🔒Gambling debate has big implications for CT Lotto’s future

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[Editor's note: After this story went to press last week, Connecticut lawmakers indicated they were not likely to take up online sports betting in a potential upcoming special session this year.]

Connecticut's lottery has seen steady growth over the past decade and expects to contribute a record $350 million to the state's coffers at the end of the current fiscal year.

Despite its financial success, Connecticut Lottery Corp. officials are concerned about competitive and generational headwinds that could imperil future revenue growth. As a result, the lottery is making some big asks of state lawmakers.

The quasi-public agency has been lobbying for authorization to sell its draw games online and to become a sportsbook — significant new offerings that could bring the most drastic change to its product mix since the lottery was birthed in 1971.

The lottery is also developing a new player loyalty program and just hired new marketing firms to re-craft its image, particularly to younger adults.

“We're the fourth-oldest lottery in the country and we basically still sell the same two products — we sell draw games and instant games,” said Chelsea Turner, the lottery's interim president and CEO for the past year, during a recent wide-ranging interview at her Rocky Hill headquarters. ”If we're going to continue to maintain or even increase our general fund transfers over time, we need to innovate and adapt.

“We don't want to be left behind,” she added.

For the lottery, a win on either front could mean significant revenue growth for an organization that is already ranked No. 5 in per-capita sales among its U.S. peers.

Legislative hopes

There's no guarantee Connecticut Lottery's legislative wishlist will make it through the General Assembly.

Internet lottery, or “ilotto,” legislation faces retailer opposition and has failed several times in recent years, while a bill authorizing the lottery to offer sportsbetting didn't reach a vote in either chamber during the 2018 legislative session. Even if sportsbetting became legal here, the lottery may not end up as its purveyor.

There are plenty of potential complications in negotiating with the state's casino-operating tribes, not to mention concerns about the potential social impacts of more gambling options.

But Connecticut's efforts to expand gaming have picked up momentum, following the U.S. Supreme Court's recent decision to open up sportsbetting to states.

Gov. Dannel P. Malloy last month sought input from lawmakers on how he might approach negotiations with the Mohegans and Mashantucket Pequots, operators of Mohegan Sun and Foxwoods Resort Casino, which have a claim on expanded commercial gaming in Connecticut through a 1993 compact that requires them to pay the state 25 percent of their slot machine revenues.

Lawmakers could meet in special session this year to address internet and brick-and-mortar sportsbetting, as well as ilotto, though House Speaker Joe Aresimowicz recently called online lottery sales “somewhat problematic” and in need of further study.

Player engagement

Meantime, lottery officials are working on several other projects they hope will help drive revenue growth.

One includes a player loyalty club, slated to launch next year through a website and mobile app.

The club would allow users to accumulate points by scanning their losing tickets and other activities. Points could be used for second-chance drawings and other prizes.

Though Connecticut's lottery measures its audience through surveys and other methods, a robust online database would provide it with new customer insights it could use to make marketing and business decisions.

“We could understand what kind of games they buy together,” said Tom Trella, the lottery's director of portfolio strategy and analysis. “We could also survey people about their opinions on new game concepts.”

The lottery may soon select a contractor for the project. The system would also sync up with sportsbetting and online lotto offerings.

Lottery overseers also recently awarded a three-year, $1 million contract to marketing firms Makiaris Media, of Middletown, and Glastonbury's Decker Creative Marketing.

The firms are charged with, among other tasks, figuring out ways to better reach Millennials, a generation that doesn't spend as much on lottery products as its forebears.

“We see that not only with the lottery but with a lot of our clients,” said Makiaris CEO Irene Makiaris. “That's the up-and-coming audience.”

Eleven marketing firms bid, but the lottery says Makiaris and Decker's joint proposal stuck out.

The firms' bid notes that Millennials are increasingly cord cutters who spend the majority of their online time on mobile apps, including spending money on mobile games. The question is: Why aren't they as drawn to the lottery?

“More important than the way you talk to that audience is where you're talking to them,” Decker President Kathy Boucher said. “There are ways to connect all those dots in the digital space.”

Makiaris and Decker say that the lottery needs to connect with Millennials online and in other experience-based ways. Marketing should feel real and believable to younger adults, avoiding “pitchy” hyperbole, they say.

One of their advertising pitches is titled “It doesn't take much.”

“The classic lottery winning billionaire lifestyle stereotypes of yachts, a sports car in every garage and the 'hey, look at me, I quit my job' are a dated and overused depiction,” the proposal reads. “It's out of style, out of touch and honestly, seems out of reach.”

Instead, they say why not focus a campaign on “what could you do with a little extra money to make your day just that much better?”

One ad idea shows two women relaxing on pool floats with the tongue-in-cheek headline “Own your own island.”

Another pitch is titled “Chances,” with an ad showing a walk signal in a crosswalk with two seconds remaining. Beneath is the hashtag #chancewisely and an array of scratch tickets.

Image mending?

The lottery's latest marketing refresh follows more than a year of negative press.

That included coverage of retailer fraud in the now-defunct 5 Card Cash game; criticism by auditors and lawmakers of a consulting package awarded to former CEO Anne Noble during the midst of a state investigation into 5 Card Cash, which helped make her eligible for lifetime retirement benefits; and most recently, a botched prize drawing on New Year's Day that left players who had tossed their “Super Draw” tickets thinking they'd lost with no chance of winning in the do-over drawing.

The turmoil does not appear to have hurt sales. But is some part of the new marketing effort about the lottery changing or mending its image?

“From my perspective, not so much,” said Lottery Chairman Donald DeFronzo, a former state senator and commissioner who was appointed to the board last August. “The contracts had run out and we thought we could get a fresh approach.”

DeFronzo and Turner said they don't want to discount any of the lottery's past problems, but they say the new marketing contract is about growing a key revenue stream for the state budget into the future.

The lottery sends 27 percent to 28 percent of its revenues to the state's coffers each year.

“I think we are acutely aware of some of the missteps that the lottery has made, and I think we have publicly taken responsibility for them,” Turner said. ”... But we believe we provide a product that's a form of entertainment, and try to do that in a safe way that raises a lot of money for many good causes in the state.”

Read about Connecticut Lottery's CEO search