Impact of VLTs on
Lottery Ticket Sales in
New York
Charles Vickery
Presented January 12, 2007 to
National Council of Legislators from Gaming States
Hawk’s Cay, Florida
Copyright © 2007 Charles Vickery
Summary
► New
York’s VLTs have contributed $500
million to education since Jan. 2004.
► The
relationship between VLTs and lottery
ticket sales in New York is not proven.
Preliminary numbers, discussed here,
indicate that VLTs may negatively impact
lottery ticket sales.
► Relationships
similar to those discussed here
have been reported in other states.
Summary
► New
York Lottery ticket sales rose 56% between
2000 and 2005, from $4.07 billion in 2000 to
$6.36 billion in 2005.
► 2006 New York VLT net revenue was $424 million,
or 6.7% of 2005 New York Lottery ticket sales.
► New York introduced its first racetrack casino
during January, 2004 (Saratoga).
► Growth in lottery ticket sales within casino market
areas once mirrored statewide growth – now well
below growth outside of casino market areas.
► Negative impact on lottery ticket sales could be
15% of VLT net revenue.
New York Racetrack Casinos
VLT Net Machine Revenues Since Inception
Week Ending 01/31/04 thru Week Ending 01/06/07
Racetrack
Casino
Opened
Week
Ending
Net
Machine
Revenue
Aid to
Education
Percent to
Education
Saratoga
01/31/04
$302,181,106
$165,616,283
54.81%
Finger Lakes
02/21/04
$214,458,916
$116,565,586
54.35%
Fair Grounds
03/20/04
$107,835,820
$58,083,618
53.86%
Mighty M
07/03/04
$177,918,746
$95,119,255
53.46%
Batavia
05/21/05
$39,121,041
$19,560,513
50.00%
Tioga Downs
07/08/06
$21,521,246
$10,760,618
50.00%
Yonkers
10/14/06
$55,082,289
$29,896,901
54.28%
Vernon Downs
10/28/06
$7,722,775
$3,861,387
50.00%
All Locations
01/31/04
$925,841,939
$499,464,161
53.95%
New York Casinos That Opened in 2004
Annual NY Lottery Ticket Sales within 50 Miles
($US Millions)
2005 2004 2003 2002 2001 2000
Finger Lakes
338
332
331
318
274
240
Buffalo Raceway
429
423
425
423
370
337
Seneca Allegheny
159
159
162
160
140
126
Saratoga Gaming
338
330
327
306
259
227
Monticello
324
319
306
286
248
219
Combined Total
1,588 1,562 1,550 1,493 1,290 1,149
2005 lottery ticket sales within 50 miles of these locations were 25% of statewide sales,
down from 28.2% in 2000.
New York Lottery Ticket Sales
Relative to Distance from NY Casinos
That Opened During 2004
($US Billions)
NY Total
% Change
Less than 50 Miles
% Change
At least 50 Miles
% Change
2005
2004
2003
2002
2001
2000
6.36
6.02
5.74
5.36
4.59
4.07
5.65%
4.91%
7.07%
16.77%
12.83%
1.59
1.56
1.55
1.49
1.29
1.67%
0.80%
3.85%
15.75%
12.25%
4.77
4.46
4.19
3.87
3.30
7.04%
6.43%
8.32%
17.17%
13.06%
1.15
2.92
Thank You
Charles Vickery
273 E. Mt. Vernon St.
Oxford, PA 19363
(610) 932-4167
[email protected]
January 12, 2007
Copyright © 2007 Charles Vickery
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
Impact of VLTs on
Lottery Ticket Sales in
New York
Charles Vickery
Presented January 12, 2007 to
National Council of Legislators from Gaming States
Hawk’s Cay, Florida
Copyright © 2007 Charles Vickery
Charles Vickery
1
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
Summary
► New
York’s VLTs have contributed $500
million to education since Jan. 2004.
► The
relationship between VLTs and lottery
ticket sales in New York is not proven.
Preliminary numbers, discussed here,
indicate that VLTs may negatively impact
lottery ticket sales.
► Relationships
similar to those discussed here
have been reported in other states.
Charles Vickery
2
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
Summary
► New
York Lottery ticket sales rose 56% between
2000 and 2005, from $4.07 billion in 2000 to
$6.36 billion in 2005.
► 2006 New York VLT net revenue was $424 million,
or 6.7% of 2005 New York Lottery ticket sales.
► New York introduced its first racetrack casino
during January, 2004 (Saratoga).
► Growth in lottery ticket sales within casino market
areas once mirrored statewide growth – now well
below growth outside of casino market areas.
► Negative impact on lottery ticket sales could be
15% of VLT net revenue.
