Broker Says Offshore Jackpots Pose Risk to Lottery Corporation
SYDNEY, Australia (July 24, 2023) — According to a local media report viewers watching a game of rugby or their favourite NRL team stand a good chance of seeing an advertisement promoting US Powerball.
The Australian Financial Review said ‘The Lottery Office‘, a local online lottery operator which gives Australians access to international jackpots, is behind a major marketing push to promote offshore competitions.
It is not the only provider of access to offshore lotteries, but its aggressive marketing strategy is so significant that broker Barrenjoey believes it could become a real threat to the ASX’s The Lottery Corporation.
Gaming analyst Matt Ryan predicts domestic players such as Lottery Corp are going to suffer in the long-term as offshore providers grow.
“Larger jackpots usually drive more interest and the US Powerball / Mega Millions jackpots can exceed $US1billion ($1.5 billion), which compares to Australian lotteries which have never exceeded $160 million,” Mr Ryan said.
“Pricing of the overseas tickets reveals a significant gross margin. For US Powerball, we estimate a $US3 ticket is being sold in Australia for $7. Costs related to the runner, marketing, and general operating costs are incurred by the offshore lottery reseller.”
The Lottery Office was launched in late 2018 by its parent company, Global Players Network. It appears to be the biggest supplier of offshore lottery tickets locally. The group sells one of its government-authorised Australian lottery tickets and then purchases that ticket in the corresponding overseas draw.
There are eight lotteries, giving Australians access to prizemoney in competitions such as US Mega Millions, US Powerball, EuroMillions and the UK National Lottery. Barrenjoey says The Lottery Office app downloads are rapidly increasing to sit at about 135,000, a 231 percent increase on June 2022.
ASX-listed Lottery Corp is the country’s largest provider of lottery, Keno, and instant scratch products, and was created from the Tabcorp demerger in 2022. Mr Ryan said that while some Australians prefer local draws for products they trust, more and more people are trying their luck overseas.
Local lotteries contribute about 2 per cent to state tax revenue, which could be affected long-term.
In a note to clients, seen by The Australian Financial Review, Barrenjoey estimates The Lottery Office now has an app download share of 13 per cent. The Lottery Office, it says, is now reaching signups similar to Lottoland before the banning of synthetic lotteries.
“Whether the new products will cannibalise Lottery Corp is yet to be seen, but we highlight risk to the near $2 billion of taxes paid to governments if this occurs,” he said.
“It is unclear whether we will see intervention or changes to the operating environment so for the moment, we are highlighting this as a potential risk.”
Lottery Corp’s shares closed at $5.11 on Friday, up 0.8 per cent.
SOURCE: The Australian Financial Review.