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Casinos end lottery’s winning streak

It is no coincidence that the end of the Maryland lottery’s decade-and-a-half string of record sales came in the same year Maryland casinos really cashed in.

The Maryland State Lottery sold $1.76 billion worth of tickets in fiscal 2013, $200,000 less than the state budgeted.

The Maryland State Lottery sold $1.76 billion worth of tickets in fiscal 2013, $200,000 less than the state budgeted.

The Maryland State Lottery and Gaming Control Agency on Thursday announced lottery sales took a hit in fiscal 2013, ending a formidable streak of 15 straight years of record sales with a disappointing, but not unexpected 2.2 percent decrease in ticket sales.

The state’s first casino opened in Cecil County in 2010, but the June 2012 opening of Maryland Live Casino at Arundel Mills mall — more than three times the size of Hollywood Casino Perryville — disrupted the gambling ecosystem in a state that has debated for decades how and where wagering should take place.

The four casinos in Maryland combined to generate $608.3 million in the fiscal year that ended in June, besting state projections by nearly $77 million. Overall gambling revenue from casinos and lottery sales increased 27.6 percent year-over-year, to $829.5 million.

But lottery officials say that came at the expense of the traditional offerings from the 40-year-old gambling agency, which sold $1.76 billion worth of tickets in fiscal 2013, $545.2 million of which went to state coffers — $200,000 less than the state budgeted.

The lottery has hired a research firm, the Timonium-based Key Group, to help its staff determine why revenue fell and how to reverse the decrease before it becomes a trend. But lottery Director Stephen L. Martino said there’s little mystery surrounding what happened.

The closer a lottery retailer was to the Cordish Cos.’ gambling emporium in Hanover, the greater that retailer’s losses in the last year.

“Our operating hypothesis right now is that we’ve finally seen some erosion from the traditional lottery going to the casinos, particularly Maryland Live,” Martino said. “Maryland Live is clearly the game changer in these fiscal revenue numbers.”

Officials for months had predicted the dip and ran behind revenue estimates for most of the year before realizing there would be no 16th record-breaking year of sales. Martino said with casino revenue rising so dramatically with the legalization of table games such as blackjack and roulette and the opening of Maryland Live and Rocky Gap Casino Resort in Western Maryland, a one-year decrease in lottery revenue was not a “huge problem.”

The state’s share of revenue from casinos goes to the Education Trust Fund, and lottery revenue goes to the General Fund, Martino said, making it difficult to trade off losses from one and gains to the other. He added the agency was “pleased with the numbers” but not “happy to see a decrease in sales.”

“I think there needs to be some recognition … that there was probably going to be a decline in the traditional lottery,” he said.

Richard Clinch, a research economist with Batelle Memorial Institute, said there was likely some overlap among consumers who buy lottery tickets and slot machine gamblers, and there’s only so much discretionary income to go around.

“The lottery was the only game in town, and when you’re the only game in town, you make money and lots of it,” Clinch said. “When you create other competition, like casino gaming, you get people who create budgets for these things … are going to cut back on one and use the other.”

Similar lottery losses have occurred across the United States when casino gambling was introduced in a state that previously only allowed traditional lottery ticket sales.

Maryland gambling officials have previously said that one way to boost ticket revenue would be to legalize a form of online gambling known by the industry as iLottery — essentially an online marketplace where gamblers buy and play traditional lottery games from their computers or smartphones.

“That’s one of the issues that’s out there, but I think there’s a number of things we need to look at,” Martino said. “We need to look at the inventory of games we have. What can we do to freshen up these games to make them exciting?”

Clinch said some options could include new games and new or expanded loyalty programs, such as My Lottery Rewards, which the agency launched in June.

At best, though, the lottery might need to get used to the idea that those record-breaking days are over.

“Lotteries will not go extinct,” Clinch said. “I think the general consensus is when you pass casino gambling in a state, lottery growth slows. Will the lottery go away? No. Will the takes at best grow slower, at worst decline a little? Yes.”

Lottery retailers earned $119.8 million in fiscal 2013, and gamblers won more than $1 billion buying lottery tickets. Monitor games, such as Keno and Racetrax, generated $493.6 million in sales. The most popular paper ticket games, instant-win scratch-offs, accounted for $485.8 million in sales.