Notice that 2006 New York VLT net revenue of $424 million was just 6.7% of lottery
ticket sales. When nearly a half-billion dollars is just 6.7% of something, that puts
lottery ticket sales into perspective – it’s a huge number.
The New York racetrack casinos discussed here are relatively small compared to
those coming online around New York City. New York Metropolitan Area casinos
will generate far higher revenues than New York’s other racetrack casinos and
could have a larger financial impact on lottery ticket sales. So, the financial impact
to-date of VLTs on lottery ticket sales merits attention.
In New York State, lottery ticket sales and racetrack casino revenues benefit
education. 2006 NY Lottery ticket sales, just in, were $6,665,936,158.
Charles Vickery
3
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
This map shows gaming locations in New York and surrounding states. Red dots
show gaming locations. The larger the red dot, the more machines that exist or
have been proposed. New York has about 250 off-track betting locations (OTBs),
separated into six OTB regions, which are color-coded on the map.
Charles Vickery
4
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
This map of New York shows the percent change in lottery ticket sales by zip code
relative to average during 2003 compared to 2000. During this period, average
lottery ticket sales in New York increased by 41%. Red areas on the map show zip
codes with at least $5,000 in annual lottery ticket sales and where lottery ticket
sales grew by at least 41%. Blue areas show zip codes with at least $5,000 in
annual ticket sales and where ticket sales grew by less than average. The dark
blue markers show existing and proposed casino locations (as of 2005), identified
by name on the previous map.
Notice that the blue and red zip codes are evenly distributed and casino locations
are as apt to be near areas of high growth (red) as low growth (blue). On the next
map, there are more blue areas of relatively low growth in lottery ticket sales,
especially around casinos.
Charles Vickery
5
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
This map shows the percent change in lottery ticket sales by zip code for 2005
compared to 2003. During this time, lottery ticket sales grew by an average of
10.8%. Red areas show zip codes with at least $5,000 in annual sales and at least
average growth. Blue areas show zip codes with at least $5,000 in annual sales
and below average growth. Note that there is a lot more below average growth
north of New York City and most casinos (blue dots) are in areas of below average
growth in lottery ticket sales (blue). New York’s racetrack casinos first opened in
January, 2004.
Charles Vickery
6
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
These maps show growth in lottery ticket sales relative to casinos in New York and
may make the previous point more clearly. If you point to any red areas on the top
map, lottery ticket sales within a 10-mile radius of that point exceeded 18% between
2001 and 2003 (average change during this period was 25.0%). Blue areas on the
top map indicate that lottery ticket sales grew by less than 18% within a 10-mile
radius. Most casinos fell in areas of relatively strong lottery ticket growth between
2001 and 2003.
The bottom map shows the same information for 2003 vs. 2005, after several
racetrack casinos were introduced. Red areas indicate that lottery ticket sales
growth within 10 miles exceeded 7% (average change during this period was
10.8%). Blue areas indicate that lottery ticket sales within 10 miles grew by less
than 7%. Most casinos fell in areas of relatively weak lottery ticket sales growth
between 2003 and 2005.
Casinos have had the effect of dousing growth in lottery ticket sales, which we’ll see
in the numbers in a minute. Some might wonder if these differences in growth rates
are due to the nature of casinos being near areas of concentrated populations –
perhaps urban areas experienced different economic circumstances than more rural
areas. However, if you look at the center of the bottom map, the blue dot is Turning
Stone Casino. Just to the west of that is Syracuse, a large urban area that
experienced strong growth in ticket sales. South of Syracuse on that map, along
the NY/PA border, is a yellow triangle representing the future location (now
operating) of Tioga Downs, which also experienced strong growth in ticket sales.
Finally, there was strong growth in lottery ticket sales in the NYC area, which didn’t
Charles Vickery
yet have casinos.
7
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
This graph shows the percent change in lottery ticket sales compared to the prior
year relative to New York’s first racetrack casino, Saratoga Gaming & Raceway.
Four bars are shown for each year, comparing growth to the prior year. The blue
bar, to the left of each year, shows growth in lottery ticket sales within 25 miles of
Saratoga Gaming. The red bar shows growth 25-50 miles away. The yellow bar
shows growth at least 50 miles away. The green bar shows the growth rate for all
of New York.
