The Arkansas Scholarship Lottery's greatest potential for growth during the next five years is the digital sales of tickets, said Eric Hagler, who has been lottery director since August 2020.
But he emphasized there is no specific date on the calendar for the agency to launch an iLottery to sell tickets online.
"The State of Arkansas will only have one chance to 'get it right' and we want to be deliberate in our actions," Hagler said Thursday in a written statement.
[ARKANSAS LOTTERY: Fiscal year comparisons not appearing above? Click here » arkansasonline.com/131lottery/]
The lottery set records for revenue and for money for college scholarships in fiscal 2021 and "it is important that we proceed with due deliberation," he said.
The Arkansas Scholarship Lottery created two positions last year with an eye toward expanding into multiple channels of distribution and potentially allowing the digital sales of lottery tickets, Hagler told the Legislative Council's lottery oversight subcommittee on Wednesday.
"We think there is an interim step," he said at the time.
The lottery has a "players club" mobile app, but "we believe there are features we can build around that mobile app that will enhance the sales of lottery tickets in an interim step such as checking your ticket to see whether or not if it was winner, locating a retailer who sells those tickets, things of that nature," he said in response to a question from Sen. Kim Hammer, R-Benton.
Asked if state lawmakers would go along with an iLottery in Arkansas, Hammer said Friday in an interview, "I think that is something we would want to have a discussion on.
"No. 1, what it would do to brick-and-mortar stores? And then No. 2, we are just making it that much more accessible for people to gamble [through] mobile apps. What would that look like? Before we just rush in and do it, we need an open conversation about that before they just do it."
The states with iLotteries include Arizona, Connecticut, Georgia, Illinois, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island and Virginia, as well as Washington, D.C., Hagler said.
While it is unclear whether legislative approval is required, the state Department of Finance and Administration and lottery officials would seek legislative authorization before launching iLottery, Hagler said. The lottery is part of the state Department of Finance and Administration.
LOTTERY APP
In response to a question from Hammer on Wednesday, Hagler told lawmakers the lottery has an app provided by lottery vendor Scientific Games and it's limited to accessing the lottery's "Players Club." The app allows players to scan tickets to accumulate points to redeem for merchandise.
"We are going to build that out," he said "We have other features to bring it more in line with what we are seeing other lotteries do."
Afterward, Hagler said lottery officials anticipate a tiered approach to mobile app development.
"We would like to start with ticket checking and retailer locating," he said in a written statement.
"Quickly thereafter, we would like to work with our current retailers to implement a promotional program that will drive foot traffic into their stores," Hagler said. "Brick and mortar is our lifeblood, and a digital distribution strategy must be designed so as to ensure that the mobile app both benefits the retailer channel, and does no harm to existing distribution. Cannibalizing retail sales will only shift line item entries on an income statement. We are looking to grow the lottery; we are not looking to simply shift sales to a different channel. That would be counter-productive and misguided."
In September 2020, a different mobile app called Jackpocket was officially launched to allow lottery players in Arkansas to buy draw-game tickets through their smartphones and collect winnings without leaving home. The app works through lottery retailer Winners Corner in Little Rock.
When Jackpocket was launched, Hagler said no lottery rules prohibit or authorize the use of an app-based ordering system for the purchase of hard copy lottery tickets generated through a licensed lottery terminal. The hard copy tickets ordered through the app are available for pickup at the Little Rock retail store, where they are held in safekeeping for the customer, he noted.
NEW POSITIONS
As for the two positions created with an eye toward digital sale of lottery tickets, Hagler said in a written statement that the lottery re-created the position of information technology coordinator in April 2021 to ensure that all of its information technology proprietary and vendor systems are robust from both an operational and a risk management perspective, and to begin researching various iLottery platforms, vendors, operational and risk management strategies.
He said J.C. Hedrick, who joined the lottery as information technology security coordinator in October 2017, was promoted into the position.
The lottery also re-created the position of procurement officer to ensure that lottery term contracts and purchasing activities are secured, monitored, tracked, and placed on calendar, and to work alongside the information technology coordinator in researching and developing a roadmap for possible further expansion into the digital channel, both via iLottery and more holistically, Hagler said.
He said that Eric Brown, who previously served as a finance department internal auditor assigned to the lottery, was hired to fill this position in April 2021.
FISCAL 2022
Hagler told lawmakers that the new few months will be challenging for the lottery.
The lottery had "absolutely record-setting months" during the same months last year, he said.
"When you are lapping year over year it is very difficult to run that kind of horsepower consistently through every month," Hagler said.
The lottery competes for people's discretionary spending, he said.
"We do believe that we will see some cooling," Hagler said. "We are hopeful that sales will remain strong, but I have to be completely transparent with you, the next 90 days will tell the tale."
Through the first six months of fiscal 2022, which started July 1, 2021, the lottery's revenue has totaled $290 million -- up from $283 million in the same period in fiscal 2021.
In that same period, the amount raised for college scholarships was $46.8 million, about $90,000 less than what was raised in the same period a year ago.
For fiscal 2022, Hagler had projected total revenue of $509.2 million, which would be a drop from the record of $632.5 million in fiscal 2021, and the amount to be raised for college scholarships at $88.6 million, a decline from $106.6 million a year ago.
Lottery officials attributed the records set in fiscal 2021 in part to factors brought on by the covid-19 pandemic, such as people spending more time at home.
During each of the past 11 fiscal years, the lottery has helped finance Arkansas Academic Challenge Scholarships for more than 30,000 college and university students.
NO KENO
During the 2021 regular session, state Rep. Aaron Pilkington, R-Knoxville, introduced legislation that would have created the Arkansas Lottery Keno and iLottery Act.
But officials for the lottery and Oaklawn Racing Casino Resort in Hot Springs and Southland Casino Racing in West Memphis said they opposed the bill, which died without any fanfare in the 2021 regular session.
In April 2021, Hagler told this newspaper, "Simply put, keno is not a fit for our current operations.
"The iLottery language in [House Bill] 1869 is merely a second avenue for distribution of keno, and related 'numbers' games," he said in a written statement at that time. "And, while [the Arkansas lottery] is researching the benefits of a broader iLottery platform, this is a different discussion for another day -- and only with our existing retail network at the table. It has to work for everyone."
SPORTS GAMBLING
Hammer asked Hagler whether allowing the state's licensed casinos to accept mobile sports bets from gamblers in Arkansas will reduce the lottery's ticket sales.
"I think you'll see some impact," Hagler responded. "I don't know the percentage impact; we compete directly for consumer discretionary spend.
"But I think the folks who buy lottery tickets versus the folks who want to wager on sports betting are not two of the same. One really doesn't compete head to head with the other."
The Arkansas Racing Commission has proposed rules to allow the state's casinos to accept mobile sports bets from within Arkansas.
Commission attorney Byron Freeland pulled the proposed rules from Wednesday's agenda of the Legislative Council's Administrative Rules Subcommittee after the Racing Commission approved a change in the wording of the rules on Tuesday.
The Legislative Council's approval of the proposed rules would clear the way for casinos to begin accepting mobile sports bets from gamblers anywhere in Arkansas rather than just those at the premises of the casinos.