Published on 19/11/2015 by Punchmedia

Winning in Business Can Be a Lottery

The lotteries industry is one that can often be overlooked when one is looking to purchase an established business. Often run in conjunction with a newsagency, a lottery business can be very lucrative, especially considering industry revenue is projected to increase at an annualised 3.2% through the five years to 2015/16 according to a new report.

Revenue

Industry revenue is projected to increase at an annualised 3.2% over the five years through 2015-16, to reach $6.7 billion. Revenue is represented as total sales from all lottery products, before any prize money is distributed. Prizes are therefore a major component of the industry’s cost structure. Growth in real household discretionary income has assisted the industry’s performance over the past five years, as consumers have had more money to spend on non-essential gambling services.

Profitability

Profit is estimated to account for 6.1% of revenue in 2015-16. Profitability has increased slightly over the past five years, as agent services have been provided more efficiently through online distribution systems. This trend has limited the interaction between lottery business operators and lottery agents, which are primarily newsagents, decreased operational costs and eased players’ profit margins.

Competition

Other forms of gambling have certainly had an impact on the lottery industry over the past five years. The rise of sports betting has been particularly challenging for the industry sports betting tends to appeal more to younger demographics and lottery operators generally struggle to attract consumers in these markets. In contrast, people in older age brackets typically purchase more lottery tickets and play more lottery-style games such as keno. Australia’s ageing population has therefore assisted the industry over the past five years.

Consolidation

The industry’s largest player has undergone significant consolidation over the past five years. During 2010, the New South Wales Government sold a 40-year licence to Tatts Group to operate the Lotteries Commission of New South Wales. Tatts Group was already the dominant player in the business and this acquisition substantially increased its share of industry revenue. Tatts Group continued to expand its operations throughout Australia in November 2012, when it purchased the Lotteries Commission of South Australia. Tatts Group’s market share has therefore increased substantially since early 2010.

Lottery Jackpots

Lottery sales and revenue from year to year depend heavily on the number of major jackpots. These jackpots tend to capture the interest of consumers that play the lottery on a less frequent basis. Jackpots of over $10.0 million are generally advertised more frequently and consumers are often more tempted to purchase these tickets as their expected payoffs are much higher. This increase in lottery ticket sales boosts industry revenue, while players’ profit margins will fluctuate depending on random win rates.

Innovation

Over the past five years, industry players have recognised that interest in some of their products has declined. Many major lottery business operators have therefore attempted to alleviate this problem by introducing new lottery draws and other innovations. In February 2012, the Lotteries Commission of Western Australia introduced new Monday and Wednesday lotto draws. Intralot also introduced instant scratchies in Victoria, prior to its exit from the industry in 2014-15.

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Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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