State Lottery To Hire Private Manager
Lotto Director: deal could make up to $2 billion extra for the state
The State Lottery Commission approved an outside vendor to manage the Hoosier Lottery (WIBC.com photo: Ray Steele)
The Hoosier Lottery will soon have new folks in charge.
Listen to Ray Steele's report:
The State Lottery Commission voted to hire gaming company GTECH, one of the nation's largest lottery vendors, to manage many of the lottery's operations. "They will take over sales, marketing, what we call distribution - which is the warehousing and supplying of retailers with tickets," said Hoosier Lottery executive director Karl Browning.
The commission will pay GTECH $1.7 billion over five years. with the Hoosier Lottery maintaining control of prize payouts, security, finance and legal affairs. Browning says spending big money up front will mean bigger bucks down the road for Indiana. "If I look at that threshold number for the first five years, the average is a hundred million a year more than what the lottery would perform on its own," said Browning, who added the state could generate more than $2 billion in revenue over the life of the 15-year contract that it would not see if the Hoosier Lottery continued to run the games.
Around 125 lottery employees will begin working for GTECH when the company officially takes over July 1, 2013, with roughly 50 employees remaining part of the Hoosier Lottery corporation.
Browning says GTECH must pay a penalty to the state if it does not meet a certain level of sales each year, but there are some questions as to whether that will happen in practice. GTECH and the other company who submitted a bid in Indiana, Scientific Games, formed a partnership called Northstar and successfully bid to run the lottery in Illinois.
While the Illinois Lottery recorded record profits last year, revenue fell short of what Northstar promised Illinois when it submitted it's bid and was subject to a penalty. However, an indenpendent mediator ruled last month that Northstar could reduce it's initial profits projection because the state of Illinois failed to deliver on promises related to advertising and other issues, meaning the company would not have to pay a penalty.
GTECH's proposal says it will focus on expanding the number of people playing the lottery as opposed to trying to get current players to spend more. Browning says GTECH will also try to add more retailers to the Hoosier Lottery network. "There's opportunities in grocery. There's opportunities in big box - think CVS or Walgrees and the like. There's opportunities in other big box like Walmart."
Governor Daniels applauded the decision to hire the private company. "In eight years, this may be the easiest and most obvious decision the state has had to make," the governor said in a statement issued by his office. "For the Commission not to move forward would be a violation of their legal duty to maximize that income."