Massachusetts Lottery Officials Make The Case For Online Sales

With the highest per capita revenue in the nation, the Massachusetts Lottery is considered the gold standard of state lotteries.

But despite consistently setting a new high-water mark (including a record $1.09 billion in 2019), Massachusetts Treasurer Deborah Goldberg has continuously sounded the alarm that without modernization, lottery revenues are at risk.

And by modernization, Goldberg is referencing online lottery sales.

Online Lotteries Offer Reprieve from COVID-19 Shutdowns

Online Lotteries have allowed states to offset lost retail revenue during the Coronavirus pandemic in states where it’s available.

“In Michigan, lottery sales were down 5% during the first week of statewide social distancing orders compared to the same time in 2019. A week later, the decline accelerated to a 35% drop year-over-year. That was despite a 123% increase in first-time online players and a 21% jump in online sales.”

A similar story emerged in Pennsylvania. With 30% of retailers closed, Pennsylvania reported a 25% decline in retail sales since the state enacted social distancing measures. At the same time, there was a 29% year-over-year increase in online lottery play in March.

COVID-19 Is Also Behind the Latest Online Lottery Push in MA

According to State House News Service, Lottery Executive Director Michael Sweeney echoed Goldberg’s concerns during a Lottery Commission meeting On Tuesday.

According to Sweeney, the Massachusetts Lottery faces “a significant threat of becoming somewhat obsolete” if the new normal brought on by Coronavirus persists.

Unlike states that have embraced online sales, including neighboring New Hampshire and Rhode Island, the Massachusetts model relies exclusively on retail sales, including keno sales at bars and restaurants.

Goldberg was also at the meeting (the Treasurer’s office oversees the lottery in Massachusetts) and once again advocated for online lottery. “We have to note, and I said it in the last meeting, but it’s only continued, that the states that do have an online lottery have had incredible increases in sales,” Goldberg said. “One day in March in Michigan had not a $1 million gross, but a $1 million net.”

Sweeney went on to say that Massachusetts’ April net profit fell by $22.5 million (about 25%) compared to April 2019.

Previous Massachusetts Online Lottery Efforts

As noted, there’s been an ongoing push to authorize online lottery sales in Massachusetts for several years. Efforts intensified in 2019 with the launch of New Hampshire’s online lottery.

2019 also saw Goldberg file an online lottery bill (H 37), and this year, Gov. Charlie Baker included online lottery sales in his 2021 budget proposal.

That said, there’s also significant opposition to online lottery sales. Despite evidence to the contrary, local retailers oppose the state offering online lottery products under the auspices it will cannibalize retail sales – a result the Michigan online lottery and other states with online lotteries have yet to see.

In 2017, Massachusetts retailers formed the Save Our Neighborhood Stores Coalition to fight against online lottery sales.  

“The introduction of iLottery will decimate foot traffic in their stores and present numerous other challenges to the already struggling business owners. Convenience stores are the heart of communities,” the coalition wrote in testimony prepared for the Joint Committee on Consumer Protection and Professional Licensure. “Convenience owners develop strong and unique ties to their customers and to their neighborhoods. However, the reality is that these retailers will not be able to sustain any more hits to their profits and dark, empty storefronts could soon replace our friendly, familiar neighborhood store.”

“Massachusetts has the most successful lottery in the country, thanks in large part to the 7,500 local businesses who partner with the lottery to sell its products,” coalition member Jon Hurst, president of the Retailers Association of Massachusetts said in a 2017 press release. “Abandoning the current system for a model which has yet to be proven successful anywhere in the country is simply bad policy.”

Online Lottery Provides Incremental Sales

Of course, the online lottery model has proven successful in states where it’s launched.

Michigan is the top-performing online lottery, with revenue of $116 million and sales approaching $1 billion in FY 2018-2019.

Pennsylvania’s online lottery isn’t as established as Michigan, but the Wolverine State has also seen strong online lottery sales, tallying $381 million in sales during its first 12 months.

And more importantly, the fears of cannibalization have never materialized in Michigan, Pennsylvania, or any other online lottery state.

As I’ve noted previously:

Michigan’s lottery has been growing alongside its online offerings. Michigan has set a sales record in each of the last two years, with retail sales growth increasing, despite the presence of online games.

Pennsylvania FY-over-FY was $4.5 billion compared to $4.2 billion. That’s an increase of nearly 7%. When we factor in its online sales of nearly $400 million, the state saw a small decline in retail lottery revenue.

Like Michigan, Kentucky has set revenue records in each of the last two fiscal years.