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Maryland lottery ‘believes it is time’ to offer its games online

Multi-million dollar jackpots could be just clicks and keystrokes away if the Maryland State Lottery Agency gets its way.

The agency wrote in a report to the General Assembly that it “believes it is time” to offer its games online to capture a larger slice betting-age Marylanders.

“Sales channels change over time…,” lottery Director Stephen L. Martino said Friday. “There aren’t many successful retail models out there that don’t include the Internet.”

The report estimated online sales could boost lottery revenues between 12 and 18 percent, or $200 million to $300 million, based on $1.7 billion in sales in fiscal 2010.

But the prospect of gamblers scooping up digital Mega Millions and Powerball number rather than the paper printouts along with a gallon of milk and a tank of gas at the local convenience store has riled retailers.

“It isn’t exactly fair, I would say, to the retailers that have supported the lottery in the past and continue to support it to turn around and give an incentive to folks to go online,” said Pat Donoho, president of the Maryland Retailers Association. “At the end of the day, you only have so much disposable income. Everybody is competing for it.”

Lottery tickets are big business for retailers.

The state pays about 6.6 percent of sales to the stores that sell the tickets. Commissions totaled $113 million in 2010.

Martino said there was no evidence that retailers would lose out if lottery tickets went on sale online.

“Penetration for lottery sales among Marylanders is right at 50 percent, which means there are a whole bunch of people in this state that don’t play the lottery,” Martino said. “The Internet idea may attract a completely new customer and may not affect people who now go to brick-and-mortar stores.”

States have dabbled with concept here, but not enough to yield a domestic case study.

Abroad, however, England started selling lottery tickets online in 2003, and over the first six years, retailer commissions grew 8.2 percent.

Ed McGuinn, CEO of eLottery, a Connecticut online lottery technology company, said states should expect retailers to take a small hit.

“I think cannibalization will be well inside of 5 percent,” he said. “There’s always going to be a little bit, but it’s not going to be material. You have to think bigger than that in the standpoint that you’re trying to increase sales for the lottery.”

Resistance from retailers prompted lawmakers to attach a last-minute amendment to the state’s budget in the spring that required the lottery to study the online sales issue.

The result of that study, a 15-page report, was submitted Friday and kicked off a 45-day comment period for the General Assembly.

The lottery’s path after that, Martino said, is not yet clear.

“Our position, when it comes to traditional lottery, is there is no statutory barrier to this idea,” he said.

Going digital, the lottery wrote in its report, will enable it to respond to “new customer behaviors, giving its players the ability to purchase products when and where it is convenient to them.”

Already 53 percent of lottery players use the agency’s website to check winning numbers. Some 50,176 have registered to get the online extras in the Ravens Cash Fantasy game.

Sales platforms online and on mobile phones and devices would allow the lottery to tap into the “traditionally hard-to-reach young adults” aged 18 to 34, the report stated.

Minnesota, New Hampshire, New York, North Dakota and Virginia sell lottery games online, mostly through a subscription basis where players prepay for tickets over some length of time, usually between three months and a year.

McGuinn said single tickets will be sold online eventually, as well as digital versions of scratch-offs that mimic the look of digital slot machines.

“You can scratch a ticket with a mouse no different than you can with a quarter,” he said.