With Sports Betting On Its Way, Is It Time To Talk About The NJ Online Lottery?

Martin Derbyshire June 11, 2018
nj online lottery

Until 2017, the New Jersey Lottery was on a huge winning streak.

In its 2016 fiscal year, the New Jersey Lottery set sales records for the seventh year in a row. Lottery revenues of $3.29 billion helped the organization make $987 million in contributions to various state programs and institutions that benefit millions of New Jersey residents.

The state’s Departments of Agriculture, Education, Human Services, Military and Veterans Affairs, and Higher Education Services all received pieces of the pie. Just like sales numbers, the contributions in 2016 represented a new record.

The New Jersey Lottery has been successful for decades, and the state has benefited greatly. In fact, the lottery has contributed more than $24.8 billion to various state programs and institutions since ticket sales started in 1970.

Record prize money and retailer commissions

Lottery players and the retailers that sell the tickets have benefited greatly as well. The New Jersey Lottery paid out a record $2 billion in prize money in FY 2016. Plus, the more than 7,600 licensed lottery retailers across the state received $186 million in commissions and bonuses, up from $170 million the year prior.

Unfortunately, that winning streak came to an abrupt halt last year.

New Jersey Lottery ticket sales numbers dropped for the first time in seven years in 2017. The $3.187 billion in 2017 ticket sales was down about $100 million.

It still managed to set a new record of $994 million in contributions to state programs, up from $987 million the previous year, mostly because it paid out $75 million less in prizes, making up most of the difference.

However, New Jersey Lottery officials and state lawmakers had to be left wondering why it failed to set sales records for the eighth straight year.

Blame Powerball

According to the New Jersey Lottery’s annual report, a sharp decline in ticket sales for the multi-state lottery Powerball was a big part of why overall sales numbers decreased.

Powerball sales dropped over $70 million from 2016 to $213.5 million total in 2017. Sales numbers for several other draw games, including Pick 3, Pick 4, Cash 4 Life, and the multi-state lottery Mega Millions also dropped.

In fact, only instant Scratch-Off tickets and Jersey Cash 5 tickets saw sales increases in 2016.

Since New Jersey Lottery contributions to state programs still managed to set a new record last year, the state likely isn’t in a hurry to address potential problems.

However, if sales figures continue to drop for FY 2018 and beyond, some action will be taken, and it’s a good bet it will be taken online.

Michigan’s online success story

After launching a successful pilot program in the summer of 2014, the similarly sized state of Michigan launched online lottery sales that fall.

It started with just Instant Keno and a variety of electronic scratch-offs. However, in January 2016, the Michigan Lottery started offering tickets for its most popular draw games online. This includes Powerball, Mega Millions, Fantasy 5, and Lotto 47.

According to a December 2016 report from lottery consultant Digital Gaming Group, Michigan’s online lottery sales hit $8 million a week in March 2016. Plus, they’ve had little to no effect on traditional lottery retail sales.

The Michigan Lottery posted sales of $3.3471 billion for the fiscal year ending Sept. 30, 2017. That number was up 7.4 percent from the $3.1181 billion posted a year earlier.

In 2015-16, online lottery products generated $48 million in revenue. That represented less than two percent of the Michigan Lottery’s total. However, the numbers climbed more than 100 percent in 2016-2017, with revenues increasing to $97 million. Online lottery sales were suddenly three percent of Michigan Lottery’s total.

The growth in online lottery sales is obviously helping. In fact, the Michigan Lottery contributed a record $924 million to the state’s public education system in 2017. What’s more, it’s broken that record every year since the online lottery sales program started.

Advancing the NJ online lottery

Michigan continues to focus on the online lottery for its growth potential. The New Jersey Lottery may one day find itself in the market for something similar. If it does, New Jersey lawmakers likely won’t hesitate to take it online, particularly considering their progressive track record when it comes to casinos and online gambling.

There could be opposition though. Northstar New Jersey is the private company that operates the New Jersey Lottery. It has a 15-year contract to run the lottery, which it signed in 2013. Northstar may not see the benefits of online sales.

Atlantic City casinos and NJ online casinos could also view online lottery products as competition. In November 2017, the New Jersey legislature made it legal for lottery players to purchase tickets through private couriers.

The sales still go through traditional lottery retailers. The couriers simply deliver tickets to customers who purchased them online for a small added fee. It’s not exactly an online lottery because only existing New Jersey Lottery products are available. Plus, there’s a delivery fee tacked on.

However, New Jersey lawmakers could be waiting to see what kind of numbers lottery couriers can generate in an effort to estimate, at least in part, what online sales can do for them.