Is The Florida Lottery Positioning To Go Private?

Written By JR Duren on August 3, 2022
Is the Florida Lottery considering going private?

Illinois, Indiana and New Jersey already sold their lottery systems to private companies. Is the Florida Lottery considering going private?

For the 11th straight year, Florida set a lottery sales record in 2021. It generated more than $9 billion during the fiscal year 2021-22.

Scientific Gaming and International Game Technology (IGT) are companies you may have never heard of. But if you sift through the Florida Lottery’s 2021 financial report, you’d see those names near the end of the more than 60-page document.

Why are those names important? They may play a critical role in the privatization of lotteries across the country, including in the Sunshine State. The Tampa Bay Times noted that earlier this month.

“Analysts who track the industry say the largest companies are trying to forge what one calls ‘enhanced partnerships’ with the states, and what others refer to as ‘privatization’ programs that will transfer most of the day-to-day management and strategic decision-making from states to private companies.”

These enhanced partnerships have led to lottery privatization in the three states mentioned above. Is Florida next? Scientific Gaming and IGT’s presence doesn’t guarantee privatization, but it could be an indication that something is brewing.

Scientific Gaming and IGT’s role in the Florida Lottery

IGT and Scientific Gaming are the sole participants in the Florida Lottery’s “vendor support fund.”

Companies that participate in the fund provide product sales services and marketing research that changes based on “marketing initiatives, industry developments and changes in technology,” the lottery’s 2020-2021 Annual Comprehensive Financial Report said.

The lottery pays the companies via cash deposits to designated accounts. Vendors must use the funds for market research and product sales expenses. Between the two companies, Scientific Games gets most of the money:

  • Cash sent to Scientific Games from June 2020 to June 2021: $5.6 million
  • Cash sent to IGT from June 2020 to June 2021: $360,000

At the end of the 2021 fiscal year, Scientific Games’ account had a cash balance of $3.16 million, while IGT’s account had a cash balance of $468,000.

Based on these numbers alone, Scientific Games would have a huge hand in the transition if the Florida Lottery were privatized.

Other companies paid by the Florida Lottery

In addition to vendors that participate in the vendor support fund, the lottery hires other vendors to sell draw and scratch-off tickets. Selling those tickets involves providing machines, printing tickets and other services.

The lottery pays these vendors based on the type of games they sell. For example, vendors that help with draw games earn 0.7384% of draw and scratch-off ticket sales. For the fiscal year 2021, that cut of sales resulted in payments of $67.21 million to vendors.

Vendors that help sell scratch-off games earned a payment ranging from 0.6640% to 1.4980% of ticket sales. For the fiscal year 2021, payments for scratch-off vendors exceeded $56 million.

In total, the Florida Lottery paid out more than $115 million to vendors.

What would lottery privatization look like?

Privatizing a state lottery could be a good option for a state for several reasons. For example, if a state is struggling to keep up with industry changes, privatizing could help. Hiring a private company would make sense if a state doesn’t have enough money to fund a successful lottery.

Generally speaking, the biggest part of privatizing a lottery requires the state to find a reliable company to run its lottery. Typically, the state’s contract with a private company requires the company to:

  • Make an upfront payment
  • Generate a certain amount of sales each year

If the company doesn’t live up to its end of the contract, the state can fire the company and find someone else.

Would that work in Florida? It’s hard to say. The state’s lottery has increased its sales every year for the past decade. At the same time, the state already works with the country’s two premier lottery management vendors. Should the need for privatization arise, Florida has two experienced vendors ready to step in.

The Florida Lottery’s 2020-2021 Annual Comprehensive Financial Report can be viewed here.

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JR Duren

J.R. Duren has covered the Pennsylvania, New York and New Jersey gambling beats for Catena Media. His past reporting experience includes two years at the Villages Daily Sun. Duren is a member of the Society of Professional Journalists and a first-place winner at the Florida Press Club Excellence in Journalism Contest.

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