Gaming wars: winners and losers

On August 1, 1987, a line of people curled out the front door of the Massey family pharmacy.

It was the first day of Lotto, and punters were lining up for a chance to win $360,000 - enough to buy almost three average homes in central Auckland back then.

"It was panic buying, bedlam - the hype was huge," sighs Chris Flaunty, recalling the good old days at his father's pharmacy.

These days it takes a $3 million draw to lure crowds to Mr Flaunty's two West Auckland Lotto franchises, set up in the past 10 years. Demand for the pale yellow tickets has weakened in the past year.

The Lotteries Commission earned $624.6 million from its five products - Lotto, Instant Kiwi, Daily Keno, Strike and Telebingo - in the 1999-2000 year, down $19 million on the previous year.

It is only the second earnings slump the state-owned organisation has experienced in its 13 years.

So why is the lure of the big Lotto win losing some of its appeal?

The commission says the ageing of the Lotto brand is mostly to blame, combined with greater competition in the leisure market from films, PlayStation and the internet.

It is planning a secret revamp of the weekly lotteries draw to revive its winning streak.

A facelift is well overdue, with long-departed Shortland St celebrities still promoting the game on television.

The commission wants to recapture the attention of its 25 to 45-year-old target market in the next financial year.

Options for Lotto include a combined draw with an Australian lottery, altering the odds, midweek draws or internet sales. The revamp is expected to be finished by July 2001. Other add-ons, such as sports betting and gaming machines, are also being considered.

A new television-based game will start next year to complement Telebingo, which has slumped in popularity since TVNZ shifted it from 8 pm to 9.30 pm.

This year the Lotteries Commission delivered $135.5 million to the Lottery Grants Board, $8.5 million less than the previous year.

While the commission blames ageing brands for the falling sales, others point to new entrants to the gaming industry.

In the past 11 years, almost 17,000 gaming machines have entered the market, mostly in bars and pubs, licensed by the Department of Internal Affairs.

Last year, punters spent $360 million on poker machines - not including those in casinos. This does not count money they may have put back into the machines after a win.

Four casinos have opened since 1995, and two more are on the way.

Casinos took a $294 million of the $1.2 billion New Zealanders spent on gambling in 1999, again not counting what people "reinvested" after a win.

Ralph Gerdelan, executive director of the Compulsive Gambling Society, views the latest financial result as a sign of Lotto "going down the tubes."

"With the advent of gaming machines, we've got an overheated market, a chronic oversupply of gambling, and that's going to make things difficult for organisations like Lotto."

But gambling is flourishing. New Zealanders spent $685 million more last year than in 1990.

Lotto and racing are benefiting from the increased spending, but not at the same rate as casinos and gaming-machine operators.

Auckland Racing Club chief executive Dave Lloyd remembers when a major race day at the Te Aroha club would attract more than 5500 people. These days a small provincial racing club would be lucky to get 1500 people on a big day.

Money spent on racing has been almost static since the 1987 sharemarket crash. Last year, $225 million was spent, not counting money bet again after a win. The figure 10 years ago was $230 million.

The TAB kicked off its own revamp programme around eight years ago, introducing a television channel. Other innovations have included sports betting, internet gambling and betting on international racing. These now contribute more than 26 per cent of earnings.

The facelift has helped the TAB keep a $200 million-plus chunk of gambling spending, but the advent of casinos and gaming machines has prevented it from increasing its share.

"Christchurch and Auckland casinos came into the market with a hiss and a roar, and most of them are still maintaining steady growth," said Trevor Garrett, chief executive of the Casino Control Authority. "They were offering something new."

But the real star performer has been the gaming machine market.

Last year, the coin-operated machines earned 23 per cent more than in 1998, compared with casinos' 20 per cent growth rate.

Internal Affairs hopes to complete a review of gaming policy by the end of the year.

Auckland University lecturer and gambling expert Peter Adams said gaming machines were more damaging to society than other forms of gambling because they were easily accessible. Once-a-week Lotto was one of the safer forms of gambling.



Mr Gerdelan said the Compulsive Gambling Society was lobbying the Government to give control of gaming machines to the commission.

John Markland, Internal Affairs' manager of gaming and racing policy, said the growth in gaming machines was largely responsible for the drop in the Lotteries Commission's earnings, although he agreed that Lotto's ageing brand had contributed.

"It's a pattern around the world for lottery sales to became static once the product has reached maturity."

The public also cut its Lotto spending after publicity last year about the $400,000-plus salary of commission head David Bale.

Mr Bale resigned after then-Prime Minister Jenny Shipley criticised his salary package.

"It gave the impression that the Lotteries Commission was nothing more than a wonderful trough for people to help themselves to," Mr Gerdelan said. "They may have permanently lost customer loyalty."

But Lotto shop owner Chris Flaunty is not too concerned by the game's falling popularity. Last week a customer splurged on $350 of Lotto products after a big win at Sky City Casino.

His biggest challenge is beating the competition. The Massey Pharmacy and Lotto store, still owned by his father, is the closest rival to his Westgate store.