The global lottery: Scientific Games staying ahead of the curve
The global lottery: Scientific Games staying ahead of the curve
In January 2013, the global gaming industry was rocked by Scientific Games Corporation’s announcement that it would purchase WMS Industries for $1.5 billion. The news was followed by a further announcement in August 2014 that the New York-based company would acquire another gaming industry leader, Bally Technologies, for a massive $5.1 billion.
The two transactions, which brought together some of the world’s leading gaming, lottery and interactive brands and innovation, saw the formation of a group that in 2015 achieved annual revenues of $1.4 billion. The acquisitions themselves are often viewed as the catalyst for the flurry of M&A activity that has taken place across all sectors of the global gaming industry over the intervening period.
A look at lottery
Prior to the purchase of WMS and Bally, Scientific Games was known, first and foremost, as a lottery games, technology and services supplier. And according to Jim Kennedy, the 30-year company veteran who took the helm of the group’s lottery division in October 2013, this sector remains as important to Scientific Games as ever.
“Lottery is a $276 billion industry and Scientific Games’ lottery division continues to be an enormous business globally,” Kennedy told TotallyGaming.com. “Revenue for our lottery division is now approaching $800 million annually, and most of this is from instant games, technology and services. We bring about 3,500 new games to market every year. If you put this in context, we are launching nearly 10 new games every single day.”
The group currently serves 150 lotteries around the world, including every North American lottery. Of the top 20 lotteries in the world, by total sales, 18 are Scientific Games customers.
Discussing the company’s approach to its lottery business in the wake of the two major acquisitions, Kennedy said: “In 2014, we conducted an extensive consumer segmentation study in the US and Europe, ultimately gathering information on gaming motivations from around 10,000 respondents.”
This in-depth research confirmed Scientific Games’ intuition that the gaming industry was entering a new era – one that would be defined by convergence. “We really wanted to understand what consumers were doing,” Kennedy stated, “and the headline was that players move between gaming categories.”
Lottery players are gamers
“The player who visits a bookmaker and plays a machine in London is also walking over to the retailer and buying a Thunderball lottery ticket. The same player then gets home and plays online. This convergence on the consumer side has really been at the heart of how we think about everything we do.”
According to Kennedy, the largest addressable segment across all sectors is lottery players. “I think it is really important for us – as a gaming company as well as an interactive company – to realise that, if you’re looking for sheer reach participation, lottery players are a rich target environment as our innovations begin to cross-collateralise.”
Despite the sheer scale of Scientific Games’ lottery operations, the group places strong focus on creating culturally-relevant games for all of the markets it serves. “Our content is very regional and very specific,” said Kennedy. “When we launch a game in China, it is tailored to the Chinese market. And the same goes for the UK, or Chile, or northern Europe, or Colorado in the US.”
Interestingly, however, while the regional branding of instant win games is important, Kennedy said the company’s true success comes from the game design itself – and this is a far more universal phenomenon.
“Whether you are in China or Colorado, human beings are engaged and excited around certain elements of game design,” he explained, “and this is something that can only be perfected over time. It’s the building of tension, and the ultimate resolution of that tension, that makes a great game.”
The science behind instants
As part of the company’s continued effort to develop the most captivating instant win games, Scientific Games tracks and measures the performance of every lottery instant game it produces. “We have, at this point, more than 45,000 games and nearly 2.3 million weeks of data from all over the wold,” Kennedy said.
“Our Marketing, Analysis and Planning system measures across more than 50 different attributes. It’s the perfect means of measuring the heartbeat – both locally and globally – of the lottery industry, and it helps us stay innovative and ahead of the curve.”
Over recent years, suppliers to all sectors of the gaming industry have been exploring new opportunities relating to branded content. In 2016, several popular casino and interactive brands, including Gold Fish and Jackpot Party, successfully crossed over to lottery games. In January, Scientific Games launched omni-channel KOOZA Cirque du Soleil-branded games – scratch, online and slots products – in Canada.
According to Kennedy, the cost-to-benefit ratio of licensed content is not as pronounced in the lottery industry as other sectors. “Scientific Games has about 85-90 per cent of market share of licensed games for lottery,” he stated. “We have about 200 licensed properties and in many ways, were the first to bring the fun and entertainment of licensed brands to lottery games.
“Licensing in lotteries is different to the casino side of the business, where you have to invest a lot of money in a single title. It’s the nature and the flexibility of the instant product. You can put different licences and images on tickets in different jurisdictions – and not only that, you can also tie jurisdictions together with a shared grand prize.”
Coming up at ICE
Scientific Games will once again display its latest solutions at ICE Totally Gaming. And this year, the company’s lottery team will be heading to the London showcase its sports betting and lottery retail offerings on the back of a hugely successful 2016.
“One of the key things that happened last year was the $1.6 billion Powerball jackpot,” Kennedy said. “By way of analogy, this was a once in a 10-year blizzard blowing through town. The fact is that we had everything ready to handle it – from the robustness of our systems to our call centres, and simply our logistics to get the ticket paper out to the retailers.
“When you have that kind of storm blow through, it really does test your infrastructure, your security and everything about your enterprise. We supported that enormous jackpot without a hiccup. It was flawless.”
Totally Gaming says: It’s now been four years since Scientific Games expressed its intention to purchase WMS Industries. During this time the group has moved ahead with its ‘Stronger Together’ mentality, as its pushes the envelope of innovation across the gaming, lottery and interactive segments. ‘Convergence’ remains a key watchword for the global gaming industry, and while Scientific Games is embracing cross-sector opportunities, the end consumer lies at the heart of every new development.