What's good, one or more lottery companies?

What's good, one or more lottery companies?

Sunday, March 08, 2020

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News that at least five entities have applied for licences to run lottery games has fuelled the debate about how many players are needed in the industry for it to provide maximum benefit to the State.

The Jamaica Observer, in an analysis of what transpired years before, found that in jurisdictions that had more than one lottery operators, revenue to the Government fell flatly, with some of those who had multiple players, having to resort to single-operator business after a period of time.

The lottery game in Jamaica was formalised in 1991 with the formation of the Jamaica Lottery Company (JLC). That company ran lottery games solely until 2000, when it was joined by Supreme Ventures Ltd, which got a licence to operate from the Betting, Gaming and Lotteries Commission (BGLC) — the sole entity empowered to grant gaming licences in Jamaica.

Supreme Ventures started its lottery game in 2001.

With the market failing to balance the two entities, and Government's take from taxes dropping, Supreme Ventures bought out the operations of the JLC in 2003, and by 2004 the transaction was completed, although in later years, there were legal challenges by JLC to fine-tune some of the points of agreement in the sale arrangement.

The single-operator model is the dominant one in most countries that indulge in lotteries, as statistics have shown that such a model offers more revenue for governments and charities.

Financial analysts have also put forward the view that by controlling operators to one per territory, there is greater transparency, which makes it more likely to reduce the impact of money laundering and better able to fight illegal gaming.

Sunday Observer checks have shown that 90 per cent of the countries with lottery games have single model operators, and closer to home in the Caribbean, only St Maarten, Aruba, Curacao and the Dominican Republic use the multiple-operator model.

The Netherlands, which introduced the multiple model system to the world, is now moving back to the single model system, the Sunday Observer has found.

“Even a country like Barbados has shifted back to the single model lottery system,” said one Jamaican financial analyst, who asked not to be named because he is close to operatives who have shown an interest in setting up lottery operations here.

“While the operators in a multi-model system may benefit, the Government's revenues will naturally fall, and organisations like the CHASE Fund, which benefit directly from proceeds from the lottery, will be impacted negatively.

“What we will see if there are more players in Jamaica is a kind of vulgar competition, with the players tearing down each other, which will destabilise the retain trade, more money being spent on advertising ... a general confusion for those who will be playing lottery games. One or more of the players will want to hike the payout to punters in order to be more competitive. It will also be a regulatory nightmare for those handling the policy management element of the industry,” the financial analyst said.

Another man, who has worked at the executive level in the local lottery setup, also proposed that competition would lead to lower sales and smaller jackpots. In reference to the local lottery game, in which interest is peaked when the jackpot reaches a certain level, the former executive said the “juicy” enticement for big money, usually results in a positive spin-off.

“When the lottery jackpot is under $100 million, sales are normally flat. But anytime it gets past $100 million, that is the time you see people flocking to the retail outlets, hoping to cash in on what is being offered. People who would never buy a ticket before would start trying their luck. This is where the Government makes a whole pile of money, from such huge jackpots, because the take is much more, and handouts to CHASE just goes right up.

“If there are multiple players in a jurisdiction, sales are split among the operators, and jackpots reduce in size. Rarely would they ever get to the level of whopping jackpot, which would mean less money going into the Government's Consolidated Fund. In addition, right now Supreme Ventures is a publicly listed company which means that thousands of Jamaicans have a stake in its ownership. Will the others entering the field be inclined to go public?” the former executive asked.

Commenting on the Barbados example, the former executive said that the issuing of multiple online lottery licences by the Government during the 1990s to raise money for several projects, but mainly in sports, had failed to have the desired effect.

Government revenues were low and many of the operators ran similar games which failed to inspire players and led to loss of interest, the former executive continued, which led to the government streamlining the lottery industry in 2005, when a single operator ran things.

The effects of the move, he said, saw revenue moving from US$36 million at the time of the consolidation to US$44 million in three years, and a further jump to US$53 million a decade later. The Barbados Government, which had before that been raking in an average seven per cent of sales, saw that jump to 21 per cent.

In addition, the former executive said, the system became more efficient, and players were more comfortable wagering.

“The BGLC should not even be contemplating granting more licences until a proper study is done to weigh the pros and cons,” the former executive added.

Over in Australia, the state of Victoria, which up to six years ago was the only state to have operated a multiple-player lottery model, switched back to a single model by 2014, following low tax returns to state administration, frustrating times for players, and headache for the regulator.

One St Elizabeth operator called it “ridiculous” that the BGLC was looking at “flooding” the lottery market with other players, a move he said would result in chaos.

News emerged recently that the BGLC was examining an application for a lottery licence to Mahoe Gaming Enterprises Ltd ... a group whose directors later came forward in confirming that they had an interest. The group included, among others, businesspeople Michelle Myers Mayne,who was named as chairman; and PB Scott, William Mahfood, and Lise-Ann Hoo Harris.

If others players were to be granted licences, it would mean that Jamaica would be the only country to move from single to multi-operator in the last 20 years.

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