Tuesday, August 19, 2014

Don't Believe The Hoosier Lottery-GTECH Hype

The Hoosier Lottery and their lapdogs in the major media are doing somersaults to convince the public that the first year of the lottery's operations under GTECH, the company just canned by Illinois officials after operating that state's lottery for the past three years, are absolutely stellar. Fortunately, there is at least one professional journalist still out there who can cut through the crap. Indiana Gaming Insight's Ed Feigenbaum follows the gaming industry more closely than anyone in the major media. He's not as impressed by GTECH's first year of performance.

The meme goes that GTECH has produced record high sales and revenues for the Hoosier Lottery during its first year of operations, returning close to $250 million in net profits to the state. It is true that lottery sales figures topped the $1 billion figure for the first time in its 25-year history. And it is true that the nearly $250 million returned to the state is also the highest figure in the lottery's history. Still, GTECH missed its target revenue figure under its contract with the state and will have to pay a penalty of $1.6 million for missing its target number.

Feigenbaum digs deeper into the numbers and observes that the lottery's ticket sales revenues grew by 7% over the previous year under GTECH's management compared to a 9.2% growth rate achieved during the previous year under state management. In other words, revenue gains fell by 24% under GTECH's management. The growth in net revenues was even smaller, growing just $13 million from $224.587 million to a little over $248 million, or about 5.7%. Here's the real kicker from Feigenbaum: "Five of the top eight multistate jackpots in history fell during FY 2014, cranking up purchases." Ticket sales from high rollovers is "theoretically beyond the control" of GTECH Feigenbaum observes. So without the luck of having an uncharacteristically high number of large rollovers, GTECH's numbers would have come in much less lower.

Remember, the Hoosier Lottery is one of the media's biggest advertisers in this state. Don't think for a second the media won't fudge the truth when it comes to reporting on its advertisers.

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