State Lotteries Mean Chance for Big Money for Suppliers
AUSTIN, Texas (AP) _ The dreams and dollars of Americans who play state lotteries bankroll a half-billion-dollar industry that makes its money no matter who wins and who loses.
A lottery is a complicated business that requires equipment and expertise provided by a business sector that is growing as more states turn to the game of chance as to boost revenues.
Five states will start games this year. More, perhaps including Texas, are expected to sign on in the near future.
″We’re talking about a 40 to 50 percent increase in the total number of lotteries over the next two years,″ said Duane Burke, founder and president of Maryland-based Public Gaming Research Institute Inc.
Texas is the biggest prize on the lottery horizon for the companies that make money from the games. As the third most populous state, it is by far the largest of the 23 states that do not yet have lotteries. There will be a major push in the current Legislature to win approval.
Executives from lottery-related companies gathered in Austin recently for a three-day meeting sponsored by the gaming institute. Exhibitors ranged from a Missouri carpenter who sells keys specially tailored for use on scratch-off lottery tickets to companies offering high-tech computer wares.
″Our sales for the fiscal year that will end in February are going to be in excess of $100 million,″ said Spike Speicher of San Francisco, western regional manager for GTech Corp., an 8-year-old company that produces only lottery equipment.
″It’s profitable″ was all Bill Fox would say about how much money Scientific Games Inc., a Bally Manufacturing Corp. subsidiary, makes through its sales. The Atlanta-based company sells computers for number-drawing games and tickets for instant winner games.
Scientific Games has been involved in the start-up of all 11 new lotteries since 1976. Dan Bower, company president and co-founder, said his company also operates games around the world, including the Philippines, Israel, Lebanon and Papua-New Guinea.
″Welcome to the world of show business. That’s what you are getting into,″ Bower said during his presentation at the trade meeting. ″A lot of the lottery is the sizzle and sell.″
At the lower-dollar end of the business are people like carpenter Bart Cornell of Kansas City, Mo., who hawked his ″One-Scratch″ keys at the meeting. His product is a story of invention following necessity, Cornell said.
″When the Missouri lottery started January 20th of last year, I heard a lot of people complain about using change to scratch off the cards. That stuff was sticking to it real bad. Then they had to use their fingernails to clean off the change. Then they had to clean off their fingernails,″ Cornell said.
The One Scratch, the answer to dirty change and fingernails, was born. Some of Cornell’s start-up money came from $1,000 he won in the Missouri lottery.
The wholesale price is 30 cents per key. Retailers are selling them for up to 89 cents apiece, according to Cornell, who said he had sold 100,000 in eight months.
Next to Cornell’s cluttered display, Cal Tigner offered his ″Take-A- Ticket″ dispenser, a clear plastic unit that lures lottery bettors by displaying a long roll of tickets. Officials in Vermont say the dispensers have increased sales by up to 500 percent in some locations.
Prior to the ″Take-A-Ticket,″ lottery tickets were frequently stashed in a drawer. ″Out of sight, out of mind,″ Tigner said of the old system.
Tigner was a builder in Albany, Ore., before he was struck with the idea.
Bill Beitel of Trenton, N.J., sells machines used by states that pick the lucky numbers on television. The machine Beitel displayed at the meeting - a sleek, clear plastic device that blows ping pong balls into a tube - sells for $8,200.
Beitel said his company is the only one in the nation that makes the machines. He has sold more than 50.
States getting into the lottery business need ideas and guidance, as well as equipment. Lynn Nelson of Lebanon, Pa., is a consultant who helps states get started.
″Quite obviously, it is a growth industry to those companies that supply products ... and, quite obviously, companies are looking for new places to sell their products or services,″ he said.
The push to legalize a lottery in Texas is financed, in large part, by the industry.
The companies and their lobbyists will try to convince Texas lawmakers that a lottery would mean millions of dollars for the state, which faces a financial crisis because of the slump in oil prices. Supporters also argue that a lottery does not take money from the pockets of the poor, as some religious lobbyists contend.
″I don’t look at us as greedy businessmen,″ said GTech’s Speicher. ″There is a perceived need. People want to play the games. You need equipment to play the games. There’s a lot of competition out there. I don’t look at us as being greedy at all. Everybody has got to earn a living somehow.″
End Adv Weekend Editions Jan. 31-Feb. 1