New Keno Game Fails to Hit Jackpot : Lottery: Lackluster sales are hurting overall revenue projections. Agency director Sharon Sharp attributes the poor performance to a lack of retail outlets.

Keno, the new casino-style game of chance that state officials had hoped would revitalize stagnant lottery sales, has neither hit the jackpot with gamblers nor produced the sharp revenue gains expected.

As a result of the game’s lackluster performance, overall California Lottery sales are well below projections, raising concerns that the agency may either have to cut back severely on expenditures or risk overspending its budget.

Since Keno’s debut in mid-November, its weekly sales have held steady at about $7 million--roughly a third of what had been projected.

Even worse for the lottery, Keno sales have drawn players away from some of the other games--including Fantasy Five, Decco and Daily 3--creating a drop in revenues from those games.

Director Sharon Sharp acknowledges that Keno sales have been disappointing, but says that is because the lottery has not been able to market the game in enough retail outlets, especially bars and restaurants.

“You have to understand what’s happened,” she said. “We get calls every day from people saying: ‘Where can we play Keno?’ Sometimes there is a whole ZIP code area where we have only one social place where you can play Keno.”

For the fast-action game to be successful at an outlet, Sharp said the lottery must install a television monitor that flashes the winning number combinations every five minutes.

Officials said they had hoped to have monitors in 8,000 retail establishments throughout the state by now; instead, they have been able to place them in about 5,600 locations. Installations have been slow, Sharp said, because the lottery has tried to put Keno in a large number of locations that have never sold lottery games, which means computers and specialized telephone lines have to be installed.

“The success of Keno depends on location, location and location,” she said. “Not very many people say: ‘Hey, let’s go out and play Keno tonight.’ They play Keno because they happen to see the monitor and happen to realize the game is there and it’s fun to play.”

Because Keno is not selling as well as expected, the lottery is also failing to meet sales projections, which call for it to earn at least $1.9 billion for the 12-month period ending June 30. If sales continue at the present pace, the lottery will earn about $1.7 billion by June 30--still $400 million higher than last year.

The earnings have a direct bearing on agency expenditures, which under California law cannot exceed 16% of sales. Sharp conceded that because expenditures are based on sales projections, she may soon have to order cutbacks if there is not a strong upswing in revenue.

“It’s something that we watch constantly now,” she said.

Sharp said she believes that Keno is the kind of game that catches on “over time.” She is hopeful that sales will increase markedly by spring.

But Larry Love, publisher of a weekly newsletter for lottery players, said Keno has not captured players’ imagination because of its prize structure: “There is not enough money being paid back to players in the lower prize categories.”

That is especially true, he said, because in the eight-week history of the game, no player has won the top jackpot by selecting 10 of the winning numbers.

Sharp said the lottery plans to make adjustments in the prize structure of Fantasy Five, but not in Keno.

“Fantasy Five has been a disappointment, so we’re going to change it as soon as possible,” Sharp said, adding that the top prize in the game will be reduced so that players can earn more in the lower prize tiers.

Players who hit the Fantasy Five jackpot earn about $200,000. Under new prize structures being considered, players would receive only about $45,000 or $32,000. However, second- and third-level prizes--now paying about $100 and $3--would jump to about $469 and either $19 or $24.

To play Fantasy Five, gamblers pick five numbers from a field of 39. They win prizes if they pick all five, four or three of the numbers. They get a replay if they pick two of the numbers.