As lottery product portfolios expand into digital games, the question frequently arises, does cannibalization threaten revenues and how do players respond to these changes?
(This article was originally published in 2013. Updated in 2025 to reflect the rapid evolution of digital lottery formats, player behavior and regulatory frameworks.)
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 state lottery’s evolutionary process, concerns often arise regarding “product cannibalisation”: the potential negative impact that a new gaming product may have on existing games within a category (Draw Games, Instants, Sports Betting, etc.) or across categories within the overall portfolio.
Yet, adaptation is essential for survival. The health of a portfolio depends on how effectively new games extend participation and renew engagement without destabilising existing revenue streams.
The composition and evolution of a lottery’s gaming portfolio are influenced by three broad factors:
- Regulatory framework – defining what may be offered and through which channels.
- Operational and technical capacity – determining how efficiently new games can be deployed.
- Market demand and demographic appeal – guiding where hidden participation potential lies.
Across European and global markets, the rise of commercial gaming operators, economic volatility and declining engagement in traditional draw games have forced state lotteries to review and diversify their portfolios. At the same time, evolving regulation aims to protect players while allowing fair competition among licensed operators.
As restrictions on product numbers and distribution channels ease, lotteries are investing in new platforms and resources to modernise their offerings. Under a supportive regulatory environment, product selection should be driven by measurable player demand and benchmarked both locally and internationally against comparative performance.
Lottery games appeal to distinct player segments. While some products (e.g., national draws) reach across demographics, others attract narrower groups defined by age, motivation or spending patterns.
A player-centric evaluation is therefore essential when introducing or repositioning a product.
This evaluation typically considers:
- Player frequency and spend elasticity. How engagement shifts in response to prize size or frequency.
- Motivational profiling. Understanding whether a game appeals to thrill, routine, or perceived skill.
- Channel behaviour. Where and how players prefer to engage (retail, mobile, or hybrid).
A mature lottery jurisdiction also has a finite market capacity determined by population, GDP, disposable income, cultural attitudes and product mix. Within that ceiling, innovation must expand participation rather than redistribute existing spend.
When new games are introduced, their effect on existing products must be analysed not only through sales performance but also through behavioural migration — whether players are shifting spend within the portfolio or genuinely increasing engagement.
In practical terms, cannibalisation can be identified through a blend of transactional and behavioural indicators:
- Spend allocation shifts across categories after a launch.
- Entry and exit rates of active players over defined intervals.
- Play frequency fluctuations correlated with promotions or prize events.
A sustained rise in participation in a new game accompanied by proportional declines in adjacent products typically signals substitution, whereas incremental participation without contraction elsewhere reflects true portfolio expansion.
In one jurisdiction, for example, the introduction of a high-frequency draw product initially displaced participation from the main Lotto game. By repositioning the new product as a complementary “bridge” experience between major draws, cross-participation rose, stabilising total GGR above pre-launch levels.
Cannibalisation is not inevitable; it can be mitigated through prize design, timing and communications that align new products with existing play patterns rather than competing against them.
Gaming products have a natural lifecycle. Over time, player preferences (especially among younger segments) shift away from passive play toward instant gratification / perceived-skill formats such as sports betting or interactive games.
Enhancing an existing category with new variants is operationally simpler than introducing a new category, which typically demands a dedicated platform and specialised staff. However, launching a near-identical product risks dispersing liquidity, in other words, diluting total sales volume and weakening perceived value.
By contrast, introducing products with differentiated characteristics e.g., multi-jurisdictional draws (EuroMillions), rapid draws (Keno, Bingo), or digital distribution of draw games, can attract new demographics and sustain portfolio relevance. Some liquidity displacement is natural, but if managed strategically, overall gains will exceed any internal diversion.
Cannibalisation should not be viewed as a failure of innovation but as a dynamic factor in portfolio management.
When measured, anticipated and guided through a player-centric framework, it becomes a signal of adaptive efficiency. Ensuring that the most relevant, engaging and sustainable products survive within an evolving gaming ecosystem.