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GTECH picked to run Indiana Lottery

Indiana LotteryIndiana Lottery: GTECH picked to run Indiana Lottery
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INDIANAPOLIS, Ind. — The Hoosier Lottery board voted Wednesday to hire a private company to oversee sales, marketing and other operations with the goal of earning the state about $2.1 billion in additional revenue through 2028.

The board chose Rhode Island-based GTECH — which provides similar services to the Illinois lottery and provides some computerized game services in Kentucky — at the recommendation of Hoosier Lottery officials, who conducted an expansive review of the two companies vying for the 15-year contract.

GTECH told lottery officials that it can generate $500 million more for Indiana over the next five years than the state had projected to earn without any changes. Currently, the state's lottery revenues significantly trail other states.

"We are not achieving our potential today," Hoosier Lottery Executive Director Karl Browning told the board. "We will under this contract."

Browning said that "under every scenario I can think of," the deal is better for Indiana government and taxpayers.

"And the numbers are big," he said.

Kentucky Lottery Corp. CEO Arch Gleason said his organization has never considered privatizing services as broadly as Indiana has.

He added that the Kentucky lottery's organization as a corporation, rather than an arm of state government, allows for more effective and efficient operation compared to systems in other states.

GTECH plans to grow Indiana lottery revenue by expanding the games to more retail locations, broadening the base of players and creating more games, Browning said. The company also plans to revamp lottery advertising and enhance its brand.

"They have a lot of thoughts about how we spend our advertising dollars today," Browning said.

But Hoosier Lottery Chairman William Zielke said GTECH can't make those changes without an OK from the board, which will review the company's business plan annually.

GTECH has set a threshold amount that it intends to earn for the state, which is roughly 50 percent higher than current profits from the games. If GTECH beats the threshold, it receives a bonus; if it falls short, the company pays the state a penalty.

Lottery officials will now begin negotiating the details of the contract, but the final deal will likely mean that:

  • GTECH will take over lottery sales, marketing and distribution. That means GTECH will handle the lottery's relationships with retailers and oversee the creation and administration of state-based lottery games.
  • Hoosier Lottery staff will retain control over prize payments, security, finance and legal issues.
  • Roughly 125 lottery staff will be offered jobs at GTECH and are to receive comparable salaries and benefits, although they will continue to work out of their current locations. Less than 50 people will remain Hoosier Lottery employees.

Daniels: Decision easy

Hoosier Lottery officials have developed the public-private arrangement carefully to ensure the state doesn't run afoul of a U.S. Department of Justice opinion that states can't simply turn over their entire lottery operation to a private firm.

Gov. Mitch Daniels had considered that more dramatic step several years ago as a way to generate additional revenue for higher education and scholarships. Lawmakers didn't go for the idea and then federal officials nixed such arrangements.

On Wednesday, the governor — who leaves office in three months — said that in his two terms, "this may be the easiest and most obvious decision the state has had to make."

"Our lottery revenues lag far behind most states," he said. "With this contract, the only question is how much more money Indiana will receive than under the current system."

Daniels, whose administration has completed a number of controversial privatization deals, emphasized that 88 percent of the lottery's spending already is done through contracts with private firms. Retailers, for example, sell the tickets and outside firms are used to print and distribute them.

The new deal will move that number to 95 percent and "assures significantly stronger future net income," he said.

"It's no longer my job to suggest how these additional state fundsshould be used, but it is my job to leave Indiana in the strongest possible financial shape, and this step will make the nation's most solid state fiscal position that much stronger," Daniels said.

Other states' actions

Since the Department of Justice's ruling, other states have also been exploring how to privatize parts of their lottery operations.

Last year, Illinois become the first state to act. It hired Northstar Lottery Group — a collaboration between GTECH and Scientific Games — to run some of its marketing and sales operations. In its first under the new arrangement, the Illinois lottery's revenue improved by roughly $100 million, but the numbers were also short of Northstar's original projections by about $100 million.

That state and Northstar are now in arbitration over the revenue issues and possible penalties and the company is trying to reduce the profit commitment it made to the state when it won the bid.

