The biggest players in the $46.5 billion U.S. lottery management industry are casting their eyes toward North Carolina, wondering whether the only state on the Eastern Seaboard without a lottery is about to pull the trigger.
"What have you heard?" Angela Geryak Wiczek, a spokeswoman for Rhode Island-based GTECH Corp., asked a reporter. "What do you hear about its chances?"
GTECH, which has paid a lobbyist in the state for more than a decade, is expected to be first in line if and when the state lets lottery management contracts worth potentially hundreds of millions of dollars.
But the company won't be alone. Poised to contend in North Carolina is a substantial list of gaming players, depending on which type of lottery systems the state decides to implement.
"I guess this will be the next big battle," says freshman state Sen. Bob Atwater of Chapel Hill, who represents Chatham, Durham and Lee counties. "A lot of us were under the impression that there was only one company which could handle this."
A lot has to happen before the state is ready to let any management contracts, which, depending on a state's population, can be worth from $70 million to $300 million over five to seven years.
Legislation passed by the North Carolina House of Representatives divides how lottery proceeds can be used. Some 50 percent of the yearly take - estimated at an initial $400 million - would be put back into the system for prizes, while 34 percent would go for education. That leaves 16 percent that would be used to cover lottery expenses, including payments to the gaming company and to defray the costs of a state bureaucracy set up to administer the lottery. Based on the $400 million estimate, those expenses would be $64 million.
The House legislation has to make it through the Senate. If successful there, a nine-member lottery commission has to be established, and a lottery director, or CEO, has to be hired and given an office and a staff.
It'll be up to the commission to decide which type of systems to put in place, which in the lottery industry breaks down along two major designations - instant and online.
In the first, printed scratch cards are sold that reveal "instant" winners. The second is a numbers-guessing game conducted over automated terminals feeding into a centralized computer system. The bill passed by the House authorizes both.
Publicly traded GTECH, with $1 billion in revenue in 2004, is expected to bid on both types of games. New York-based Scientific Games Corp., a $700 million publicly traded company and a late comer to the online business, is expected to do so as well. Specializing in the online variety, Intralot Inc., headquartered in Athens, Greece, has made a recent push into the American market.
A group of other players, including Canada-based Pollard Banknote and Oberthur Gaming Technologies, based in France, specialize in the instant ticket games.
"North Carolina has been on our radar screen for a number of years, but to tell you the truth I didn't think it would ever happen," says Alan Middleton, who works for Scientific Games in Atlanta. "Of course we would be interested in North Carolina. But I can't sit here and tell you we'll be bidding until we see a bill and a procurement."
A number of states let separate contracts for instant and online games. In Tennessee, for example, GTECH manages the online game, while Scientific Games runs the instant play. GTECH currently has a 63 percent U.S. market share in the online category. Scientific Games has about the same for the instant plays.
Gaming industry analyst J.P. Mark of Farmhouse Equity Research gives GTECH the early lead. The company employs the Raleigh law firm Parker, Poe, Adams & Bernstein as its lobbyist.
"GTECH has been talking to people down there for years," Mark says. "And the point of that is to try to influence what's (to) be included in the contract so it works in their favor."
The most lucrative of the lottery plays as far as the management companies are concerned, he adds, is the online variety.
Convenience and other types of stores selling tickets stand to gain a 7 percent commission, a figure that recently prompted the board of the North Carolina Association of Convenience Stores to pass a resolution supporting the House bill.
"We've monitored North Carolina, but we haven't lobbied there," says Scientific Games' Middleton. "We go up against them (GTECH) in a number of states. Sometimes we beat them, sometimes they beat us. As long as the procurement is competitive, everybody has a chance."
i wonder which one will get it?
i think these two are in a lawsuit if i'm correct.....
GTech will get it. They always get it.
Not always.