Lotto's expansion to online sales underscores larger trend in gaming

Rhode Island Lottery Banking On New Online Games To Plug Revenue Leak

Folks in Rhode Island can now play instant lottery games and keno online. The products, powered by IGT, went live this week without much pomp for the circumstance.

The RI Lottery announced its new toys via a short press release issued Tuesday. In order to enjoy them, players need to sign up for a VIP+ Purchase Power account through the lottery website.

The addition of Rhode Island makes eight states that now offer a full suite of iLottery products, but it’s still a long way from becoming the norm in the US.

Selling lottery tickets online typically requires standalone legislation, such as the kind Virginia passed earlier this year. In Rhode Island’s case, however, the Lottery inherited the power to do so under the 2019 legislation authorizing statewide online sports betting.

Online lotto vs. sports betting: a matter of priorities

The launch of online lottery products in Rhode Island isn’t a complete surprise, as it represents something of a return to the original plan.

State lawmakers last year joined a national trend by passing an updated bill that moved their existing RI sports betting industry online. As it did with casino gambling, the General Assembly opted to give its lottery a monopoly on sports betting rather than open the doors to free-market competition.

The same powers granted to the lottery to establish contracts with outside providers for mobile betting also allowed it to do the same for iLottery products. At that point, however, it was a matter of priorities.

Paul Grimaldi, Chief of Information and Public Relations for the Rhode Island Department of Revenue, explained the progression:

“In keeping with the Department of Revenue’s long-standing approach, we develop initiatives in an incremental manner. Mobile gaming has been envisioned for several years, going back at least to 2016. Our priorities changed with the advent of sports betting, and our goal became first to build out capacity for sports betting before turning to other matters.”

Although iLottery fell by the wayside in the rush to launch sports betting, it has subsequently become a higher priority during the outbreak of COVID-19.

The closure of land-based casinos and the temporary stoppage of all major sports means that 2020 gaming revenue won’t meet expectations in any state — including Rhode Island.

Can iLottery make up for falling ticket sales?

Sports betting isn’t the only revenue stream hurt by the pandemic. Throughout the US, retail lottery ticket sales have plummeted.

The Rhode Island Lottery hasn’t yet released sales numbers for April, but they’re certain to show a huge year-on-year decline. Sales in March were down 27% from 2019, whereas the preceding months had shown slight annual growth.

Other lotteries have released more recent numbers and the picture isn’t pretty.

Washington D.C., Pennsylvania, Massachusetts, California and others have all reported huge drops in sales — in some cases more than 50%. States with some form(s) of online gaming have conversely seen increases in revenue from iLottery products, casino games, and poker.

Thanks in large part to the economic effects of the pandemic, Rhode Island is facing a probable $800 million budget shortfall this year, including a lottery contribution projected to decline from 2019 by some $130 million.

It’s no wonder, then, that it would accelerate its plans for its iLottery at this juncture. Indeed, there are probably many state lotteries wishing they had the same option to do so.

RI online lottery emulates retail products

Tuesday’s launch included a dozen “instant ticket” products alongside keno.

Online keno is identical to the version available at retailers, with the same draws determining the outcome for both retail tickets and online play. There is one such draw every four minutes, beginning at 5 a.m. most days and ending with the final draw at 12:44 a.m. each night. The top prize is $100,000 for regular play, or up to $500,000 or $1 million for players selecting the Keno Overtime or Keno Plus options.

Gameplay for Rhode Island’s instant lottery tickets mirrors that in other iLottery states. Most resemble animated scratch tickets in that the player chooses areas of the card to reveal symbols and (hopefully) create winning patterns. Some digital products have additional features like bonus games and multistage gameplay that would be hard to implement with physical tickets. Top prizes depend on the ticket price and game, but range up to $250,000 on a $20 purchase.

Most crucially for money-minded players, the payouts for both types of product are similar or identical to those for retail tickets. The return-to-player (RTP) for instant games begins at 60% for $1 plays up to a maximum of 73% for $20 plays. The state’s video lottery terminals (VLTs), meanwhile, return over 86%.

That’s in stark contrast to some other online lottery states, where instant tickets offer payouts in the same range as slot machines or VLTs rather than retail scratch tickets. The Michigan online lottery, for instance, offers instant products with an RTP of about 88%.

The difference may be due in part to the choice of provider. Online lotto products in Georgia, also provided by IGT, offer payouts similar to Rhode Island’s.

Will more games help offset poor RTP?

Given the current circumstances and the growing popularity of iLotteries in other states, Rhode Island’s new products should have no trouble finding traction among lottery fans in the short term.

Once the pandemic abates, however, the lottery may find it needs to improve its product lineup. A greater variety of games will certainly be required, but that figures to be a foregone conclusion. Georgia’s online lottery, for instance, consists of over 50 games provided by IGT.

The low RTP may also be a problem, but that depends on the players. Not all customers are equally sensitive to changes in expected return, and lotteries already offer lower payouts than most forms of gambling.

The lotto’s own VLTs, currently idle inside two closed casinos, will provide the most direct form of competition to its online products. It remains to be determined whether players notice the difference in payouts and prefer the terminals when they reopen or whether the convenience of mobile play will offset the lower RTP.

New Hampshire expands iLottery too

States with existing online lottery programs are pushing them harder than ever. New Hampshire, which opened its online lottery in September 2018, announced an expansion to its line of products just this week.

It struck a deal with Instant Win Gaming (IWG), which provides online products for 20 other lotteries worldwide — including Michigan. Under the terms of the agreement, lotto customers in NH now have access to hundreds of new games.

In announcing the deal, the NH Lottery revealed that its iLottery sales have nearly doubled since last year. Over 67,000 New Hampshire residents have now registered for the online lottery, and the new products should push that trend to new heights.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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