Legislature hears from the Arkansas Lottery and its consultant | Arkansas Blog

Legislature hears from the Arkansas Lottery and its consultant

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Benji Hardy is following the lottery oversight committee session. It began with Lottery Director Bishop Woosley's report on operations.

So far this year, revenue is down 4.9 percent, with a 25 percent drop in online tickets — the most profitable — driving the results. He said this was a result of a drop in Powerball ticket sales, here and everywhere.

He said the lottery has taken steps to produce $4.2 million in savings the last couple of years, including a change in the contract with the vendor that handles instant tickets, closing claims centers and reduced salaries. A contract change with online vendor Intralot that would produce about $1 million a year in savings was put off because of implicit objections from Sen. Jimmy Hickey, who orchestrated the consultant review by Camelot Global that the committee is also to discuss today.

UPDATE: The Camelot people's presentation emphasized a few key points. One of them was that vendor contracts aren't the only issue. "The issues facing this lottery go way beyond expenses ... has to do with mix of games, how it's marketed and promoted, how service retailers, how you service players..." PR was the biggest thing they cited.

"Out of all the jurisdictions I've looked at, out of all the states I've looked at, the negative PR here in Arkansas is possibly the most difficult I've seen," said Richard Bateman, Sr. VP of Sales and Marketing for Camelot. He presented the results of a survey showing that, "13 percent don't trust the lottery. 16 percent think the lottery is dishonest."

Moreover, they say this can't just be blamed on evangelical Arkansas values. The survey shows that over 25 percent of Arkansans say they'll never play the lottery. Out of those, fewer than half cite "religious or ethical objections" to explain why they will never play. Most say it's because of the odds — a perception they'll never win.

"This is even more concerning because Ark has the second highest payout of prizes" of any state, said Sam DePhillippo, a Camelot executive consultant. Arkansas pays out about 67 percent of its revenue in prizes, which is 8 points higher than the average for US (59 percent). They repeatedly referenced the bad rollout of the lottery, saying it's had the second worst launch of anywhere in the US. "Four years on from launch, and only Oklahoma has performed worse than ASL amongst peer states."

Camelot says that negative PR is reversible. Bateman said this of the British lottery: "We were one of the most negatively seen institutions in the UK back in 2003 ... by 2010, we'd arrested that and had become the second most trusted institution in the UK, right behind the Army."

The consultants had harsh words for the governance structure of the lottery, saying it's been micromanaged by the legislature. The report noted that the lottery is set up to be an independent agency, but in practice is treated more like a state agency.

"The legislature should have an oversight of lottery activities but not in a way that hinders progress," said DePhillippo. "Way over the top" ..."I'm just being completely honest ... it would be much better if the legislature and the governor were holding the Lottery Director's feet to the fire to come up with a business plan you can all agree on" rather than questioning every decision. It suggested that commissioners should be appointed by the Governor alone, rather than 2/3rds from the legislature. "That gives the Governor's office an excuse to say 'i don't want to get involved.' It needs the support of the governor."

Camelot says its recommendations can boost sales by over $460 million over the next five years, and lead to a $136 million increase in net income.

***

One lottery consultant — with no client in Arkansas — wrote the Times today to express alarm at the legislature's apparent intention of using Camelot to take over lottery operations. He predicted it would be done on an emergency basis, without an RFP process. Time will be too short for full proposals because of the short time before Intralot's online contract runs out, he said. Camelot could be expected to want GTECH to become a major lottery vendor. In seeking Arkansas business at the start of the lottery, it's worth noting, it complained that Arkansas put too much emphasis on cost in evaluating proposals.

The consultant is Kip Peterson of Roswell, Ga. He's worked with Camelot and others in years past. He also had earlier criticized the legislature for its no-bid $149,000 contract with Camelot to review the Arkansas lottery.

I share his letter  because it's interesting and takes pointed exception to the Camelot report presented to legislators:

The debacle in the Arkansas Lottery review continues as the report from Camelot Global Services has severe flaws and biases. Some of these are as follows:

· The claim that private manger would be more efficient. It must be noted that the Camelot Plc contract in the UK is a concession in which Camelot takes on the entire operation of the lottery with oversight from a board. The “Private Manager” model in the USA has been a disaster as the “private manager” still has a lottery organization in place, so there is an additional layer that cost the jurisdiction even more, and the operator (not Camelot in the USA) has not met the guarantee in three states that have tried this and the first state (Illinois) has now cancelled the arrangement.

