Tag: #products

Horse betting in the lotteries product portfolio

I have written this text for http://www.lotterydaily.com, and Conor Porter has partly edited it.

Traditionally, horse betting and lotteries have not belonged together. The gambling business is almost everywhere based on a model in which gambling is divided into three or four different areas of activity. Casino operators have run casinos and in recent years, also online casinos. Betting companies have operated sports betting, including in many cases, horse betting. 

On the other hand, there have also been separate horse betting companies in the market that have taken care of on-track betting and later also online horse betting. In addition to these, there have been lottery companies whose product range has included lotto games and scratch cards. The product range of lotteries has expanded to sports games in many countries, and in some cases, to casino games and horse betting.

As we know, the consolidation of the gambling industry is happening at a rapid pace. New operators from outside the gambling industry have entered or are entering the industry. In addition to this, the division within the industry is breaking down. More and more operators today offer almost all different product groups for gambling. The digitalization of operations and online sales have made this more accessible than it was in the old retail channel model. For example, many traditional sports betting operators now make most of their revenue from casino games. Several lotteries have also realized that they have the potential to succeed in the competition if they expand their business to other gambling verticals.

Customers’ demands on businesses have grown tremendously. Companies can no longer succeed with old-fashioned operating models. Products should be available where customers are anyway. That has placed great demands on the digitization of operations. It is already impossible to do an effective gambling business in many countries without an online sales channel. For example, about half of all gambling sales take place on digital channels in Nordic countries. Customers also seem to prefer companies from which they can buy all products from one place. This implementation requires expanding the product range to cover all major product groups. The competitive advantage of lotteries is so far quite strong, as private operators have not found a sensible way to offer lottery jackpots. However, lotteries should also be active and expand their product range to other gambling verticals.

As I said earlier, lotteries don’t easily come to mind when you think about horse betting. When you look at it a little more closely, the image turns out to be at least partially wrong. One member company of the World Lottery Association (WLA) is the Hong Kong Jockey Club (HKJC), one of the world’s largest horse betting companies. In addition to HKJC, WLA’s member companies include dozens of lotteries that also offer horse games. In Europe, companies like SISAL, IGT Lottery, Veikkaus, Loterie Romande, Svenska Spel, and Danske Spil have horse betting in their product portfolio. According to the experience of European companies, customers who actively play horse betting also play other games offered by lotteries and are therefore very profitable customers.

The WLA recently added an interesting new member company in Europe’s biggest horse betting company, the French PMU. PMU has been working closely with lotteries, mainly in French-speaking countries, for a long time. Several of the lotteries in the French-speaking countries of Africa sell PMU horse betting, which accounts for a large proportion of the total revenue from those lotteries. PMU also cooperates with European lotteries at two levels, commingling and technology.

The strength of lotteries compared to other gambling operators is the large number of customers and the tradition of cooperation. As we know, the big lottery products in North America and Europe are the result of collaboration. Individual lotteries could not have produced products like Euro Millions and Powerball. In such pool-based products, collaboration allows for huge jackpots. The same model could work in the area of horse betting. Lotteries have an extensive customer base and sales network in their own countries. When combined with an exciting product, there is a “winning combination” in size. Of the WLA members, both HKJC and PMU already have betting products that would seem to appeal to customers of other lotteries.

Last week, WLA organized a horse betting webinar, where lottery companies were introduced to the World Pool horse betting that is already up and running. Lotteries from countries where horse racing is a popular sport should consider joining that World Pool game. The easiest way to expand your product range to the field of horse betting could be to work with PMU. I believe that other member companies in the lottery world that already run horse betting are also ready to help other lotteries join.

The development where lotteries are getting involved in the horse betting business is exciting to me personally. My gambling business career started with a horse betting company, where I had time to be the CEO for a while before joining the lottery company. I’m still an active horse bettor and involved in Board-level horse racing activities here in Finland. That’s why I think I’m qualified to help lotteries who want to understand the potential of horse betting. So, I’m ready to help if contacting the giants of the lottery world is not the most interesting option of all.

MORE GAMES PLEASE!

I wrote this column for http://www.lotterydaily.com and they published it few days ago. This text is partly modified by Chris Murphy.

The world is changing, and cycles of change are constantly accelerating in all areas of living. This is also the case in gambling business and the change will continue. The digitalization of gambling has been talked about to the point of fatigue, but despite this, for example, many lotteries do not seem to be able to move around in a large scale. Somehow it seems that traditional state-owned lottery companies prefer to focus on the fight against change rather than seeing it as an opportunity. But change can’t be stopped and coping with change requires the ability to adapt to it.

