Md. flush with gambling revenue even as games undergo changes

State revenue from gaming topped $1 billion last year even as portions of the traditional lottery portfolio shrank under pressure from casinos, demographic shifts, consumer fatigue and a discontinued game.

Much of the 19 percent growth over last year resulted from the addition of Horseshoe Casino in Baltimore. Revenue from gaming is the fourth-largest contributor to the state after income, sales, and corporate taxes. But traditional games, such as the daily lottery drawings, and so-called monitor games, including Keno, continue to show declines, a trend analysts say is not unexpected and has happened in other states.

Despite those declines, state Lottery and Gaming Director Gordon Medenica said that many of those games remain ahead of their peers nationally and that he expects Maryland could see increased growth in sales for instant lottery products.

“I think the market share erosion from casinos like we saw with Keno is behind us,” said Medenica.

Gov. Larry Hogan praised the revenue increase and the effect it has on the state.

Nearly $388 million of casino revenue — about 37 percent of the pot— went to the state education trust fund. Casino operators took nearly 52 percent of the overall take last year.

“Surpassing the $1 billion mark in total contributions to the state is a significant milestone for Maryland Lottery and Gaming,” said Hogan in a statement. “The lottery continues to be a revenue generator for the state, and the presence of the casinos has created thousands of jobs, boosted local economies and added significant new funding for education.”

Maryland’s gambling pie continues to grow. Last month the agency reported that the state’s five casinos generated nearly $99 million in combined revenue — the most ever in a single month. Those figures are expected to continue to increase when a sixth casino is completed and begins pulling gamblers from Washington, D.C., and Virginia.

Overall, lottery sales were nearly $1.8 billion, an increase of $38.5 million, or about 2 percent. Much of that was driven by $546 million in sales of scratch-off games.

“The $38.5 million increase in lottery sales, along with record sales of scratch-off tickets, are indications that traditional lottery products are poised for continued growth,” said Medenica.

Sales of instant tickets not only recovered from last year, when they lost 5 percent year over year, but set a record for annual sales.

In Massachusetts, instant games make up about 70 percent of sales according to experts.

Medenica called that state “a statistical outlier” but said he could envision Maryland growing its instant games business to as much as 50 percent of sales. Currently, the agency launches as many as 60 such games annually.

“We’d all like to be like Massachusetts,” Medenica said. “We have a lot of headroom in that category. We think it could do well.”

But not all of the news is positive.

Sales of daily lottery tickets and Keno continue a downward slide falling almost 2 percent each.

Richard McGowan, an economics professor and gaming expert at Boston College, said such declines are similar to national trends and are driven by demographics and the expansion of casino gaming.

“Younger people just don’t want to buy a ticket and wait all day to hear the numbers,” McGowan said of lottery ticket sales declines.

Falling Keno sales are mostly attributable to the expansion of gaming in Maryland. McGowan said many customers who would typically play those games now spend their money in casinos.

Flat sales of so-called jackpot games such as Powerball and Mega Millions suffer from a lack of large prizes that draw people in to buy tickets. McGowan called it “jackpot fatigue” and said that game operators are hoping to reverse the trend by decreasing the odds of winning in the hopes of quickly driving up the size of the prizes.

Lottery officials also joined 24 other states in discontinuing a highly touted game, the Monopoly Millionaires’ Club game, just two months after it began because of lackluster sales.

On the casino side, the news continued to be positive.

Maryland’s five casinos generated more than $1 billion in revenue, an increase of $204 million or more than 25 percent. Much of that is attributed to the addition of the state’s fifth casino, in Baltimore. Still, Horseshoe Casino has under-performed expectations, and violence in the city this spring kept the facility from having what was expected to be one of its best months since opening nearly a year ago.

The state’s sixth casino — MGM National Harbor — is expected to open in 2016.

McGowan said that if Maryland tracks with other states that allow casinos, revenues will continue to climb for a year or two after the opening of the National Harbor venue before leveling off.

“Then it will be up to the operators to make improvements and reinvest in their facilities in order to keep people excited about coming in,” McGowan said.