Paraphrasing a general principle of Darwin’s theory.
“Natural variation occurs among the products of any portfolio offered by an organization. Many of these differences do not affect survival, but some differences may improve the chances of survival of a particular product and consequently the organization itself…”
Within a European State Lottery’s evolutionary processes and the consequent introduction of new Lottery Games, many concerns have been raised over the issue of “cannibalization”. This phenomenon relates to the possible negative impact the introduction of a new gaming product has on the performance of the existing gaming products within a category (Draw Games, Instant tickets, Sports Betting, Casino Games, VLTs, Poker, etc.) and/or the impact of an alternative gaming Category could have on the performance of the overall portfolio.
The level of development of a Lottery’s Gaming portfolio would be at any given point, subject to: the market’s legislative and regulatory framework, the operational and technical capacity of a Lottery to incorporate new products, and the potential appeal or demand of a product by demographic profiles of the player base.
Throughout the European State Lotteries industry it is quite evident that the emergence of Commercial Gaming operators, the negative economic climate, declining Lottery sales and (in many cases) the implementation of EU guidelines; are enforcing on the States the development of a new Gaming Regulatory framework.
While new regulation is being drafted to protect players and ensure that an “even playing field” exists amongst the increasing number of legally regulated operators within each market; concessions are also being made in order to ease previous restrictions relating to the number, types and distribution channels of Lottery Games offered within the jurisdiction.
As a result, many State Lotteries are currently undergoing the process of upgrading their technical and operational capacity to potentially enhance their products portfolio and possibly incorporate new product categories.
Assuming a favourable regulatory framework, a Lottery’s new product selection criteria would be directly proportionate to player demand and such would be benchmarked against its popularity within the market’s space (if offered) and the product’s greater performance within the Lotteries industry at large.
It must be acknowledged that Lottery Games appeal to various profile segments of the player base and while some products have a broad appeal, some Games appeal to distinct player groups and are niche. Therefore, a “Player Centric” evaluation and approach is an integral component of a successful product/category introduction.
Furthermore, it must be recognised that at any given point in time, a Gaming & Lotteries (G&L) jurisdiction has a distinct capacity in as far as player engagement and revenue contribution levels are concerned. This “sealing” is determined by a number of dynamic factors such as: population, GDP, economic climate, culture, the scope of the distribution channels and products offering, etc.
Accordingly, a Lottery operation must determine its G&L market share in order to evaluate the potential growth or impact, the introduction of a new gaming product will achieve. Indicatively in deregulating markets, the introduction of new gaming product while responding to player demand, is also being leveraged to reclaim segments of the traditional customer base that have been captured by Commercial Operators and to generate additional revenue, by developing cross-promotional activities and the creation of a “one-stop-shop” environment.
Gaming products have a “natural life cycle” and in as far as customer engagement levels are concerned; player preferences in younger demographic profiles appear to be moving away from the “passive” gaming products to Games that incorporate player “skills” for ex. Sports Betting. It should be noted that the enhancement of a Gaming Category with new products is financially and operationally, a much easier proposition than the introduction of a new Gaming Category since this would require the integration of dedicated operating platforms, accompanied by proficient human resources. In such a case, a Lottery operation must carefully evaluate the overall investment Vs. the overall return of the proposition.
The ultimate operational objective is the efficient increase of the player base and engagement levels. This could not be achieved by merely reproducing for example, a Draw Game product since such an introduction, could simply disperse liquidity across the category weakening the product’s perceived value. In contrast, the introduction of a product with new characteristic for example in this case, of a multi-jurisdictional Draw Game (Euromillions), a Rapid-Draw product (Bingo, Keno) or the distribution of the Draw Game Category via the Interactive channels; would appeal to additional demographic profiles of the player base increasing thus, overall participation numbers. Some liquidity could naturally be dispersed however if the process is managed correctly, the gains would far outweigh any losses while at the same time, product offerings are being developed that are relevant to today’s and future market demands.