Outlook For PA Lottery Newly Optimistic After 2017-18 Growth And Launch Of iLotto

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When it comes to gambling at a casino or playing the lottery, it’s well-known that the house always wins, at least in the long run. But that doesn’t necessarily mean that the house is turning a profit after paying all of its bills.

After disappointing sales in Fiscal Year 2016-17, the Pennsylvania Lottery, which provides crucial assistance for the state’s seniors, found itself in the red for the first time in 40 years.

When sales continued to lag during the first few months of the most recent FY, government officials became concerned that the industry was on the cusp of an extended downward slide.

Those fears, however, were seemingly unfounded. To the great relief of lawmakers, lotto sales showed growth during the 2017-18 period. What’s more, the state took in millions during its first month offering a selection of lottery games online. The two factors together paint a reassuring picture of the industry as a whole, and present a positive outlook for the state and its budget necessities.

Pooled jackpot games drive sales

For FY 2017-18, the state’s Independent Fiscal Office (IFO) has factored growth of 5.4% for the PA lotto, mostly due to increased sales of instant tickets and multi-state draw games like Powerball and Mega Millions, according to a recent release.

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While the exact numbers haven’t been disclosed yet, we know that the lottery took in just over $1 billion in FY 2016-17, putting the FY 2017-18 revenue somewhere around $1.1 billion.

It’s not hard to see how a game like Mega Millions, which is seeded with a minimum of $40 million and fed by gamblers in 44 jurisdictions, could prove a boon to the state. Jackpots can quickly reach sizes of epic proportions, prompting even those who wouldn’t normally purchase a lottery ticket to try their luck.

During the most recent fiscal year, Mega Millions helped drive increased sales when its grand prize soared to $521 million, the fourth largest in its history.

The IFO believes that the lotto’s positive trajectory will only continue, estimating 3.8% growth in FY 2018-19.

iLotto just getting started

Also on the rise is the PA online lottery, which was legalized as part of an expansive gambling package last year. The state officially launched its first batch of virtual lotto games in late May, just after keno games went live at thousands of retail outlets.

Initial game selection online has been underwhelming, with the state offering just 13 instant win games. Virtual draw games and keno are not yet available, but are expected to be added at some point in the future.

While the current online options may be paltry, that hasn’t deterred players from flocking to the site. Officials reported that in the first month alone, 45,000 Pennsylvanians created accounts and spent $21.6 million playing online lottery games. Of that money, the state paid out $18.7 million, leaving it with $2.9 million to pay operational expenses and distribute to social programs.

Gary Miller, spokesman for the (IFO), estimated that the online lottery will bring in around $30 million in profit, presumably in the next fiscal year, although the exact time period was not specified.

By contrast, Michigan’s online lottery generated $18.5 million in its first full year, from a population 3 million people smaller than that of PA.

With a decades-old state lottery and 12 casinos in operation, Keystone State residents are already quite familiar with the world of gambling. Taking the plunge and playing lottery games online could come easily for those tempted by the big prizes on offer.

On a per resident basis, the PA iLotto is on pace to extract around $2.72 annually, compared with $1.86 per resident during Michigan’s first year.

When players are able to easily purchase draw game tickets and play keno online or on mobile devices, revenue will only continue to climb.

Even so, lotto officials are being cautious and measuring expectations. “iLottery is still very new,” said Miller. “We are being realistic about the new revenue potential.”

Casinos feel the heat

The potential online lotto threat is enough to strike fear into PA casinos interested in launching their own online offerings. Recently, state casinos collectively petitioned the governor to remove instant win games that, in their opinion, violate language written into the state’s iGaming bill. iLotto games cannot, according to the bill, “simulate casino-style lottery games, specifically including roulette, poker, slot machines or blackjack.”

PA online casino operators already face onerous fees and taxes, and don’t relish the idea of the online lottery further biting into profits.

Of course, there was little chance that the state would acquiesce to the casinos’ demand and pull some of their most popular products. They did, however, make a somewhat small concession by prohibiting iLotto affiliates from advertising games as “casino-style” or “slots-style.”

Whether slick instant win games will have any major effect on the state’s forthcoming online gaming sites is still up in the air, but for now, things are looking up for the state lotto.

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Bill Grinstead

Bill has over a decade of experience working in diverse aspects of the online gambling space. He is currently focused on legal, US online gaming, which he has reported on since the industry first became regulated in the country.

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