BuSiNeSS PlAN - California Lottery

IntroductionIn FY 05/06, the CSL reported the highest sales in its history at $3.58billion and transferred $1.28 billion to education. This marked the sixthconsecutive year the CSL contributed more than $1 billion to education.In fiscal year 2006-2007 the CSL is poised to finish the year with $3.3billion in sales. While the CSL is proud to record its seventh consecutiveyear with over $1 billion contributed to education, sales have declinedfrom the previous year.Although the CSL, as is true of any business, has historically experiencedgrowth and decline from year to year, it is important to undertake a thoroughanalysis to determine the causes of the recent decline and predict futureperformance. This entails careful examination of the CSL’s historical effortsto build sales, the current state of its business, and an assessment of theindustry and marketplace.4.1 Overall Sales EvaluationGiven the continueddownward trend of drawgames in California andacross the nation, it isnecessary to determinehow this trend can bereversed or to developnew strategies for longterm growth.While the CSL has managed to increase sales and contributions toeducation over a 10-year period from 1997 to 2006, virtually all of thisgrowth was fueled by higher Scratchers game payouts which increasedfrom 51.52% in 1996-97 to 58.32% in 2005-06.The CSL is dependent on using administrative funds from draw game salesto supplement higher payouts on Scratchers. As is evident from the currentfiscal year, poor draw game performance has limited our ability to fundScratchers payouts and consequently affected overall sales significantly.In fiscal year 2006-07, the CSL suffered a series of low jackpots dueto jackpots being hit at lower levels than statistically expected in bothSuperLOTTO Plus and MEGA Millions. In addition to poor rollover luck,there are a number of other factors contributing to the 2006-07 salesdeclines. Jackpot fatigue is also a factor behind the recent SuperLOTTOPlus sales declines.Given the continued downward trend of draw games in California andacross the nation, it is necessary to determine how this trend can bereversed and to develop new strategies for long term growth. This ismore imperative in California, where the CSL’s ability to fund Scratchersprizes has peaked and is likely to decline as draw game sales decline.California Lottery 2007–2010 Business Plan – 41 –