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Neighbor states may lose lottery windfall

Oct 8, 2003, 4:42 am

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Tennessee LotteryTennessee Lottery: Neighbor states may lose lottery windfall

A solitary billboard between Nashville and the Kentucky state line tells the story of what surrounding states have to lose or possibly gain when Tennessee begins its own lottery next year.

The billboard, leased by the Kentucky lottery, announces the latest Powerball jackpot. It is a subtle reminder that lottery tickets are available not far ahead.

Kentucky does little to promote its lottery in Tennessee, spokewoman Sara Westerman said. But it would like to keep as much as possible of the estimated $80 million that Tennesseans spent there for lottery tickets last year. Much of that was spent along the border with Tennessee, where four of Kentucky's top five lottery ticket retailers are located.

"They're right there on I-65. It's easy for Tennesseans to get there," Westerman said.

Even so, Kentucky has no plans for an advertising campaign in Tennessee. Neither does Missouri, Georgia or Virginia, the other states next door to Tennessee that already have lotteries. All told, Tennesseans spent more than $200 million on those four states' lotteries last year.

Now that Tennessee is getting its own lottery, it's legal for neighboring lotteries to advertise here. But tight state government budgets, and a desire to spend limited marketing dollars where they do the most good at home are discouraging any idea of advertising in Tennessee, spokesmen for those lotteries said.

"They have been taking those marketing budgets and slashing them," said Joe Mahoney, spokesman for the Multi State Lottery Commission, the organization that runs Powerball. "Do you want to advertise to people who might not even see it?"

Kentucky spent about $41 million to operate its lottery last year, including $10.6 million for advertising. Georgia spent $144 million on operating expenses, including $18 million for advertising. Virginia spent $12 million on advertising and Missouri spent $6.25 million, lottery spokesmen said.

This year, because of state budget problems, the Missouri lottery's advertising budget has been cut to $3 million, spokeswoman Susan Goedde said.

"Traditionally we haven't advertised in other states, and we don't have any plans," she said. "Obviously we're worried about keeping our sales up."

Instead of mounting advertising campaigns in Tennessee, those states are waiting to see what kinds of opportunities arise to keep Tennesseans driving across their state lines and past the doors of retailers selling tickets for Tennessee's own lottery.

Their strategy depends on one of the most important decisions that the managers of Tennessee's lottery will have to make. Which big-jackpot, multistate lottery game will Tennessee join?

The choices are Powerball, played in Kentucky and Missouri and 22 other states, and Mega Millions, played in Georgia and Virginia and eight other states. Rebecca Paul, director of Tennessee's lottery, has said her organization will join one of those games by July 4. Whichever game Tennessee chooses, two of those states might be winners. The thinking is that Tennesseans might keep going there for a chance to win a big jackpot not available at home.

If Tennessee doesn't join Powerball, Kentucky's I-65 billboard will serve as an invitation to players who don't want to limit their chances to Mega Millions, Westerman said

"If that's all you have and you're willing to make the drive," she said. "We're not going to turn away your sales, that's for sure."

That sentiment is echoed in Virginia, Georgia and Missouri.

Tennesseans spent $100 million last year on the Georgia lottery, which had overall ticket sales of $2.4 billion.

Even though the Georgia lottery does not advertise outside the state and has no plans to do so, its managers aren't closing the door on the possibility of a marketing campaign designed to encourage people from the Chattanooga area to keep crossing the border.

"As for what the future holds, it's too early to tell," spokesman J.B. Landroche said.

The Powerball-Mega Millions decision, not advertising, will have a lot to do with whether Tennesseans keep traveling to Missouri. For now, the No. 1 Missouri lottery retailer is across the Mississippi River from tiny Dyersburg, Tenn., Goedde said.

Powerball drew Tennesseans to buy $11.2 million worth of lottery tickets in Missouri last year.

"Powerball draws people everywhere," Goedde said. "We have people from Memphis who play, especially when the Powerball jackpot is high."

Virginia plans to advertise its lottery on television stations in the Tri-Cities area of East Tennessee, Director Penelope W. Kyle said. But those ads will not be aimed at Tennesseans. Instead, they will be intended for residents on the Virginia side of the mountainous, intertwined border whose televisions receive signals only from Tennessee stations.

Sales to Tennesseans account for just 1%-2% of Virginia lottery receipts, she said, largely because there are no large cities on the border, which is in the heart of the Appalachian Mountains.

"To get to us to buy tickets is a lot more difficult than going to Georgia or Kentucky," Kyle said.

Virginia expects to lose between $11 million and $22 million in annual sales, but only after Tennessee's lottery has had a few years to build a home-state following. It will be several years before Tennessee's lottery offers enough instant-winner scratch-off games to compete with the 70 games offered by her state, Kyle said.

While lottery officials in other states wonder how to keep collecting money from Tennesseans, one official here has the opposite in mind. State Rep. Chris Newton said it's time for Tennessee to turn the tables on those states.

"For years, we've had a lottery in Tennessee. We've just never had the benefit of it," said Newton, R-Benton. He sponsored legislation that authorized Tennessee's lottery.

If Tennessee joins the right multistate game, he said, players from Virginia, Georgia, Missouri and Kentucky might spend their money in Tennessee, instead of the other way around. That could significantly increase the amount of money Tennessee's lottery generates. Ticket sales are expected to be between $550 million and $650 million for the first year.

"There's no other state in the union that has more states that adjoin it. And then you factor in tourist traffic," Newton said. Of the eight states that touch Tennessee, four do not have lotteries.

"It's a competitive environment," Newton said of the relationships between states when it comes to lotteries.

That scenario has played out before. When South Carolina's lottery, which began selling tickets on Jan. 7, 2002, joined Powerball, players from Georgia came across the state line even though they had Mega Millions, said Mahoney, the spokesman for the Multi State Lottery Commission.

"Tennessee's in a great situation," he said.


The Kentucky lottery has a Powerball billboard on Interstate 65 announcing the game's latest jackpot. As Tennessee prepares to start a new lottery, several bordering states are bracing to lose revenue from Tennesseans.


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