BOSTON (State House News Service) – Massachusetts Lottery officials are gearing up to argue that the legislature and next administration should provide it with more advertising money as it faces the dual threat of a world of increasingly competitive game and an inflation that eats away at players’ disposable income.
Although the lottery has recently had some of its best years, headwinds have been building in recent months as economic uncertainty and an expanding menu of gaming options have slumped lottery sales in Massachusetts and around the world. all the countries.
Lottery sales in September were down $40.3 million or 8.9% from September 2021 and every product was in the red for the month. In one quarter of fiscal 2023, lottery sales were down $60.6 million or 3.8% from the same period last year, the acting chief executive said Tuesday morning. , Mark William Bracken, to the Lotteries Commission. (Thanks to fewer prize claims so far this year, the Lottery is just $13.2 million behind last year’s earnings pace).
He said one of the driving forces behind the slump in lottery sales was a main topic of conversation at a recent industry conference and was summarized on the cover of a leading trade publication.
“The August cover of La Fleur’s magazine was literally entitled “Inflation: will it blow up the industry?” and that’s the word on everyone’s mouth. There is a trend across the country, every state is down in sales. But, you know, you may be down in sales, but then what do you do about it? he said on Tuesday. “And many states have a lot of leeway in how they can manage the market because of how their funding sources are managed. I think we all know that in Massachusetts we are different, we are purely appropriate. We are given a fixed budget for the year and we have to respect this budget. We saw a slight increase last year, but it is by no means an increase that then allows us to be reactive to certain market trends.
These market trends are impacting scratch ticket sales, which represent approximately 67% of the Lottery’s business and are down $70.4 million or 6.7% so far this fiscal year. Massachusetts lotteries are seeing the same thing, Bracken said: Scratch ticket sales were down 6% in New Hampshire, 6.7% in New York, 9.2% in Connecticut, 10, 9% in Vermont and 12.4% in Rhode Island.
Bracken said 2022 has seen the biggest year-over-year drop in real disposable income on record with the prices of gasoline, home heating fuels, electricity, food and essentially everything else rising and crushing the workers; leaving people with less money available to them for things like the lottery. It tracked the price increase of convenience store staples from August 2021 to August 2022: eggs up 82.3%, coffee up 31.9%, bread up 19.7% , milk up 17.8%, cookies up 15%, ice cream up 14.6% and bananas up 9.2 percent.
“Our biggest agent chain is 7-Eleven. Their sales are down, both in-store for their retail sale and for Lottery products. When people go to a convenience store, they buy a lot of the items that we just saw on the last slide. They run there to get simple basics they don’t have anymore that they won’t go to a big box supermarket [for]. They’re looking to buy juice, they’re looking to buy milk, they’re looking to get bread or candy or a pint of ice cream, and all of those items are up,” Bracken said. “People just aren’t going to those stores to buy those discretionary items and because they’re not going to the stores to buy the discretionary items, they’re not buying a lottery product either.”
And people who want to buy lottery products now have fewer places to do so. Bracken said more than 400 lottery retail agents (stores, restaurants and bars that sell lottery products) have suspended operations during the COVID-19 pandemic, with most becoming permanent closures. Year-on-year, he said, the Lottery’s agent base fell 4.5%, from 7,354 to 7,024.
The Lottery cannot sell its products online either. While legislation allowing in-person and mobile sports betting reached the governor’s office before the end of official sessions on August 1, Goldberg’s long-requested permission for the lottery to sell some of its products online remains on hold. the ice as House and Senate Democrats remain paralyzed. on how or whether to move forward with their long-stalled economic development bill.
With that policy request still pending, Bracken said on Tuesday he was prepared to ask for the Lottery to get a larger advertising budget next year so it could try to reach new players and remain a relevant player. as fantasy sports, casino games, sports betting and others. forms of jockey entertainment for a limited pool of discretionary dollars.
For seven years, the legislature funded the lottery’s advertising item in the state’s annual budget at $4.5 million, although the lottery could supplement this with supervisory gaming funds. The $4.75 million the Lottery spent on advertising in fiscal year 2022 represented 0.08% of the agency’s total sales ($5.863 billion) in the same year. Peer-to-peer lotteries, Bracken said, spend a much higher percentage of their sales on advertising. In percentage terms, the closest to Massachusetts is Florida, which reinvests 0.41% of its total sales in advertising.
Ohio and Virginia both spend 0.6% of their total sales on advertising, Bracken said. Virginia had an ad budget of $23.03 million in fiscal 2022 and $3.83 billion in sales, while Ohio’s ad budget of $25.68 million generated 4 .3 billion in sales.
“When we have our upcoming conversations with [the Executive Office of Administration and Finance] and the Legislature on their budgets for FY24…I’m not looking for a $25 million advertising budget,” he said. “We’re going to ask for a modest raise, you know, to give us the ability to be able to be reactionary.”
State spending to promote the lottery has been called both essential to maintain the revenue stream used for local aid and the exploitation of vulnerable residents who might be drawn into the game by the advertisements.
“We have a challenge, but we don’t have ultimate control over how we respond to the challenge,” Treasurer Deborah Goldberg said. “It is very simple.”
Goldberg, who at some point early in her tenure as treasurer asked lawmakers to allocate $10 million a year to the Lottery to advertise its products in an increasingly competitive gambling market, pointed out that the Lottery had an advertising budget of $8 million in 2013 and that the legislature removed the line item when it “needed it because there was a structural deficit”.
“I just thought some of that would start to come back when we get more revenue,” the treasurer said. “I think we are doing too good a job.”
Bracken compared the lottery to a Ron Popeil-style rotisserie chicken cooker “set it and forget it”.
“I think a lot of times people look at the lottery and take it for granted,” he said. “And it’s one of those situations where it’s, ‘well, they’re doing their job and even when, you know, we’re in a recession and a financial crisis…we’re still breaking sales records.’ But it’s not the increases we should be able to do, which we’ve seen year over year where we’re increasing by hundreds of millions a year I mean last year I think our increase was a few million dollars, and our overall net profit was down a few million.
Goldberg doubled down on a comment she made at the September Lottery Commission meeting on Tuesday, when she said, “There are a few options here: that we had a great 50-year run and that those are all the expectations there are from those who make these decisions, or we can continue to have…an operation whose mission is to give back resources to all the local communities. And that decision is up to the legislature and the leadership.
While the Lottery’s downfall is a pressing concern for Goldberg, Bracken and other supporters, there are others who would be happy to see the Lottery’s fortunes turn.
“Some of the most serious problems facing America today are in part rooted in the fact that lotteries, which are a government program, have transformed tens of millions of low earners, who could be small savers, into a nation of habitual gamblers,” Les Bernal, a former Massachusetts Senate aide who now heads the national nonprofit Stop Predatory Gambling, said last week during a online seminar his organization hosted on the “failure” of state lotteries. He added: “What separates state lotteries and other forms of marketed gambling from all other businesses, including other vices like alcohol and tobacco, is that it s is a form of consumer financial fraud. It’s a big con similar to price gouging and false advertising. And this results in life-changing financial losses for many, many citizens of our country…success only comes at someone else’s expense.