationale is simple. State governments need to protect sources of income that provided $25 billion (fiscal 2019) for such good causes as education, college scholarship and the general fund. Selling online is an insurance policy that states should acquire as protection in a post COVID-19 world.