Aug 9, 2005, 12:35 pm
North Carolina lawmakers are slapping limits on how much a proposed lottery can spend on advertising and what the commercials can say, but they may have underestimated both.
The General Assembly is scheduled to vote this week on a state budget that includes a lottery. The lottery would be limited to spending 1 percent of its revenue on advertising. That figure, while in line with many lotteries, may not be enough for a lottery's first year.
"When we started out, we spent 3.1 percent," said Virginia Lottery spokeswoman Jill Vaughan, "because it takes a lot to educate the public about how you play the lottery, where you buy the tickets."
The Virginia Lottery had revenue of $409 million in fiscal year 1989, its first year of operation.
North Carolina's proposed 1 percent limit was included, in part, to ease the fears of legislators who don't want a mass marketing campaign that preys on consumers. The original lottery bill passed by the House this year banned advertising except at stores or businesses selling tickets, a provision that House Speaker Jim Black insisted on.
"We have the most restrictive lottery advertising in the country," said Black, a Matthews Democrat.
After the budget vote expected today, the N.C. Senate must approve the lottery again in a separate vote. Five Democrats have voiced opposition to a lottery, but party leaders said they have the votes to pass it.
The S.C. Education Lottery spent about $7.5 million on advertising in its first fiscal year, or about 9 percent of the $80.4 million the state earned.
"You certainly want to get the message out about where the money goes and who makes those decisions," said Ernie Passailaigue, the S.C. lottery's director.
Each year afterward, the Palmetto State operated under a 1 percent cap on advertising spending.
Charles Clotfelter, a Duke University public policy and law professor, wrote in his book, "Selling Hope: State Lotteries in America," that states spend about 2 percent of revenue on advertising, more than most industries. That figure does not take into account the free advertising the games receive from televised drawings and newspapers publishing winning numbers.
The N.C. lottery legislation mandates that the ads not appeal to children. Virginia uses a similar qualification, saying the ads can't use a character that appeals to kids -- no "SpongeBob Scratch Off" games.
Many states require that the odds of winning be included, while some ban ticket sales at places such as universities and schools. A common restriction bars "inducing" anyone to play.
"What's the point of advertising if it's not to motivate behavior? So we had this kind of oxymoron," said Ken Thorson, Virginia's tax commissioner and previously the state's first lottery director. "We played up humor and did not try to play up the idea of winning big. ... We did not want to push that hard edge of trying to get people out there to buy tickets. It's a difficult line to walk."
North Carolina, already surrounded by lottery states, will face the additional challenge of abiding by content guidelines while persuading some players to change games or play in two states.
As other states' lottery sales have peaked, some marketing strategies have shifted. Thorson said Virginia ads have become more aggressive
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