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Lottery courier operators maintain that they serve an important function for state lotteries, enabling them to reach new players and bringing marketing firepower that the lotteries themselves may not have.
Courier companies such as Jackpocket, Lotto.com and Jackpot.com are currently available in up to 19 of the 45 U.S. states with lotteries, as they work to convince other lotteries and retailers, as well as legislators and regulators, that they are additive to a state lottery’s product rather than cannibalistic to existing operations.
“I don't think it’s going to cannibalize all sales from the retailer's perspective; my dad was still going into bodegas in New York and New Jersey to buy a lottery ticket when his son had created a damn app to do so,” quipped Peter Sullivan, CEO of Jackpocket, which is the process of being acquired by U.S. online gambling giant DraftKings through a deal worth $750m.
“I think what we’re going to do is expand [the market]. We have so many new players that are creating incremental revenue that had never played before,” Sullivan added, claiming that a recent customer survey showed that 15 percent of Jackpocket players had never previously bought a lottery ticket.
“I think there is an ability to extend that and continue growing the demographic that plays lottery and not cannibalizing sales, but expanding sales,” Sullivan said at this month's SBC Summit North America in New Jersey.
According to Vixio GamblingCompliance research, courier services are directly regulated through specific rules in just two states: New Jersey and New York. A small number of states have prohibited courier operations, while the issue has been debated in other markets including Texas.
In other states, various courier companies are either operating with approval from state lotteries, seeking permission to do so, or doing business in the absence of a law or regulation that expressly accommodates them.
Tom Metzger, CEO of Lotto.com, echoed that his company has no interest in cannibalizing retail lottery sales.
“You’ll never see Lotto.com put out an advertisement that says skip the line at retail, play online, because we know that retail is the lifeblood of our customer, who, at the end of the day, is the lottery and the state government,” he said.
“And so we don’t want to cannibalize their biggest retail channel, and quite frankly, it’s a very different demographic that’s playing our services.”
Akshay Khanna, CEO of Jackpot.com, suggested that customers could even become more inclined to use retail channels once breaking through the initial barrier to entry for lottery tickets.
“They’ve now done something they had never done before or that they hadn’t done in the last five years, they remember how much they enjoyed it or they appreciate how easy it was, and now the next time they’re already at a retailer, they’re much more likely to make a purchase they had not previously made,” Khanna said.
“And so now you’ve got a customer that’s buying omnichannel that was just never buying on retail before because they were either intimidated by the experience, or it just wasn’t a product that they thought associated with their purchasing behavior.”
The courier executives added that as state lottery marketing budgets continue to decline, couriers can help fill that void.
“We’re spending tons of money that the state lotteries don’t have, and some budgets have really been cut, so even if you’re getting served an ad on Facebook or Instagram or television or radio, we’re letting you know what that jackpot is regardless of if you go to our platform or you decide to buy it at retail,” Jackpocket's Sullivan said.
“Lotteries are woefully underfunded,” Metzger also told SBC Summit delegates. “From a marketing perspective, most lotteries are limited to 1 percent of sales as a marketing budget, and that’s determined by the legislature every year.
“Find a business anywhere in this room that only has 1 percent of sales as the marketing budget, and so private organizations like ours, we’re perfectly happy to spend the dollars that it takes to acquire a customer and we know that we’ll make that money back in three months, six months, 12 months, whenever.
“That’s not in a state lottery’s DNA to risk capital and hope they make it back in the future,” Metzger said. “It’s just not in the budget, and they need more marketing dollars, not less.”
See also: U.S. Regulatory Review: Lottery Couriers
