Asia lottery upgrades provide potential supplier bonanza

Countries across Asia are overhauling their ageing lottery systems, introducing new products and online sales to boost revenue and appeal to a broader market, providing opportunities for suppliers.
China, with sales revenue in its two lotteries topping $61 billion in 2014, remains the top prize as Beijing mulls new regulation on online and mobile sales. But elsewhere in Asia, lottery markets are also undergoing change, even in countries where gambling is illegal, or off the cards for locals.
South Korea’s Nanum Lotto, which has held a license to operate the country’s lottery since 2007, says it sees “huge” potential for online sales and is developing new products to expand the market demographic.
The company achieved lottery sales of $3.3 billion in 2014 and raised $1.4 billion for a lottery fund, as 42 percent of group revenue is earmarked for public use. 
Since it obtained the license, it has seen sales surge by 150 percent, helped in part by its efforts to shift the image of the lottery as a straightforward gamble on a jackpot to one of projecting an image of sharing and sound leisure. The name Nanum means sharing in English. 
“Through 8 years of our hard efforts, we have been able to turn the staggering $2.3 billion market into a dynamic market where it is expected to reach $3.5 billion this year,” the company said.
Gambling in casinos is off limits for locals in South Korea, apart from in one property, and many sectors of the conservative culture oppose gaming. 
Since 2013, when Nanum Lotto became the exclusive lottery operator, it has also managed to convince the government to allow development and enhancement of existing products which were once strictly prohibited and regulated. 
“Consequently, we have successfully turned some of the inactive product sectors into one of our major product categories. Seeing from above, we believe Korean lottery industry has opened up a new era of opportunity where the future growth potential could go beyond our imagination,” the company told AGB.
At present, lottery regulations in South Korea don’t allow online sales of its main lotto product, Nanum Lotto 6/45, which makes up 91 percent of total revenue. 
However, it is now operating print lottery and e-lottery through online channels and is focusing on long-term investments in this sector, helped by the advanced level of IT infrastructure already in place in South Korea. 
“We are seeing huge potential in this sector. Recently, we have been pushing ahead with the product renewal, mobile platform development, and sales promotion,” it said. 
In terms of new products, Nanum recently launched print lotteries in the form of a pair product, which it says has been highly successful with sales growth of more than 100 percent. 
As with many lotteries across Asia, it is also facing the challenge of seeking to appeal to a younger audience. At present, most of its customers are males in their forties or fifties. As a result it’s moving towards developing various seasonal products with innovative and entertaining themes such as baseball game, TV show, and 2nd chance game using a QR code. 
Although casino gambling is off limits for most locals, it’s also seeking a way of developing online products that could assimilate the format of the casino for all people to enjoy casino games at home, though controlled as to the amount of money they could afford to gamble. 
Although Nanum holds the sole license to operate the lottery in South Korea, there may be opportunities for foreign suppliers, especially in the e-lottery sector. 
“We are looking for an opportunity to work with suppliers who have profound experience and knowledge in providing integrated lottery system which could enhance overall development of our industry.”  
That said, the company is also taking its own expertise elsewhere in Asia. 
“In fact, we are actively conducting consulting services for several operators in Asian Pacific region providing localized solutions for product development and implementation.”
Thailand’s military government is also implementing amendments to gaming laws that may open the way for online lottery sales and almost double annual revenue to 44 billion baht ($1.35 billion). The illegal market is pegged at more than $3 billion.
Previous attempts to introduce reforms under elected governments faced a strong backlash from thousands of sellers of the paper-based tickets concerned over loss of income.
The first attempts at reform were taken in 1996 when then Prime Minister Banharn Silpa-archa signed a 1.6 billion baht ($50 million) joint venture deal with lottery firm GTech and local communications operator, Loxley Plc. But the project was suspended.
International Game Technology, which recently merged with GTech, is still interested in opportunities in Asian lotteries, including Thailand.
“We try to concentrate on the state lotteries. We’ll always look at any opportunity that is potentially out there and if it’s commercially viable we’ll consider it,” said Sabby Gill, IGT senior vice president for international sales, in a recent interview. “In Thailand there was an opportunity and now if it does come back I’m sure we’ll take a vested interest in pursuing it if it’s commercially viable.” 
“In places like Cambodia there is the potential for a lottery license, but what tends to happen is small states or provinces try to create small offerings. We believe the best approach is to really take those smaller ones and try to build up an affinity so you can put in a state lottery. That’s where you get real economies of scale and benefits.”
Scientific Games is also interested in the market potential and recently held talks with officials in both Vietnam and China. 
“There are three major global players in lottery and we are clearly one of them,” Scientific Games CEO Gavin Isaacs said in an interview in May. “It’s a very different animal. It’s fabulous stuff.” 
In Taiwan lottery sales slipped to NT$116.1 billion in 2014, down from $138.1 billion in the previous year. In the six months to date, the lottery has taken in $54.7 billion, according to Ministry of Finance figures.
In Taiwan, the lottery is run entirely as a means of raising public funds and not as a for-profit business. The Ministry of Finance grants the right to hold a lottery to banks, which then partner with a technology provider to hold the lottery.
Under the Public Welfare Lottery Issue Act two kinds of lottery can take place, a normal lottery and a special lottery, held in conjunction with an internationally recognized competition such as a sporting event. 
The normal lottery was administered from 2002 to 2006 by Taipei Fubon Commercial Bank Co. Ltd, but struggled to compete with the black market and offshore gambling. The new licensee, which holds the permit through to 2023, has fared better. 
Taiwan Lottery Co., Ltd. (Taiwan Lottery) is a subsidiary of CTBC Financial Holding Co. Jeffrey Koo Jr., chairman of CTBC Charity Foundation, said that all earnings from Lottery business will be donated to social welfare. Lottery is not a business, and CTBC Bank contributes a sum of NT$2.7 billion each year to the government welfare funds so as to take care of more underprivileged people, regardless of profits or losses, it says on its website. No online games are offered. Products include lottery (different models); scratch tickets and Bingo drawn every five minutes during a set time period during the day.
Taiwan Lottery also holds the license, for the same period, to operate a Sports Betting lottery, which is able to offer online products - a prize that many other lottery operators in Asia aspire to.