With jackpot games down, lottery seeks winning formula

The state's lottery chief stood up and promoted rising sales of instant tickets, those wildly colorful scratch-off cards full of dollar signs and exclamation points.

"Our success story," said Gina T. Smith, acting director of the Lottery and Gaming Control Agency, at a recent meeting of its oversight commission.

Sales of the tickets are up more than $60 million, or 14 percent, over the first 11 months of the fiscal year compared with a year earlier, she said.

But — as any lottery player knows — wins are inevitably intermingled with losses.

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While the popularity of instant tickets is surging, sales of most other games in Maryland — including Powerball and Mega Millions, which rely on escalating jackpots to entice players — have slipped. Sales of Racetrax, a computer-animated game, and Keno also are down in year-over-year comparisons — a result experts attribute to competition from new casinos.

The bottom line: Overall sales are up 3.6 percent as of May 18, but lottery officials consider the figure a mixed bag because so many games are lagging.

Like a player seeking a winning strategy, the agency is continually tinkering with its mix of games to enhance the bottom line. For now, that means broadening its offering of instant ticket games while trying to shore up its other offerings.

Instant tickets account for 30.4 percent of lottery sales, up from 27.6 percent a year ago. The state launches an average of four new scratch-offs a month. There are about 60 such games in circulation at any given time with names like "Blingo Bingo," "Twisted Treasures" and "Mustache Cash."

The lottery says it must attract younger players.

"Traditionally, our strongest demographic is ages 45-60," said Michael Hofferbert, the lottery's directory of product development.

He said the agency is taking measures to try to appeal to players 18-34. That's a group, outside analysts say, that could embrace instant tickets because of their immediacy.

The measures include the use of promotional tie-ins such as scratch-off tickets featuring a Ravens theme or the face of the Oriole bird mascot.

"And we are taking advantage of technology with games like Bonus Crossword, which is accompanied by a mobile app that offers extended play and the chance to play for prizes," Hofferbert said.

It is important for the lottery to associate itself with recognizable brands, said former agency director Stephen Martino, who resigned in March to join the law firm of Duane Morris as a partner in its Baltimore office. Former New York State Lottery chief Gordon Medenica has been named by Gov. Larry Hogan to succeed Martino and is now transitioning to the job.

"The lottery doesn't have the budget to mount ongoing, repetitive marketing campaigns," Martino said. "So they are capitalizing on brands that people already know. Those licensed property tickets tend to do better than the average ticket."

Instant tickets, which cost from $1 to $20, contain built-in advantages for players. While results vary from game to game, they offer relatively high average payouts — from about 59 percent of sales for a $1 ticket to nearly 78 percent for a $20 ticket. That compares to anticipated payouts of 50 percent for Powerball and Mega Millions, and between 60 percent and 68 percent for Racetrax and Keno, according to the state.

"The instant-play ticket is like a reliable workhorse — little excitement, but they deliver fairly reliably," said George Loewenstein, an economics and psychology professor at Carnegie Mellon University.

With scratch-off tickets, players don't need to wait for a drawing.

"You can get your winnings right away," said Sandra James, 56, of Baltimore, who said she plays "every day or every other day" at a local convenience store.

James has ample reason to enjoy playing scratch-offs. A few months ago, she won $50,000 on a $5 ticket for a game called Bingo Times 10.

"I got to pay off my bills," the military retiree said.

Analysts are studying the decline of other games such as Powerball, sales of which are down 15.4 percent from a year ago in the state.

One reason might be a 2012 price increase for Powerball tickets, from $1 to $2.

"It didn't work," said Dawn Nettles, a self-described lottery "watchdog" and publisher of the Texas-based Lotto Report. "As few winners as there are, people are backing off their spending."

Lottery analysts have suggested that players might be becoming numb to Powerball's soaring prize numbers — a phenomenon they call "jackpot fatigue." It was up to $188 million as of Monday. Powerball, which Maryland officials say is undergoing restructuring designed to produce faster-growing jackpots, is played in 44 states and the District of Columbia.

The more big jackpots are publicized, the more routine jackpots "come to seem smaller, and people aren't as captivated by them," Loewenstein said.

In many states, players are confronted with so many lottery options they can become confused, said Dr. Timothy Fong, a psychiatrist who is co-director of the UCLA Gambling Studies Program.

At convenience stores, liquor stores, gas stations or other retailers, "you are standing in front of gambling machines, and there are 20 choices of games," Fong said.

"It's the paradox of choice. You go to the supermarket and you see 25 types of chicken soup," he said. "It creates this conflict: 'What if I choose poorly and what if I choose wrong?'"

Seeking to attract new customers, Maryland joined 23 other states last October in offering a new weekly game, Monopoly Millionaires' Club. Promoters said it would offer three ways to win and generate "more millionaires than any game in lottery history."

But sales were suspended after a couple of months because the game was not meeting revenue projections. Critics said it was too difficult to understand.

Sales of Keno in which players choose up to 10 numbers they hope will be randomly selecteddropped more than 10 percent in the state between the 2013 and 2014 fiscal years. Lottery officials say they are giving Keno a new look with enhanced promotions and updated graphics.

Racetrax sales fell 6.5 percent over the same period, which coincided with the rise of Maryland casinos. Maryland Live, the state's largest casino, opened in 2012. Horseshoe Casino Baltimore, the second-largest, opened last August.

To play Keno and Racetrax, which simulates horse races, bettors purchase play slips at restaurants, gas stations or other retailers and can view the games on monitors.

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