Browning told the Hoosier Lottery board on Wednesday that the review team considered the Illinois issues as it studied GTECH's bid. But he said regardless of what Northstar promised Illinois, it did deliver additional revenue.

"The people of Illinois are $100 million richer than they were," Browning said. "If you think that's a problem, I'd like to have that problem."

The Kentucky Lottery contracts with GTECH to provide services for "online" games — such as Pick 3 and Powerball — and with another private firm for services related to scratch-off tickets.  [Editor: The term "online" in the lottery industry refers to games with tickets that are printed at a retailer's lottery terminal — it does not mean tickets are available over the Internet, nor does it refer to the type of drawings (i.e., traditional ball drawings or computerized drawings) that are conducted for the game.]

Those contracts include incentives to improve sales, Gleason said.

The Kentucky lottery reported $823.5 million in sales in fiscal year 2012, a 2 percent increase over 2011.

"I am convinced that we have one of the best run lotteries in the nation," said Rep. Mike Cherry, a Princeton Democrat who chairs the House Committee on State Government.

Scientific Games was the losing bidder in Indiana. Officials from the company attended Wednesday's board meeting but declined to comment after the decision.

Courier-Journal

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32 comments. Last comment 2 years ago by mcginnin56.
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United States
Member #111446
May 25, 2011
6323 Posts
Offline
Posted: October 3, 2012, 8:22 pm - IP Logged

The Hoosier Lottery board voted Wednesday to hire a private company to oversee sales, marketing and other operations with the goal of earning the state about $2.1 billion in additional revenue through 2028.

The board chose Rhode Island-based GTECH — which provides similar services to the Illinois lottery and provides some computerized game services in Kentucky — at the recommendation of Hoosier Lottery officials, who conducted an expansive review of the two companies vying for the 15-year contract.

GTECH told lottery officials that it can generate $500 million more for Indiana over the next five years than the state had projected to earn without any changes. Currently, the state's lottery revenues significantly trail other states.

"We are not achieving our potential today," Hoosier Lottery Executive Director Karl Browning told the board. "We will under this contract."

Browning said that "under every scenario I can think of," the deal is better for Indiana government and taxpayers.

"And the numbers are big," he said.

Kentucky Lottery Corp. CEO Arch Gleason said his organization has never considered privatizing services as broadly as Indiana has.

He added that the Kentucky lottery's organization as a corporation, rather than an arm of state government, allows for more effective and efficient operation compared to systems in other states.

GTECH plans to grow Indiana lottery revenue by expanding the games to more retail locations, broadening the base of players and creating more games, Browning said. The company also plans to revamp lottery advertising and enhance its brand.

"They have a lot of thoughts about how we spend our advertising dollars today," Browning said.

But Hoosier Lottery Chairman William Zielke said GTECH can't make those changes without an OK from the board, which will review the company's business plan annually.

GTECH has set a threshold amount that it intends to earn for the state, which is roughly 50 percent higher than current profits from the games. If GTECH beats the threshold, it receives a bonus; if it falls short, the company pays the state a penalty.

Lottery officials will now begin negotiating the details of the contract, but the final deal will likely mean that:

  • GTECH will take over lottery sales, marketing and distribution. That means GTECH will handle the lottery's relationships with retailers and oversee the creation and administration of state-based lottery games.
  • Hoosier Lottery staff will retain control over prize payments, security, finance and legal issues.
  • Roughly 125 lottery staff will be offered jobs at GTECH and are to receive comparable salaries and benefits, although they will continue to work out of their current locations. Less than 50 people will remain Hoosier Lottery employees.

Daniels: Decision easy

Hoosier Lottery officials have developed the public-private arrangement carefully to ensure the state doesn't run afoul of a U.S. Department of Justice opinion that states can't simply turn over their entire lottery operation to a private firm.

Gov. Mitch Daniels had considered that more dramatic step several years ago as a way to generate additional revenue for higher education and scholarships. Lawmakers didn't go for the idea and then federal officials nixed such arrangements.

On Wednesday, the governor — who leaves office in three months — said that in his two terms, "this may be the easiest and most obvious decision the state has had to make."

