Scratch-Off Games Pale Against Big Lotto Pots
The runaway success of the state lottery’s scratch-off games may be overshadowed this year by computerized numbers games, offering jackpots so huge that they could whip Californians into a gambling frenzy.
Though unable to claim the first state lottery, Californians upheld their trend-setting reputation by making last year’s lottery’s start-up with $1 ticket games the most successful in industry history.
Players have gambled about $800 million since the Oct. 3 kickoff, highlighted by gala Hollywood-style ceremonies. About half of the revenue will be returned to them in prizes; about a third, $272 million, will go to public education, and the remaining 16% will be used for administration.
$2 Billion Annually
Total sales may near $2 billion annually after computerized lotto games are added by July 1 to the scratch-off games, which will continue after lotto starts, making the operation the nation’s largest legal lottery.
Lotto players will have store clerks log their $1 bets into central computers, using the world’s largest lottery computer system. Up to 12,000 terminals, scattered at businesses throughout the state, will be continuously linked via telephone lines.
Officials say that, initially, adults could place bets by picking six numbers out of a set field of numbers: 1 through 40 for example.
The lottery will pick the six winning numbers in a daily or weekly drawing. Top winners would be those who choose the winning numbers in the correct order.
Parimutuel System
Payouts are parimutuel in most states, which means that the size of the jackpot is determined by how many people enter. If no one wins the jackpot, the money is carried over to the next drawing.
Unless California officials decide to limit the carry-over amount, jackpots could build into the $100 million range, according to industry experts.
The numbers games will be aimed at maintaining Californians’ willingness to gamble on the lottery. They are traditionally added as interest wanes in the scratch-off games, which are sweetened with ever-greater prizes to hold as much attention as possible.
Lottery Commission Chairman Howard Varner says organizing the initial ticket games was “kid stuff by comparison” to the complexities that officials are encountering as they plan the numbers games.
12,000 Terminals
California envisions a 12,000-terminal system at a time when, worldwide, there are only 24,000 lotto terminals in existence. The largest single cluster currently is New Jersey’s 3,500.
The California lottery may eventually extend the numbers games into the home, as well, by adding equipment that would allow players to place bets in the central computer via telephone.
Officials, however, fear that they face a tougher task in educating residents about how to play the games as opposed to their counterparts in eastern lottery states, where there have been illegal numbers games for decades.
By late this year, millions of Californians will probably be playing lotto, but the true jackpot winner will be whoever gets the contract to create the computer system.
$200-Million Contract
Lottery Director Mark Michalko says the pact for manufacturing the computer terminals, setting up the network and maintaining it may total $200 million over four years and may be given to more than one company. It will be the largest contract awarded by the lottery.
Competition for the job is a virtual stampede compared to the maneuvering for the initial $40-million scratch-off ticket contract, for which Scientific Games of Georgia was the sole bidder.
Five firms have bared their financial souls in bids on the computer system, complying with controversial financial-disclosure regulations in the voter-approved lottery initiative.
Scientific Games, General Instrument Corp. of Maryland, Control Data Corp. of New York and International Totalizator Systems Inc. of San Diego are among the bidders.
International Totalizator sent three assemblywomen to Hong Kong last spring so they could view company equipment in action, capping a $275,000 battle by the bidders to influence legislation.
Bidding Disclosures
Most of the lobbying was aimed at supporting legislation that would have eased bidding disclosures, which must include the finances of officers, directors and shareholders of firms, their parent corporations and subsidiaries.
The rules are supposedly aimed at maintaining the integrity of the games but have been criticized as limiting competition.
In October, a technical error forced Gov. George Deukmejian to veto a disclosure-easing measure. Lawmakers are expected to resurrect the bill in early 1986, but too late to affect bidding on the estimated lotto games contract.
To meet its July 1 start-up of the lotto games, the Lottery Commission plans to tentatively select a contractor by next month.
The remaining bidder is Gtech Corp. of Rhode Island, the world’s leading supplier of lottery computer equipment, which counts among its shareholders the billionaire Bass Brothers of Texas.
Protest Filed
A competitor, Electro-Sport Inc. of Costa Mesa, which said it was unable to bid because its partner could not fully meet financial disclosures, filed a protest claiming the lottery’s bias toward Gtech had tainted the bidding process.
The company alleged that Lottery Director Michalko favors lotto game systems such as those supplied by Gtech, which won a contract in Ohio under guidelines Michalko helped shape when he was that state’s lottery attorney.
Michalko has denied any bias in the bidding process.
Electro-Sport also tried to convince a Superior Court judge to delay bidding by arguing that the Lottery Commission had unfairly exempted telephone companies from making the financial disclosures.
But the judge refused, saying that by delaying the entire process while he considered the issue would deprive schools of revenue expected from lotto games and disrupt other bidders’ plans.