The Virginia Lottery The Virginia Lottery Briefing: House - - PowerPoint PPT Presentation

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The Virginia Lottery The Virginia Lottery Briefing: House - - PowerPoint PPT Presentation

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The Virginia Lottery The Virginia Lottery Briefing: House Appropriations General Government Subcommittee February 1, 2011 Paula I. Otto Executive Director 1 Budget Amendment 478 #1h Budget Amendment 478 #1h external performance

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Briefing: House Appropriations General Government Subcommittee

February 1, 2011

Paula I. Otto Executive Director

The Virginia Lottery The Virginia Lottery

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Budget Amendment 478 #1h Budget Amendment 478 #1h

“ “external performance audit of the Lottery Departments operations and contracts”

  • APA required by statute to do annual

audit

  • 5-7 audits performed by Lottery’s

Internal Audit Department each year

  • Audit Department reports to Director

and to five-member Lottery Board (appointed by Governor)

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Budget Amendment 478 #1h Budget Amendment 478 #1h

“prohibited from entering new contracts for games that award non-monetary prizes until audit is completed”

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Lottery Product Mix Lottery Product Mix

50% 34% 15% 1%

Scratch Daily Games Jackpot Games Other

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Scratch Strategies Scratch Strategies

 Competition from NC Lottery

significantly affected sales in this Category.

 Need to meet consumer demands

for appealing games and play styles, as well as attract new players, by including proven successful licensed properties like Harley Davidson, Monopoly, etc.

 All lottery states use licensed

properties.

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Licensed Properties Licensed Properties

Three ways to pay:

  • Licensing fee
  • Percentage of sales
  • Agreement to purchase merchandise, trips, etc.
  • Cost of licensing comes from prize fund

Success of Licensed Property Games

  • part of portfolio for the past 10 years
  • avg. 17% better sales than similar price points
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Redskins Mania Redskins Mania – – 2009 2009-

  • 10

10

 No licensing fee; agreement to

purchase prizes, advertising, marketing

 $20 ticket  Redskins record in 2009-10

season: 4-12

 Sales of $28 million; profit of $2.5

million

 Redskins Mania outsold

average $20 games by 8%

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Redskins Mania Goals ~ FY10 Redskins Mania Goals ~ FY10

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Muscle Car Money Muscle Car Money

 $5 game  Players can win one

  • f four “muscle cars”

 Cars fulfilled at Virginia dealers  Muscle Car Money outsold

average $5 games by 24%

 Still on sale, already sold

$1.5 million more than average

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Advertising Advertising

Restriction – “no funds shall be expended for the primary purpose of inducing persons to participate in the Lottery.”

 Attorney General’s Office involved in early

years

 Still use check sheet developed by AG

Office

 Spending has been flat/declining –

approximately $25 million annually

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Advertising Advertising

 Advertising & Promotions – Total

– $25-$26 million annually, or approximately 33% of total Operating Spending

 Advertising

– Includes media and production costs for TV, Radio, Internet, and Outdoor advertising – Approximately $15 million annually

 Other Advertising & Promotion

– Includes in-store point of sale materials, in-store signage including electronic messaging, community and sports sponsorships, advertising agency fees, and draw show costs – Approximately $11 million annually

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Why does the Lottery need to advertise? Why does the Lottery need to advertise?

 The Lottery is a consumer product  2% ad budget, compares to 7% average for

  • ther amusement/recreation products

 need to maintain awareness of new games,

jackpots

 increase revenues by expanding player base,

not just increasing existing players’ spending

 advertising must reflect changing consumer

habits

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Why the Lottery Advertises Why the Lottery Advertises

  • Nearly 5,000 retailers earn

$80.4 million in commissions

  • Lottery brings consumers

into their stores

  • Lottery supports small

businesses and helps create jobs

We need to properly support our retail partners

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Spending Reductions Spending Reductions

 Continually assessed for efficiencies  Spending required to support sales and profits  Advertising ($3.7 million reduction)

– Changes in strategy to meet changing consumer preferences – Reduce promotional spending for non-cash prize awards

 Personnel Costs ($1.3 million reduction)

– Utilize part-time staffing; suspend portions of compensation plan; continued assessment of

  • rganizational structure

 Other ($0.6 million reduction)

– Extend useful life for fleet, computers

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Questions?