BuSiNeSS PlAN - California Lottery

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1.1% General Operating ExpensesGeneral operating expenses include a collection of miscellaneous operatingexpenses such as general operating costs, contracted services, assetdepreciation, State Controller’s Office support expenses and facilitiesmaintenance costs.1.4 Business ModelThe CSL has been operating under the same basic business model for20 years. This business model is based on partnering with retailers forthe sale of lottery products. This business model is still used, with onlyminor variations, by every state lottery in the United States. The basicsof the CSL’s business model are as follows.• With few exceptions, players must purchase lottery tickets fromauthorized CSL retailers.The CSL has been operatingunder the same basic businessmodel for 20 years.• Retailers earn sales commissions, cashing bonuses, andmiscellaneous incentives for performing a range of activitiesassociated with selling and cashing tickets.• There are two basic categories of lottery tickets: draw gametickets and Scratchers tickets also known as instant games.• Draw game tickets can only be sold through either retailerclerk-operated terminals or player-operated self-service terminals,and all purchase transactions must be recorded in a centralcomputer system to be valid.• Scratchers tickets are sold directly by retailers and throughself-service vending machines, and no computerized recordingis required for these sales transactions.• All cashing activities must be authenticated through the centralcomputer system.• Retailers can pay prizes up to $599 – larger prizes must be paiddirectly by the CSL.• Scratchers tickets are printed by a handful of specialized vendorswho follow prescribed industry standards.• Draw game contractors typically provide and maintain all gamingsystem software, data center operations, gaming terminals,retailer hotline support, and telecommunications services.California Lottery 2007–2010 Business Plan – –
Retailer CompensationAs previously noted, retailer compensation represents the largest shareof the Lottery’s administrative budget. The following provides a high levelsummary of this compensation.Compensation TypeAmountSales Commissions6% of the retail sales price of the tickets soldCashing BonusesBetween 2% and 3% of the value of the prizes cashedIncentive Bonuses0.5% of prizes of $1 million or more soldat the retailer’s locationIn addition, retailers receive sales commissions for tickets that are soldfrom Lottery self-service vending machines in their stores as well ashandling fees for issuing free ticket prizes.Retailer NetworkThe backbone of the CSL is our extensive retailer network. With over19,000 retailers across California, lottery products are available throughoutthe state. The CSL’s retailers can be segmented as follows.Convenience Stores With or Without GasThe backbone of the CSLis our extensive retailernetwork. With over 19,000retailers across California,lottery products are availablethroughout the state.This is the CSL’s most prevalent trade style with over 7,500 retailer locations.Circle K and 7-Eleven are the dominant chain accounts, although mostretailers in this category are independent “mom and pop” shops. Overallthis category of retailers outsells every other major trade style that currentlysells lottery products.Liquor StoresLiquor stores also make up a large percentage of the retailers in the CSL’sretailer network. Sales performance of liquor stores is similar to that ofconvenience stores. There are approximately 4,200 retailers in this category.– 10 –California Lottery 2007–2010 Business Plan
Page 3: CommissionersJOHN MASS, of Los Ange
Page 6 and 7: Introduction
Page 8 and 9: IntroductionIn order to fulfill the
Page 10: focus on huge jackpots and more foc
Page 14 and 15: Figure 1.2 - 2004-05 K-12 Percent o
Page 18 and 19: SupermarketsAlthough supermarkets h
Page 20 and 21: handles all Spanish language advert
Page 22 and 23: Fantasy 5Value Proposition: The bet
Page 24 and 25: 1.6 Organizational Structureof the
Page 26 and 27: ITSD consists of four offices and t
Page 30 and 31: Integrity,Security,Honesty,and Fair
Page 32: The CSL not only employsinternal au
Page 35 and 36: Since its inception, the CSL has wo
Page 37 and 38: Last year, the California Problem G
Page 39 and 40: Marketanalysis
Page 41 and 42: EthnicityThe following charts show
Page 43 and 44: GenderThe household incomeof past m
Page 45 and 46: 3.2 Consumer ProductSales Compariso
Page 47 and 48: Technology TrendsAll of these techn
Page 49 and 50: are large, to maintain sales in lot
Page 51 and 52: IntroductionIn FY 05/06, the CSL re
Page 53 and 54: Figure 4.2 is a list of some of the
Page 55 and 56: Figure 4.4 - Overall PRIZE PAYOUTS
Page 57 and 58: Figure 4.5 shows that in terms of p
Page 59 and 60: Raffle GamesRaffle-style games are
Page 61 and 62: Pursuant to section 8880.64 of the
Page 63 and 64: Fig. 5.12 CSL Scratchers Game Growt
Page 65 and 66: As shown in Figure 5.13, the lotter
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Fig. 5.15 Sales per RetailerFigure
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etailers with special “Check-a-Ti
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Gaming System ComplexityThe CSL’s
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Fig. 5.19 Budgeted Per Capita Adver
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There is an opportunity to reverse
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Public Relations and OutreachOur fr
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Ticket Dispenser RestrictionsThe re
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IntroductionA careful analysis of o
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Unfortunately, increasing jackpot s
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Key StrategicInitiatives
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Shift the Jackpot ParadigmOur strat
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12. Recruit Non-traditional Retaile
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www.calottery.com600 North 10th Str
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BuSiNeSS PlAN - California Lottery

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