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N.D. lottery ticket sales, profits continue slide

Sep 14, 2009, 10:32 pm

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North Dakota Lottery

Despite hefty increases in promotional spending, lottery ticket sales and profits have declined in North Dakota during the past two years and led to a large reduction in the lottery's financial reserves.

Ticket sales of the North Dakota Lottery's four games — Powerball, Hot Lotto, Wild Card 2 and 2by2 — have dropped by 4 percent, to $21.7 million, from 2007 to 2009, according to lottery financial statements. Profits in the 2009 budget year alone dropped 15 percent, to $5.78 million, primarily because of increased marketing expenses.

The lottery has not added any new games since the 2By2 game debuted in February 2006, said director Randy Miller. The state constitution restricts the lottery to offering only multistate games, which rules out "scratch ticket" instant-win games that are popular in other states.

"That is probably the foremost issue" that explains why sales have slipped, Miller said. "That is something that we're continually monitoring ... new game concepts that would add to our product mix."

North Dakota's winter storms and statewide flooding contributed to the most recent year's sales decrease, along with the absence of a popular Powerball promotion that increased prizes for ticket buyers who paid an extra $1 for the game's Power Play option, Miller said.

Miller said the lottery has not increased its spending on advertising, but has run ticket discount promotions — including one that allowed customers to buy $6 worth of Hot Lotto tickets for $5 — that accounted for the increase in marketing costs.

In searching for a new game, Miller said the lottery has asked about joining the Tri-State Weekly Grand, which debuted in New Hampshire, Vermont and Maine in February. It has also explored offering a game tied to the Wheel of Fortune television game show.

Maura McCann, a spokeswoman for the New Hampshire lottery, said the three New England states would have to change their mutual lottery compact to allow another state to participate in the Tri-State Weekly Grand game.

The Wheel of Fortune game is offered by a subsidiary of New York-based Scientific Games Corp., which supplies the red terminals that 400 North Dakota merchants use to sell lottery tickets.

Miller said the lottery is not close to adding more games.

"We have had some brief discussions on different game options that we're looking at," he said. "But nothing has come to fruition."

In the meantime, the lottery has attempted to goose ticket sales by revamping some of its games, including an increase in the top prize for the 2By2 game from $20,000 to $22,000.

The Powerball game, which is played in 30 states, instituted changes in January that were intended to boost the size of the average winning jackpot from $95 million to $141 million. North Dakota's lottery sells about $200,000 worth of Powerball tickets each week, Miller said, and sales usually rise about 10 percent when the jackpot exceeds $100 million and double when the prize rises above $200 million.

Although lottery profits totaled only $5.78 million in the 2009 budget year, the agency transferred $6.38 million to the state, including $5.76 million for the state's general treasury, $200,000 to provide counseling for gambling addicts and $422,500 for drug enforcement.

To supply those revenues, the lottery cut its financial reserves by 45 percent, from $1.34 million to $743,146. Miller said the reduction would not affect the lottery's operations, since the agency needs reserves of only $400,000 to $600,000, an amount that represent two to three months' worth of operating expenses.

The reduction in reserves doesn't bother Attorney General Wayne Stenehjem, who oversees the lottery, since most of its earnings are destined for North Dakota's treasury.

"Really, it's kind of a wash when you get right down to it," Stenehjem said. "The net profit from the lottery goes into the general fund anyway."

The lottery's most recent financial statement, which details income and spending from July 1, 2008, through June 30, 2009, is still being audited and the final figures could change slightly.

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