Notice that growth within 50 miles of Saratoga, and certainly within 25 miles of
Saratoga, mirrored state-wide growth during 2001-2003. Saratoga Gaming and
Raceway casino opened in January, 2004. During 2004, growth in ticket sales
within 50 miles of the casino were very low. While statewide growth had slowed
considerably, it was more notable around the casino. Differences still existed in
2005. Similar patterns existed for New York’s other racetrack casinos.
Charles Vickery
8
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
New York Racetrack Casinos
VLT Net Machine Revenues Since Inception
Week Ending 01/31/04 thru Week Ending 01/06/07
Racetrack
Casino
Opened
Week
Ending
Net
Machine
Revenue
Aid to
Education
Percent to
Education
Saratoga
01/31/04
$302,181,106
$165,616,283
54.81%
Finger Lakes
02/21/04
$214,458,916
$116,565,586
54.35%
Fair Grounds
03/20/04
$107,835,820
$58,083,618
53.86%
Mighty M
07/03/04
$177,918,746
$95,119,255
53.46%
Batavia
05/21/05
$39,121,041
$19,560,513
50.00%
Tioga Downs
07/08/06
$21,521,246
$10,760,618
50.00%
Yonkers
10/14/06
$55,082,289
$29,896,901
54.28%
Vernon Downs
10/28/06
$7,722,775
$3,861,387
50.00%
All Locations
01/31/04
$925,841,939
$499,464,161
53.95%
There are a lot of numbers on this chart, mainly for the record. I’ll discuss just a few
of them. This shows the names of New York’s racetrack casinos that have opened,
including the week opened, net machine revenue to-date and aid to education.
Total net machine revenue to-date (January, 2004 through the first week of
January, 2007) is $926 million. Nearly a half-billion has gone toward education, or
54% of net machine revenue, excluding New York Lottery’s administrative costs.
Net machine revenue, as used here, is the amount remaining after paying winners
and before further revenue distributions.
Charles Vickery
9
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
New York Casinos That Opened in 2004
Annual NY Lottery Ticket Sales within 50 Miles
($US Millions)
2005 2004 2003 2002 2001 2000
Finger Lakes
338
332
331
318
274
240
Buffalo Raceway
429
423
425
423
370
337
Seneca Allegheny
159
159
162
160
140
126
Saratoga Gaming
338
330
327
306
259
227
Monticello
324
319
306
286
248
219
Combined Total
1,588 1,562 1,550 1,493 1,290 1,149
2005 lottery ticket sales within 50 miles of these locations were 25% of statewide sales,
down from 28.2% in 2000.
This table lists New York casinos that opened during 2004. Seneca Allegheny was
an Indian casino and the others were racetrack casinos. This table lists combined
NY Lottery ticket sales within 50 miles of these locations. Lottery ticket sales within
50 miles of these locations was $1.6 billion during 2005, represented 25.0% of
statewide sales. These same areas accounted for 28.2% of lottery ticket sales in
2000.
Charles Vickery
10
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
New York Lottery Ticket Sales
Relative to Distance from NY Casinos
That Opened During 2004
($US Billions)
NY Total
% Change
Less than 50 Miles
% Change
At least 50 Miles
% Change
2005
2004
2003
2002
2001
2000
6.36
6.02
5.74
5.36
4.59
4.07
5.65%
4.91%
7.07%
16.77%
12.83%
1.59
1.56
1.55
1.49
1.29
1.67%
0.80%
3.85%
15.75%
12.25%
4.77
4.46
4.19
3.87
3.30
7.04%
6.43%
8.32%
17.17%
13.06%
1.15
2.92
This table lists New York Lottery ticket sales relative to distance from NY casinos
that opened during 2004, as listed on the previous slide. Sales are shown in billions
of US dollars.
Total NY lottery ticket sales, summarized on the first two lines, were $6.36 billion in
2005, representing a 5.65% increase compared to 2004.
Lottery ticket sales within 50 miles of casinos that opened during 2004 are
summarized on the next two lines. These sales were $1.59 billion in 2005,
representing a 1.67% increase compared to 2004.
Sales at least 50 miles away from these casinos are shown on the final two lines.
These sales were $4.77 billion in 2005, representing a 7.04% increase compared to
2004. Compare the growth rates at least 50 miles away from these casinos to
those within 50 miles. Looking at these numbers, it seems possible that sales within
50 miles of these casinos were at least 3% below expectations. If that is a fair
assumption, then lottery ticket sales within 50 miles of these casinos were about
$45 million below expectations during 2005. This represents just 0.71% of statewide lottery ticket sales, but 15% of VLT net revenues at these locations.
These relationships are unproven here, but merit further study to better understand
the total contribution of VLT revenues to education. How much of VLT revenues
represent new money for education as opposed to a transfer from lottery ticket
sales to VLT net revenues.
Charles Vickery
11
Impact of VLTs on Lottery Ticket Sales
in New York
January 12, 2007
Thank You
Charles Vickery
273 E. Mt. Vernon St.
Oxford, PA 19363
(610) 932932-4167
[email protected]
January 12, 2007
Copyright © 2007 Charles Vickery
Charles Vickery
12