Instead of the relentless talk of digitalization, I would like to bring another topic to the debate where I’d expect a much more active approach from the lotteries. Fighting against change has meant that lotteries’ own game portfolios haven’t been developed as much as they should be. 

A typical portfolio has been just a few draw-based games and some scratch cards. Product renewal has meant a new lotto game or instant ticket. No more radical changes have traditionally been seen from the lotteries.

The gambling market has been constantly evolving and new business areas have followed each other. People use a wide range of gambling products and have started to become customers for several different gambling companies. 

A modern and agile gambling company focused on the digital business often builds its strategy for a goal that aims to get customers to use products from as many different product groups as possible. The idea is based on the fact that a customer playing several different products in the same company is more likely to remain the company’s customer than those who play only one or two products.

Gambling companies will get another benefit if they manage to expand customer product usage. Customers, who increase the number of games they play, will also increase their total consumption on average.  Of course, the growth is not as big as the money invested in a new game, because most of the money spent on the new game is out of some other games they used to play before.

However, the actual jackpot for the company is available. If the money that customer uses for playing your new game is at the expense of the games of another gambling company, then the entire profit of this new game is new money for your company. If lottery expands its offering to completely new game types, it is possible that its loyal customer will discover games which he used to play with another company. In this situation, there is a chance that the customer will transfer all his gambling to the lottery and even in the case where his total gambling does not increase, the lottery’s profits can and will increase.

How does the traditional lottery product development with a “new lottery game” fit into that pattern, which is hoped to produce customers who are going to use just lottery’s own products? Not so good. With a new lottery game or scratch card it is extremely difficult to get any customer to transfer his gambling from another company to your lottery. 

A successful launch of the lottery game can certainly bring new money from old customers, but the turnover that has been accumulated mainly for the new product is a shift from your other products. You won’t earn a lot when you just move money from your right pocket to the left one.

Of course, I’m aware that in many countries lottery owners have curbed product development and instead been satisfied with the profits from the traditional lottery business. The most important thing has been to secure the established monopoly position and try to prevent that from being jeopardized. Business growth may not even be a key consideration. But what will the future look like if the static offering starts to lose interest against other gambling offerings? Not good at all.

The monopoly status of the lotteries is beginning to be more and more nominal.  Lottery betting has come to rob the same market and other gambling verticals have otherwise stuck right next to customers on their skin. Modern gambling is often fast and entertaining compared to lottery products. 

Nowadays it is much more difficult to get younger customers to become regular customers for lottery products. Should lotteries expand their offering to other gambling verticals? They definitely should if it is legally possible. And if it is not, at least a reasonable effort should be made to change the legislation to a form in which other gambling verticals could also be offered to the lottery customers.

Why has this not been done to a significant extent? The owner’s will and legislation are, of course, valid reasons but they can be influenced if necessary. The big ideological problem seems to be that many lottery operators are cautious about using smaller prize games to compete internally against traditionally higher payout lottery products. 

If only the same bet moves to a lower payout product, the revenue will of course be lower. You shouldn’t worry about that at all. In modern gambling products, the rhythm of gaming and the circulation of money enable the same kind of profits thanks to increased turnover. 

The crucial factor for the overall development of revenue is whether the customer is ready to increase the total amount of money he used to play or not. It is difficult to see that adding a new product group to the company’s portfolio would reduce the total amount of money spent on gambling in any significant customer segments.

In today’s gambling world where responsibility is the key word, the offering of lottery has traditionally been the product vertical that causes the least gambling problems. Will lotteries risk their reputation if they start offering more harmful gambling products? 

This is a scenario that needs to be taken into account. An extremely aggressive offering of casino games could lead to such a thing. To offer much softer sports and horse betting is hardly not. And casino games can also be offered to customers in a responsible way. The market situation and the potential of the different new product verticals should determine which product groups give the best balance between possible risks and profits. But responsibility shouldn’t be a barrier to expanding the range of gambling verticals for lotteries.

As we go further in the 2020s, it is clear that the competition in gambling businesses will become even harder. Even in countries where traditional betting shops have managed to maintain a strong position in the face of internet competition, the situation is not everlasting. 

Even in those cases, lotteries can’t fail to try to maintain their position as the sole gambling operator of large customer groups in their own country. However, this won’t be possible in the future unless lotteries are starting to expand their offerings to other gambling verticals. In the future a modern, successful, and competitive gambling company will offer a wide range of different gambling products from different gambling verticals. I would like to see lotteries to be among those modern gambling companies!