The Daily Item, Sunbury, PA

News

January 14, 2013

British firm seeks more players for state lottery

HARRISBURG — If you don't gamble on Pennsylvania Lottery games, the British company that's poised to take over management of the $3.5 billion system is looking for you.

Executives from London-based Camelot Global Services told senators at a Finance Committee hearing Monday that the key to expanding lottery profits will be to win over people who never play, play infrequently or stopped playing.

How to get people to gamble more is the British national lottery operator's secret recipe. It is, they say, what they do better than anybody else, and senators elicited only so much information as they took their first crack at questioning Camelot executives in public.

"Perhaps we should say, 'Congratulations, you've won the lottery,'" Sen. John Blake, D-Lackawanna, told Alex Kovach, the firm's managing director, and Dianne Thompson, the CEO of its parent Camelot Group.

"I don't think we've won the lottery," Kovach responded. "I think seniors in the state of Pennsylvania have won the lottery and I think this is a deal that is a very, very good deal for seniors here."

Gov. Tom Corbett's administration announced Friday it had awarded Camelot a 20- to 30-year contract to manage the Pennsylvania Lottery, which last year delivered more than $1 billion to programs for the state's elderly.

The deal pledges $34 billion in profits to the state over the next 20 years, while Camelot will charge a management fee worth hundreds of millions of dollars over the life of the deal and get cash incentives for exceeding its annual profit commitments. Those incentives are capped at 5 percent of profits.

Corbett administration officials expect to finalize the contract later this week, making Pennsylvania just the third state — behind Illinois and Indiana — to privatize its lottery management. They maintain that Camelot's commitment is a stronger, more stable source of revenue than state employees could deliver as Pennsylvania eyes growing demand for services for the elderly. The union representing state lottery employees, however, disagrees.

Part of Camelot's strategy will be an expansion of gambling — installing keno monitors in restaurants and bars and providing online access to games, for instance — that some lawmakers, the lottery employees' union and state Treasurer Rob McCord say does not appear to be allowed by state law.

The union, Council 13 of the American Federation of State, County and Municipal Employees, has sued to block the contract, in addition to filing a grievance and an unfair labor practice charge against the Corbett administration. McCord has threatened not to pay Camelot until he is satisfied that its plans to expand gambling are legal. The contract will also need approval from the state's incoming attorney general, Democrat Kathleen Kane.

Besides those legal hurdles, Camelot's big challenge will be to persuade more people — perhaps even double the number, or more — to play the Pennsylvania Lottery.

Senate Finance Committee Chairman Michael Brubaker, R-Lancaster, asked whether such a strategy is realistic. Kovach insisted his company has carried out research that gives it confidence.

"The research would indicate to us that there are infrequent, lapsed and non-players, and there is a market that currently is not being focused on by the lottery," he said. "And some of the things the lottery has done has been very successful with the core player, but actually presents some barriers to infrequent or lapsed players playing."

Sen. Pat Vance, R-Cumberland, told Kovach he was being vague and pressed him for details.

Kovach responded that Camelot has marketing techniques and ways in which it designs and presents games and terminals that make them friendlier to the uninitiated or unfamiliar.

"The use of language, the complexity of the game can sometimes put off people who might play, but just find it a little too difficult, the barriers to actually playing a little too intimidating," he said. "And we would look to reduce those barriers."

Camelot's business plan was not made public by the Corbett administration on Monday afternoon.

Camelot officials have said independent research shows that nearly 50 percent of the adult population plays the lottery every week in the United Kingdom. In Pennsylvania, 10 percent to 30 percent of adults play it every week, Kovach said.

After he testified, Kovach would not say to what level Camelot needs to raise player participation to reach its profit commitment in Pennsylvania. He said he believes there may be another U.S. state or two that is much closer to Britain's adult lottery participation than Pennsylvania.

Peter Tartline, a top Corbett administration budget official who negotiated the deal with Camelot, said Camelot's plan was built on different growth targets in different game areas, but he wasn't sure whether Camelot had a certain percentage of adult players in mind. Administration officials have said they need to target people in higher-earning households.

 

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