Michigan has been the poster child for legalized online lottery sales, with only five other states ratifying legislation permitting the practice. These are Illinois, Kentucky, Georgia, New Hampshire and Pennsylvania. Michigan tops the list in terms of success with consecutive years seeing double-digit growth in online lottery revenue.
Steady growth in lottery sales
Online lottery tickets and instant play lottery games similar to casino features have been available to residents since 2014. The iLottery industry in Michigan has grown by leaps and bounds since then. Revenues were a disappointing $600,000 during its first year in operation, jumping to $18.5 million the following year and $48 million the next. The gains are undeniable, for sure. However, these revenues are a small part of the greater gaming behemoth that is the Michigan Lottery.
Today, the Michigan Lottery pulls in more than $1 billion in net profit annually and has been steadily increasing since 2011. While these numbers are substantial in size, the majority of the profits go to the Michigan School Aid Fund, Health and Human Services and the state’s general fund.
While it looks as if the Michigan Lottery is riding the gravy train all the way to the bank, the flood gates will soon be open for other legalized gambling industries, including online casinos, online poker and sports betting.
Michigan revenue concerns
These new gambling outlets still have a year before they’ll be accessible to the general public in Michigan. One concern lottery officials are investigating is not whether newly sanctioned gaming verticals will affect the Michigan Lottery’s revenue, but rather how significantly.
Cannibalization is not an uncommon concern when new paths open for peripheral industries. In this case, one may be comfortable in assuming that they rely on similar demographics for revenue. However, in the case of land-based gaming, one need only point to established gaming hubs to upend this assumption. Just look at gambling destinations around the world, like Las Vegas, Atlantic City, Macau and so on.
Online environments may prove a different beast in this case. Pennsylvania is the only state to have both land-based and online gaming entities. Pennsylvania only launched the online portion in mid-2019. So the data revealing just how the previously establish gaming industry is affected won’t be available until at least Q3 of 2020.
In the case of Pennsylvania’s gambling industry, existing land-based casinos attempted to ban online lottery games they found too similar in nature to casino games. Ultimately, the courts denied the request. Because Michigan’s gambling infrastructure exists opposite to Pennsylvania’s before the launch of online gambling, no such request can be made on the part of the Michigan Lottery. Only time will tell just how these entities interact and exist in a competitive space.