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Volume 20 No. 42
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Lotteries still a scratch and win for sports?

New England’s teams keep winning and their fans keep scratching. Lottery tickets, that is.

A SportsBusiness Journal analysis of the 44 state-run lotteries (43 states plus the District of Columbia) shows that sales of instant lottery games, or scratch-off tickets, bearing a New England Patriots, Boston Red Sox, Boston Bruins or Boston Celtics logo have topped $1.63 billion in the nine years since such tickets were introduced. More than half of the revenue generated by all licensed sports lottery tickets come from sales associated with Boston’s four teams.

Since Massachusetts and Maine each launched a Red Sox scratch-off in 2006, the six-state region has fielded 32 team-logoed games, with more on the way this spring.

The number of big league teams with lottery deals was down last year compared with the past few years.
More than 95 percent of those sales have come from the 16 games produced by the Massachusetts State Lottery, accounting for 302 million team-logoed tickets. The state’s commission is considered to be one of the most successful in the world: Lottery ticket sales represented 1.4 percent of the state’s 2012 GDP, nearly triple the average of other U.S. states. The state sold $3.25 billion worth of instant tickets in 2012, just behind New York’s $3.58 billion, despite having a population just one-third the size of New York.

In general, the lotteries do not contract directly with the MLB, NBA or NHL teams to use their logos, and though the teams receive licensing fees, they do not receive any proceeds from the sale of the games bearing their marks.
Atlanta-based MDI Entertainment holds the licensing rights to use the team logos on lottery products and negotiates directly with the teams and leagues on usage. NFL teams are permitted to broker deals directly with the state commissions. Many of them do, although some hire MDI to act on their behalf.

The art of deciding when, or even if, to field a team-logoed ticket requires constant attention to data.

“We monitor our weekly game sales, forecast how long each game will be in market, and that helps us to develop and build our annual marketing plan,” said Beth Bresnahan, the Massachusetts State Lottery’s assistant executive director and director of marketing and communications. “For example, there was quite a bit of Red Sox-branded inventory across many price points when we were developing our 2012 and 2013 marketing plans. While the brand is undoubtedly one of the strongest in the league and region, it would not have been beneficial to the lottery’s game portfolio to flood the marketplace with another ticket until we moved existing inventory. As such, we did not release a Red Sox game in either year.”

Bresnahan acknowledged that the on-field success of Boston’s teams makes things a little easier than most. “We

have found that there is a direct correlation between a team’s performance and the success of a lottery ticket bearing its logo,” she said.

Alex Traverso, assistant deputy director of the California Lottery, said that like most lotteries, his group is always looking for ways to connect with the younger demographic. He cited internal research that shows that although the scratchers category accounts for the vast majority of annual lottery spending among 18- to 34-year-olds, that age group does not spend as much on the games as others, and when it does, it is not on sports-themed games.

“We always keep our options open, but we have found that other games or themes in our portfolio tend to perform better for whatever reason,” he said.

The group sold a combined $31 million for Oakland Raiders, San Francisco 49ers and San Diego Chargers tickets that launched at the beginning of the 2010 NFL season, and paid a total of $1.73 million in licensing fees to those teams, but has not had a sports ticket since. The state also had an NBA-level deal during the 2003-04 season that featured multiteam campaigns. California Lottery had two MLB tickets in 2007, one with the A’s and Giants logos, and a second one with the Dodgers, Angels and Padres marks.

Even some games that have sold well find themselves replaced in the display window by more popular images, such as Monopoly and Wheel of Fortune.

For example, despite in 2010-11 selling more than $47 million combined in Pittsburgh Steelers, Philadelphia Eagles and joint Philadelphia Flyers/Pittsburgh Penguins tickets, a spokesperson for the Pennsylvania Lottery said the state “has no plans for any professional sports tickets at this time.”

This doesn’t mean the state is abandoning sports as a sales hook, though. Pennsylvania is one of 18 states taking place in the first “Powerball Pro Football Hall of Fame” promotion. Sponsored by the Urbandale, Iowa-based Multi-State Lottery Association and run by MDI, 200 winners in the contest will be treated to a four-night trip to Cleveland, May 1-5, including round-trip airfare, hotel rooms, meals, ground transportation, admission to the Pro Football Hall of Fame and Rock and Roll Hall of Fame and Museum, as well as admission to a Powerball winners-only Ultimate Tailgate Party event.

“It’s not surprising that there was a slowdown with licensed sports games,” said Steve Saferin, president of MDI. “There are very few brands who are strong enough to support an annual game.”

Saferin said the areas of growth for the genre lie outside traditional markets. He cited the “Take Me Out to the Ballgame” scratch-off game run by the South Dakota Lottery (MLB owns the rights to the song, and the league’s logo was on the front of the ticket), and an NHL-licensed Hartford Whalers ticket in Connecticut, which is selling well.

While the number of big league teams with lottery deals was down last year compared with the past few years, scratch-offs made a foray into uncharted territory in 2013. For example, the Florida Lottery last fall released the nation’s first college sports-themed game.

“The Florida State-Florida scratch-off game was the first time that collegiate licensing rights were secured in this category,” said Andrew Giangola, vice president of strategic communications at IMG College. IMG College’s licensing affiliate, CLC, brokered those rights on behalf of the schools. “As far as other scratch-off games, we are very positive on the concept and on replicating the success we had in Florida,” Giangola said.

Other games of note:

In exchange for a $45,000 licensing fee that the Kansas Lottery paid directly to the Kansas City Chiefs, the state lottery commission printed 630,000 tickets, priced at $5 each, and offers more than $2 million in prizes. The game began July 31 and had generated $1.3 million in retail sales as of mid-January.

The Georgia Lottery and Atlanta Falcons celebrated their fifth annual scratch-off, printing 5.4 million tickets and generating more than $27 million in sales through mid-January. As it did in 2012, the team received a $250,000 licensing fee in 2013.

The Louisiana Lottery Corp. renewed its annual sponsorship agreement last May with the New Orleans Saints and issued its fifth consecutive Saints-themed game before the 2013 season. The lure of second-chance prizes has become a high-profile marketing tool for Louisiana, as it has for most of the other state commissions. Customers who failed to win instantly in Louisiana, for example, could enter their losing tickets for a chance to win merchandise, game-day experiences and season tickets.

The NHL jointly approved, with the NHL Players’ Association, a series of tickets in Slovakia featuring Tomas Kopecky, Zdeno Chara, Andrej Meszaros and Marian Gaborik, current NHL players from that country. That game launched in January.

MLB has licensed 16 Red Sox instant games throughout New England, with New Hampshire and Massachusetts each in discussions to issue one this spring.