"Our lottery revenues lag far behind most states," he said. "With this contract, the only question is how much more money Indiana will receive than under the current system."

Daniels, whose administration has completed a number of controversial privatization deals, emphasized that 88 percent of the lottery's spending already is done through contracts with private firms. Retailers, for example, sell the tickets and outside firms are used to print and distribute them.

The new deal will move that number to 95 percent and "assures significantly stronger future net income," he said.

"It's no longer my job to suggest how these additional state fundsshould be used, but it is my job to leave Indiana in the strongest possible financial shape, and this step will make the nation's most solid state fiscal position that much stronger," Daniels said.

Other states' actions

Since the Department of Justice's ruling, other states have also been exploring how to privatize parts of their lottery operations.

Last year, Illinois become the first state to act. It hired Northstar Lottery Group — a collaboration between GTECH and Scientific Games — to run some of its marketing and sales operations. In its first under the new arrangement, the Illinois lottery's revenue improved by roughly $100 million, but the numbers were also short of Northstar's original projections by about $100 million.

That state and Northstar are now in arbitration over the revenue issues and possible penalties and the company is trying to reduce the profit commitment it made to the state when it won the bid.

Browning told the Hoosier Lottery board on Wednesday that the review team considered the Illinois issues as it studied GTECH's bid. But he said regardless of what Northstar promised Illinois, it did deliver additional revenue.

"The people of Illinois are $100 million richer than they were," Browning said. "If you think that's a problem, I'd like to have that problem."

The Kentucky Lottery contracts with GTECH to provide services for "online" games — such as Pick 3 and Powerball — and with another private firm for services related to scratch-off tickets.  [Editor: The term "online" in the lottery industry refers to games with tickets that are printed at a retailer's lottery terminal — it does not mean tickets are available over the Internet, nor does it refer to the type of drawings (i.e., traditional ball drawings or computerized drawings) that are conducted for the game.]

Those contracts include incentives to improve sales, Gleason said.

The Kentucky lottery reported $823.5 million in sales in fiscal year 2012, a 2 percent increase over 2011.

"I am convinced that we have one of the best run lotteries in the nation," said Rep. Mike Cherry, a Princeton Democrat who chairs the House Committee on State Government.

Scientific Games was the losing bidder in Indiana. Officials from the company attended Wednesday's board meeting but declined to comment after the decision.

Party

    vjohnson8's avatar - Lottery-050.jpg
    fort
    United States
    Member #72407
    March 17, 2009
    6114 Posts
    Offline
    Posted: October 3, 2012, 9:00 pm - IP Logged

    IND needs to give back!!!!!!!!!!!!!!!!!!!!!!!!!

    LET's get paid$$$$ money rollYes Nod

      grwurston's avatar - Lottery-012.jpg
      Goal. $1,500 a week.
      bel air maryland
      United States
      Member #90253
      April 24, 2010
      2249 Posts
      Online
      Posted: October 4, 2012, 12:14 am - IP Logged

      The Kentucky Lottery contracts with GTECH to provide computerized lottery games  such as Pick3 and Powerball...

      Computerized games. That's just GREAT.

      "You can observe a lot just by watching."  Yogi Berra, Hall of Fame baseball player.

      The numbers will tell you what numbers to play. Pay attention to the numbers.

        RedStang's avatar - mustangstu zps4c591ef5.jpg
        Dutchess , NY
        United States
        Member #121966
        January 21, 2012
        2514 Posts
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        Posted: October 4, 2012, 1:16 am - IP Logged

        Gtech is also converting ice-cream trucks into mobile lottery machines. You will be able to buy tickets at birthday partys, weddings, and red lights. Keep us updated in a year.

          Avatar
          baton rouge
          United States
          Member #10797
          January 26, 2005
          74 Posts
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          Posted: October 4, 2012, 8:10 am - IP Logged

          They have vending machine to sell lottery tickets in many shoppong centers too.


            United States
            Member #111446
            May 25, 2011
            6323 Posts
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            Posted: October 4, 2012, 9:11 am - IP Logged

            They should also make available, vending machines which dispense lottery clerks, without the attitude or patel disposition.