· Camelot does not like or understand instant “scratch-off” lottery games as these games were not included in the original operations of Camelot in the UK and were added later, but the Camelot games compete with a consortium of charities in instant “scratch-off” games that has create animosity in the UK market after Camelot sued and lost to stop the charities from operating fund raising lotteries in the UK. Camelot considers instant “scratch-off” games as declassee and offers them but does not promote them with much enthusiasm. The multiple price points have been successful in almost all of the USA states, and there are even $50.00 instant “scratch off” lottery games available in many jurisdictions that generate revenue for the states.

· The instant “scratch-off” lottery games in Arkansas are on a “shared risk” basis with the vendor Scientific Games who does not get paid until the tickets are sold (they get a percentage of sales) so multiple games are the norm in the industry in the USA. It doesn’t cost the Arkansas Lottery to have multiple games in the market.

· The comment that Powerball and Mega Million on-line games are too much flies in the face of the entire USA lottery market…once again, the majority of this report was written in England by people who have no clue what the marketplace is like in the USA. The “research” done by Camelot Global Services was insufficient and arbitrary with a pre-ordained outcome. Camelot Global Services consultancy should be ashamed as their report was a paid advertising for possibly taking over the Arkansas Lottery. Camelot Global Services is anything but an independent resource…their agenda is abundantly clear and the government and people of Arkansas are the losers.

· The selection of comparative states for fee comparison to the existing on-line vendor was deliberately fraudulent to make a comparison that has no basis in fact…the lead consultant knows that, but the report was written to create an “emergency” for the Senator to push through a “private manager” award without a bid (the Senator has already done that with the award of this report…clarity, honesty and transparency obviously are an anathema to the Senator and his cronies). This same Senator stopped a negotiated vendor contract extension that would have allowed for an orderly continuation of operations just yesterday.

· The position of moving the focus from “gambling” is a code word to ban the introduction of Monitor games and VLT (Video Lottery Terminals) in the Arkansas market…which is the entire goal of Senator who has orchestrated this putsch of the lottery for his desires/devices whilst receiving attention ($) from Camelot’s lobbyists.

· Camelot is not allowed by policy to operate VLT games and is also not fond of monitor games as the owner of the Camelot Group, (the Ontario Teachers’ Pension Fund) has placed a policy that Camelot will not operate such games as the retired teachers of Ontario don’t want to be involved in “hard core” gambling. Yet these two game types are large revenue earners for the states that operate them.

· Camelot’s Corporate operating management in the UK were not aware of the Camelot Global Services’ pre-judging and political subservience to the Senator from Arkansas. I know this for a fact as I spoke to the outgoing CEO and the new head of Camelot Global Services in Rome at a World Lottery Association meeting the first of November…yet this report came out anyhow as there is immense pressure from the Chairman of the Board of Camelot who is also the Officer responsibility for the Camelot investment at the Ontario Teachers’ Pension Fund to expand Camelot operations as a means to attempt to generate some sort of return-on-investment from their large investment in purchasing Camelot. The Chairman is desperate to “win” a contract in the USA as Camelot is only allowed by its owners’ (Ontario Teachers’ Pension Fund) policy to operate in countries where English is the major language and the jurisdiction is governed by Anglo-Saxon Law. So much for expanding into the world market.

You may ask why am I even spending any time with this as I don’t have any interest in the Arkansas Lottery.

The interest I have is that this entire mess reflects very badly on the lottery industry and professional consultants as the participants in Camelot Global Services have defamed a brand, Camelot, that used to stand for integrity and honesty. For the past thirty-four years I have operated in 98 countries and I have to say that the Arkansas legislature/government operates with the same morality and ethics that constrains most African developing nations…the losers are the students of Arkansas that will see reduced funding for their education. What a travesty.

The prior scandals and the constant news/interference from the Senator and cronies who have their own agenda is THE MAJOR REASON that players don’t trust the lottery.


From the ArkTimes store

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