Lottery looks for new growth
Consultants suggest a horse-race game and bingo TV show as gains in revenue slow
The Massachusetts State Lottery, its games mature and its revenue growth slowing, should launch a Keno-style virtual horse-racing game and explore the development of a half-hour play-along bingo show on television, according to a consultant's report released yesterday.
The 216-page, $75,000 report by Christiansen Capital Advisors did not endorse the most disputed revenue-raising option for the Lottery, the installation of slot machines at the state's four racetracks. But the consultants estimated the gaming devices would bring in $1.1 billion a year without having any dramatic negative effect on existing Lottery revenues.
The Lottery consultants were less enthusiastic about rolling out a $20 instant ticket game or new electronic cards that would allow users to play multiple games for one set price.
The report was commissioned last summer and designed to be a road map for future growth. The Massachusetts Lottery generated $4.46 billion in revenues in fiscal 2005, second only to New York, and funneled $936 million to the state's cities and towns.
But sales are declining for five of the Lottery's games. While Keno and instant ticket games are still growing, the consultant's report said overall Lottery revenue growth has slowed to $11.6 million per year, or just 0.04 percent.
It's also unclear how much more Massachusetts residents can spend on the Lottery. On average, each Massachusetts resident spent $681 on the Lottery in fiscal 2004, way above the next-closest state, Delaware, at $435.
''The Lottery and the Commonwealth of Massachusetts should not expect dramatic increases in revenues from the existing menu of games," the report said.
Alison Mitchell, a spokeswoman for state Treasurer Timothy Cahill, who oversees the Lottery, said the report would be used as a starting point for discussions internally and with the Legislature. Cahill has opposed the introduction of slot machines in the past because they could lower Lottery revenues. ''As of now, his position has not changed," Mitchell said.
The slot machines would cut into existing revenues, lowering them 3.6 percent, or $161 million, the first year, and $164 million the second year, the report said. After that, however, the report said revenue from existing lottery games would rise again and surpass the previous high point by year five.
A bill that would allow slot machines at the tracks has passed the Massachusetts Senate and is awaiting action in the House.
Representative Daniel E. Bosley, a Democrat from North Adams, said he supports efforts to refresh and update Lottery games because cities and towns have become dependent on the money. But he said he opposes expansion into slot machines and other forms of gambling because they will only suck revenue out of other areas of the economy. He said cities and towns need to realize that the Lottery is maxed out.
''At some point you have to draw a box around the Lottery and what you get is what you get," he said. ''You can't rely on it to always be a cash cow."
The horse-racing game, which the Lottery was ready to roll out last year before lawmakers became concerned about its effect on the horse tracks, would be played at 1,767 outlets and boost total Keno sales by 21.7 percent, or about $168 million using 2004 revenue data, the report said.
The consultants said a horse-race Keno game is nothing like a real horse race, since the winning horse is randomly selected just as a winning number is randomly selected in a regular Keno game. The consultants also said the horse tracks will continue their decline regardless of what the Lottery does, unless they are allowed to add slot machines.
Mitchell, the state treasurer's spokeswoman, said the Lottery could push ahead on its own with the horse-racing game, but indicated Cahill would seek legislative support.
''The report shows the game would not impact live horse racing, but if members of the Legislature feel it would, the treasurer would listen to their concerns and probably not push it," she said.
Senator Michael W. Morrissey, a Democrat from Quincy who held hearings last year on the horse-racing game, said he still has reservations about it. A supporter of slot machines at the state's tracks, Morrissey said his concerns about the Keno game would be eased if the Legislature approves slots.
Gary T. Piontkowski, president of Plainridge Racecourse in Plainville, which is pushing for slot machines, said the report should ease concerns that the gaming devices would cannibalize existing Lottery revenues. ''I couldn't be more pleased," he said.
The report did not estimate the effect of a televised bingo show, but it said the Lottery had been approached by a Miami company called Business Information Solutions LLC that has a contract with Comcast to explore the development of a show in prime time in Massachusetts and other states.
Players would purchase game cards from lottery vendors, play along at home, and return their cards to claim prizes. A spokeswoman for Comcast confirmed the cable giant is exploring the bingo show but said no decision has been reached.
The consultants said the Rhode Island Lottery tested a similar televised bingo show in 1996 for two days before the governor halted the game as an unlawful expansion of gambling.
Bruce Mohl can be reached at mohl@globe.com. 