Lottoland is being blamed for all manner of losses in Australia but, as Joanne Christie reports, the numbers simply don’t stack up.
In its four years of operation, Lottoland has attracted the ire of a number of state governments, regulators and lottery monopolies. Claims of parasitism by incumbent lottery providers have been plentiful, as have the company’s rejections of such claims as monopolistic.
In some ways, the heat it is facing in Australia is nothing new. But figures being bandied about recently suggest the company has become the fall guy for a land-based industry that is struggling to keep up with changes in consumer lifestyles.
Over the past couple of months in particular, Lottoland has faced criticism from Australia’s state governments, prominent politicians, newsagents and lottery operators.
Last week Australia’s smallest state, Tasmania, joined New South Wales, Western Australia and Victoria in stating a desire to ban synthetic lotteries. These are already banned in South Australia.
Last month Tatts, which operates state lotteries in all of Australia’s states apart from Western Australia, rolled out a campaign called “Lottoland’s Gotta Go” in newsagents across the country.
Among the claims is that more than 4,000 small business lottery retailers around Australia stand to lose more than 50% of their revenue, but the losses being attributed to Lottoland simply don’t stack up.
Fiddling the figures
Western Australia's lottery operator LotteryWest partially attributed a AUD$60m fall in lottery sales in its last financial year to synthetic lotteries such as Lottoland. But with Lottoland’s revenues for last year standing at AUD$16.2m for the entire country, it’s difficult to see how it could have had any impact on LotteryWest’s revenues at all.
As Lottoland’s Australia chief executive officer (CEO) Luke Brill points out: “This drop in sales cannot be blamed on us. We are less than 1% of the market and in September had only 6,000 active users in Western Australia. How can that have led to a AUD$60m fall? The numbers they are stating just don’t add up. In Australia, the lottery industry is worth AUD$1.4bn – we are a very small player in this.”
Tatts also reported a AUD$137.8m drop in lottery revenues for 2017, which it openly attributed to having had fewer jackpots than the previous year – 31 opposed to 45.
“Tatts’ own chairman [Harry Boon], last month went on the record with The Australian Financial Review newspaper and said that online lottery gambling firms such as Lottoland, as well as CrownBet's CrownLotto, had yet to take any market share from Tatts' lottery business,” Brill adds.
Much of the momentum behind the campaign against Lottoland is coming from ground level, from newsagents that blame the lottery provider for flagging sales.
But as a report on the Australian newsagent industry from research provider IBISWorld flagged in November 2015, overall industry revenue had been declining at an annualised rate of 3.6% for the previous five years — before Lottoland even launched in Australia.
When contacted by iGaming Business, CEO of the Australian Lottery and Newsagents’ Association (ALNA) Adam Joy insists that the newsagent industry is performing well. “Many newsagents are thriving by diversifying their offering and focusing on the advantages that physical stores have over ecommerce”.
Lottoland is “seeking to siphon the goodwill that newsagents have worked hard to develop within their communities and reap the benefits of the products that news and lottery agents sell. One of the ways that it does this is through consumers being misled,” Joy says.
“Lottoland have said they are attracting a different customer, one that has not been taken from a newsagent. However their marketing is positioned around newsagents and they are leveraging the branding and IP of official lotteries.”
Leveraging beyond the local market
On the last point, it’s unclear how much Lottoland is leveraging the IP of the official lotteries. It used a massive US Powerball draw to launch in Australia, and it’s far more likely that Australian punters are being drawn to the chance to win big overseas than the opportunity to bet on local lotteries with Lottoland.
Brill says: “Overseas lotteries still account for the highest percentage of our turnover and definitely our profit due to the higher margin”.
In fact, Lottoland claims to be offering newsagents the chance to get in on the action. It says it has repeatedly proposed a partnership with newsagents, whereby Lottoland customers could nominate their local agent which would receive a percentage of the revenue from that customer.
Asked if the ANLA would ever support such an idea, Joy says: “They have denigrated newsagents in advertisements, deliberately conducted media interviews in front of newsagents, and declined to engage with news and lottery agents pre-launch in Australia.
“The offer to work with newsagents has only arisen now that the concerns of newsagents and government are well-known,” he argues, adding that it’s all a ploy to move customers from newsagents to their business.
Again, on the last point, the online betting business disputes Joy’s claims. Lottoland says it began attempts to initiate partnerships with both the ANLA and the Lottery Retailers Association as early as February 2016.
It also held a meeting with Joy’s predecessor Alf Maccioni, and the Lottery Retailers Association chief executive officer Gary Carter on 15 March, 2016.
Lottoland confirms that during that meeting, it “explained our business model and suggested further talks to progress some form of partnership. Unfortunately, neither organisation came back to us”.
After Joy took over at ALNA, Brill arranged another meeting, which was held in August this year. Lottoland says: “[Brill] once again offered to work with the newsagents and asked Mr Joy to discuss this option with his members, however up until this point we have not had a response”.
On the topic of these meetings, ALNA recalls a different version of events. It claims the first meeting was “a result of ALNA reaching out to Lottoland”.
“ALNA wanted to have an opportunity for consultation about how a business that would appear as a lottery would engage in the lotteries market. At this meeting, Lottoland was disingenuous and ALNA requested an explanation on how they would operate. Lottoland said they would provide this information. This never happened,” it explains.
On the second, it says: “Following a negative response to their business by newsagents and other interested groups, Lottoland held a meeting with ALNA. The crux of this meeting was Luke Brill desperately urging ALNA to no longer talk about his business. Luke Brill mentioned a token gesture of offering to essentially reward newsagents for signing over their own customers to Lottoland.”
Regardless of how the meetings came about, any kind of partnership between the two parties seems highly unlikely in the foreseeable future.
The real danger
In any case, the threat to Australia’s newsagents could be much bigger and much closer to home. As the IBISWorld report outlines, one of the biggest reasons for reduced in-store spending at newsagents is the “growing preference by individuals to access products online”.
In this regard, it is perhaps competition from Tatts that they should be worried about. As more people buy tickets directly from Tatts online, less people visit newsagents to purchase them.
Indeed, despite Tatts’ fall in revenues last year, digital lottery sales increased from 13.5% the previous year to 14.5%. The online bookmakers’ annual report described this as “a significant achievement given the lower jackpot run and that a greater proportion of digital sales are typically achieved during periods of stronger jackpot activity. Our online sales performance is category leading when compared to our global lottery cohort”.
Even if the politicians, newsagents and lottery groups succeed in their bid to get Lottoland banned in Australia, it’s unlikely to lead to a turnaround in the fortunes of newsagents or state lottery operators.
For its part, Lottoland is actively trying to ensure they don’t succeed, by wooing state governments with proposals to pay point of consumption taxes and apply for licences in states outside of the Northern Territory, where it is currently licensed.
The great irony is that if Lottoland is allowed to continue in Australia, its opponents may well find they’ve created the very monster they claimed was there all along.
According to Brill, the company has seen a 100% increase in signups and a significant spike in turnover since the Lottoland’s Gotta Go campaign kicked off.
“Once again it goes to show all publicity is good publicity,” he says. “I’m considering entering Tatts into a marketing award for Lottoland once the campaign is over as our awareness has never been higher.”
Both LotteryWest and Tatts were contacted by iGB for comment for this article but did not respond to our questions.