Cure for the Common Lotto

Dave Mizeur spent 18 years at the Illinois Lottery, including roles as Deputy Director of Finance and Deputy Director of Operations, before co-founding the DMM Group in 2003. During seven of his years at the Lottery, he served as Chairman of the Mega Millions Finance/Administration Committee. Afterdrafting this perspective on Lotto Gold and Lotto Silver, Dave joined Lottery Dynamics Inc. as a consultant.

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The Rise and Fall of Lotto
From the time the game was first introduced in New York State, Lotto was the game that defined an industry. Most veterans of the lottery business have their own favorite Lotto stories and they all involve a level of public interest and excitement that those new to the industry find hard to comprehend.

Late August, 1984 was the beginning of the glory days for Lotto. Just a week and a half before, the Illinois Lottery was sitting on an unprecedented jackpot of $16 million, mostly funded through a predictable pattern of sales to that point. The Lottery Superintendent had a hunch that if the jackpot was bumped to an incredible amount, such as $25 million, it would be the talk of the state.
The thinking was that Lotto wagering would step up to match the hype. Little did he know it would shortly become the talk of the nation.

Two weeks of pure hysteria followed, ending on a September 1 drawing of $40 million, delivering to the state a level of sales and revenue beyond all dreams. Players from all over the country were flying into Chicago’s O’Hare airport, grabbing a taxi to the nearest lottery retailer, and then heading right back home with their tickets. Michael Wittkowski, the holder of the single winning jackpot ticket, became an instant international story.

In the years following, Lotto was the flagship that carried and defined state lotteries. Not that other products weren’t providing a steady base, but lotteries incremental success depended on the almighty jackpot. In 1989, for example, Lotto provided 44% of total lottery sales in the U.S. (La Fleur’s 2005 World Lottery Almanac). But by FY 96, the game was slowing. That year saw a nationwide decline of 3.5% in Lotto games and the vibrancy was slowly being replaced with player apathy. Including multi-state games, Lotto sales now represent only 22% of traditional (non-VLT) lottery games. Today, that same $40 million jackpot barely gets a mention in most states.

While the purpose of this document is not to analyze the reasons for the decline, suffice to say Lotto has been ill for some 10 years and not getting better. Although four new state lotteries (New Mexico, South Carolina, North Dakota and Tennessee) and one new multi-state game (Mega Millions) have been created since 1994, there has been virtually no growth in total Lotto gaming
in the U.S. ($10.6 billion in FY 95 versus $10.7 billion in FY 04 per La Fleur’s). More telling is the decline in just those states that had Lotto/multi-state back in FY 89 compared to today. Those states have shown a 22% decline in noncash Lotto games, despite having the benefit of the mega jackpots. Excluding the multi-state games, Lotto itself in those same states has shown a 56% decline over the period.

Multi -Jurisdictional and In -state Games Have Merely Swapped
Sales Over the Long -term.

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