              Avatar
              Texas
              United States
              Member #132460
              September 4, 2012
              483 Posts
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              Posted: October 4, 2012, 11:17 am - IP Logged

              This is good for Indiana... Definitely it will bring them more income and people there will play great...

                CARBOB's avatar - FL LOTTERY_LOGO.png
                ORLANDO, FLORIDA
                United States
                Member #4924
                June 3, 2004
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                Posted: October 4, 2012, 12:32 pm - IP Logged

                They also do pre-draws!!

                  Avatar
                  New Member
                  Louisville KY
                  United States
                  Member #132514
                  September 5, 2012
                  11 Posts
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                  Posted: October 4, 2012, 12:39 pm - IP Logged

                  The Kentucky Lottery contracts with GTECH to provide computerized lottery games  such as Pick3 and Powerball...

                  Computerized games. That's just GREAT.

                  Hey grwurston - this is Chip Polston with the KY Lottery. I wanted to clarify the "computerized games" reference in this story. I sat in on the interview yesterday between the reporter and our president and CEO. There was some confusion as to what was meant by that - draw games used to be called online games, and they were given this term before the advent of the Internet (and thus the phrase online took on a whole different meaning). The reference to computer means the tickets are printed from a centralized computer - it does NOT refer to RNG. Both of these games are still drawn the old-fashioned way with balls and machines. Feel free to check out our new draw site that is linked to our main website and you can see our Pick 3 and Pick 4 midday and evening drawings there. Let me know if you have any other questions - thanks!

                    CARBOB's avatar - FL LOTTERY_LOGO.png
                    ORLANDO, FLORIDA
                    United States
                    Member #4924
                    June 3, 2004
                    4069 Posts
                    Offline
                    Posted: October 4, 2012, 1:20 pm - IP Logged

                    Hey grwurston - this is Chip Polston with the KY Lottery. I wanted to clarify the "computerized games" reference in this story. I sat in on the interview yesterday between the reporter and our president and CEO. There was some confusion as to what was meant by that - draw games used to be called online games, and they were given this term before the advent of the Internet (and thus the phrase online took on a whole different meaning). The reference to computer means the tickets are printed from a centralized computer - it does NOT refer to RNG. Both of these games are still drawn the old-fashioned way with balls and machines. Feel free to check out our new draw site that is linked to our main website and you can see our Pick 3 and Pick 4 midday and evening drawings there. Let me know if you have any other questions - thanks!

                    I noticed you didn't address my post about pre-draws???

                      Todd's avatar - Cylon 2.gif
                      Chief Bottle Washer
                      New Jersey
                      United States
                      Member #1
                      May 31, 2000
                      21432 Posts
                      Online
                      Posted: October 4, 2012, 2:09 pm - IP Logged

                      I have edited the story just a bit to replace the term "computerized" and insert a note that should clear things up.

                       

                      Check the State Lottery Report Card
                      What grade did your lottery earn?

                       

                      Sign the Petition for True Lottery Drawings
                      Help eliminate computerized drawings!

                        Original Bey's avatar - Lottery-022.jpg

                        Bahamas
                        Member #133467
                        September 30, 2012
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                        Posted: October 4, 2012, 2:27 pm - IP Logged

                        I have edited the story just a bit to replace the term "computerized" and insert a note that should clear things up.

                        Thanks Todd.

                        "Everything works  ONCE!"

                          Avatar
                          New Member
                          Louisville KY
                          United States
                          Member #132514
                          September 5, 2012
                          11 Posts
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                          Posted: October 4, 2012, 2:37 pm - IP Logged

                          I noticed you didn't address my post about pre-draws???

                          Hey CARBOB - I didn't address it because I never saw it. What's up?

                            CARBOB's avatar - FL LOTTERY_LOGO.png
                            ORLANDO, FLORIDA
                            United States
                            Member #4924
                            June 3, 2004
                            4069 Posts
                            Offline
                            Posted: October 4, 2012, 5:14 pm - IP Logged

                            Hey CARBOB - I didn't address it because I never saw it. What's up?

                            Will the lottery be conducting pre-draws?? If yes, how many?