Jan 27, 2005, 10:57 am
Kentucky has Daniel Boone, Abe Lincoln, Adolph Rupp, Loretta Lynn, and Ashley Judd.
Tenessee has Davy Crockett, Andy Jackson, Bob Neyland, Dolly Parton, and Dixie Carter.
For a couple of centuries, there has been a border rivalry between Kentucky and Tennessee as the states have dueled over history and heroes and have had spats over sports and politics. Now the rivalry has become more serious than ever. The Big and the Big Orange are fighting over the Big Green - as in money.
Kentucky has the lottery.
Now Tennessee has the lottery.
Since its inception in April 1989, Kentucky has been operating a state lottery that has generated nearly $8 billion in ticket sales, and perhaps as much as $800 million of that has come from tickets bought by Tennessee residents at Kentucky lottery retailers in 16 counties along the border. But last year Tennessee implemented its own lottery and now offers its own residents several games.
Will Tennessee's new games cloud the future of the Kentucky lottery, an enterprise that has produced more than $2 billion for the state's coffers, including more than $500 million in scholarships, as well as $4 billion in prize money for winners and more than $800 million in commissions and bonuses to retailers?
"Are we losing sales because of the Tennessee lottery? Yes," acknowledged Chip Polston, vice president of communications and government and public relations for the Kentucky Lottery Corp. "But so far it is not as bad as we had originally predicted."
The corporation has predicted that the Tennessee lottery would result in Kentucky's lottery losing $70 million in total ticket sales a year during at least the first couple of years of the Tennessee lottery's operation. That would amount to a little less than 10 percent of the Kentucky lottery's total sales. In fiscal year 2004, the Kentucky lottery generated $725 million in sales.
As far as individual games are concerned, the Kentucky lottery projected that, in 16 Kentucky counties that border Tennessee, it would lose 90 percent of the dollars spent on tickets for its on-line games, including the popular Power Ball, and 80 percent of the dollars spent on tickets for its instant games, including the scratch-offs and pull-tabs. It is estimated that Tennessee residents used to buy 20 percent of all Kentucky lottery Power Ball tickets.
However, Polston noted that early figures indicate the picture for the Kentucky lottery, so far at least, is not as bleak as was first forecast.
"In the first 18 weeks of fiscal year 2004, we had projected that we would sell $18.1 million in tickets in 16 Kentucky counties that border Tennessee, but our actual sales totaled $27 million," he said.
The biggest impact by the Tennessee lottery on the Kentucky lottery is occurring in the sale of Powerball tickets but the damage has been much less in the sale of Pick 3 and Pick 4 tickets and instant scratch-off and pull-tab tickets, said Polston.
"In the Powerball tickets, we're off 63 percent in Powerball sales in those 16 border counties, but we're only down 13 percent in Pick 3 sales and 10 percent in Pick 4 sales," he said.
Planning and proactive game-development and ticket-pricing strategies have helped cut down on the big projected losses, Polston said.
"We saw this train heading in our direction, so to avoid the wreck, in the year before Tennessee implemented its lottery, we decided to offer more games and, where possible, higher prizes," he said.
For instance, the top prize for the Kentucky lottery's Pick 3 is $100 higher than that for the Tennessee lottery's Pick 3. And there is no competition so far for Pick 4 business. The Tennessee lottery doesn't offer the game.
"Offering games Tennessee doesn't have and offering prize money they aren't matching gives us a competitive edge. It's when the two lotteries go head to head that the impact of lost sales is being felt," he said.
But will the impact eventually be felt by Kentucky's general fund and the scholarships and grant programs lottery proceeds have funded, not to mention the prize money that has gone to winners and the commissions and bonuses that have gone to retailers?
"Any time you lose up to 10 percent of your business, you take a hit, and you have to be concerned about the impact the hit will have on those people and programs and state budget that our lottery has benefited," said Polston.
However, he is cautiously optimistic about the future of Kentucky's lottery and its ability to pay winners and retailers and contribute to the state treasury and scholarships.
"Our sales have been increasing steadily over the last few years - by a total of $225 million from fiscal year 1997 to fiscal year 2004 when we recorded that record $725 million - and that is putting air into that cushion we need to absorb the lost Tennessee sales," said Polston. "And we will continue to be creative with our games and aggressive with our prize money.
"There is a little cloud looming overhead but we're a long way from getting any rain."
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