U.S. lotteries as a group post first sales decline in years, but bright spots were evident

It’s no surprise that lotteries are not immune to the effects of the recession, but they have fared better than other gaming industry segments, which have seen double-digit declines in some areas. And it’s important to point out that the widely varying results turned in by individual lotteries in fiscal 2009 are proof that the “industry” is actually a collection of individual lotteries with specific experiences that are hard to group and trend together. In fact, of 43 U.S. lotteries, 18 managed to grow sales, many by a significant amount. And though for the first time since fiscal 1997 more lotteries were down than up, again, the results are all over the map.

U.S. Lottery Sales Fiscal 2009

While it is easy to blame the economy for lackluster sales in many jurisdictions, and certainly it has played a role, it is not that simple. Ticket sales continue to be driven heavily by the luck of the draw. The big jackpots that may drive record sales one year often fail to materialize the next, driving down sales. It happens year after year in this industry, and in no way can this type of result be blamed on the particular lottery or lotteries that experience it.

Such was the case with Indiana’s Hoosier Lottery, which achieved its best sales ever in fiscal 2008, thanks in part to a record Hoosier Lotto jackpot run. Without a repeat performance in fiscal 2009 total sales dropped by almost 11 percent, which was the biggest decline by any lottery this year. Still, that drop, turned in by one lottery with extenuating circumstances, was less than many other gaming industry operators have reported over the last year.

Hoosier Lottery officials did cite the economic downturn for declining instant ticket sales as part of its experience, and other lotteries also reported that instant ticket sales have been hit the hardest. These games, which are often impulse purchases, may be the first that consumers cut back on as budgets get tight. Certainly the lofty double-digit growth in instant tickets that has driven sales records in the past seems mostly absent this year. Then again, some strong-performing lotteries pointed to instant games as the main reason for their growth in fiscal 2009 - Arizona, Idaho, Kentucky, Louisiana, Minnesota and Tennessee all saw instant sales increase by more than 5 percent. So it just drives home the point that every jurisdiction, and every lottery, has particular circumstances that influence sales, for better or for worse.

Several long-established lotteries achieved record sales in fiscal 2009, including Arizona, Georgia, Idaho, Illinois, Kentucky, Maryland, Minnesota, Montana, Nebraska, New York, Ohio and Rhode Island. New York and Rhode Island continued to benefit from electronic gaming machines. Tennessee also set a sales record but is still considered a newer lottery with only five full years of operation.

Then there’s North Carolina, which continued its remarkable startup growth through its third full year. This is one of the most successful lottery startups ever, certainly the most successful recent startup in terms of its ability to grow sales by double digits beyond the first couple of years. Total sales were up almost 20 percent over fiscal 2008, thanks primarily to a 25 percent increase in instant ticket sales.

Among the 13 largest lotteries (those with sales of more than $2 billion), Georgia and Ohio were most impressive of those limited to more traditional products, each growing about 4 percent from the previous year. Rhode Island, with electronic gaming machines accounting for more than 90 percent of its sales, grew by 6.8 percent to surpass $2.5 billion.

And speaking of gaming machines, Rhode Island and New York were the only jurisdictions where machine revenues increased during the year - Delaware and West Virginia continue to be negatively impacted by competition in Pennsylvania, while Oregon’s smoking ban certainly contributed to an 8.5 percent decline in gaming machine revenues there. South Dakota nearly held its own with revenues just a bit lower than fiscal 2008.

For the second consecutive year there were no record-breaking jackpots to be found between Powerball and Mega Millions during fiscal 2009. A few $200 million-plus jackpots weren’t enough to grow the games - sales for both were down about 3 percent, as Powerball sales checked in with $2.5 billion and Mega Millions sales were $2.65 billion.

Canada Lottery Sales Fiscal 2009

North of the border, the picture was brighter - almost all Canadian provinces reported sales increases for the year, with total lottery sales in the country reaching almost C$8.9 billion in fiscal 2009, a 2.6 percent increase over fiscal 2008. Those figures exclude gaming machine revenues in Alberta, Manitoba and Saskatchewan, which would add more than $1 billion to that total.

The country’s largest lottery with traditional products turned in one of the best performances as the Ontario Lottery and Gaming Corp. increased sales by more than 6 percent. The lottery continues to defy the odds, posting sales increase for six consecutive years, the only major Canadian lottery to do so.

Certainly the controversies the organization has faced over the last few years haven’t negatively impacted sales.