appropriate metrics by which to measure impacts, and then provide a forecast for impacts under four main scenarios: (A) no impact of casinos on lottery growth rates; (B) impact with casinos being introduced in the three defined regions in the state (correlating to Scenarios 2 and 3); (C) impact should casinos only be introduced in the eastern portion of the state (correlating to Scenario 1); and (D) impact should horse and former dog racing facilities be granted slot machines in addition to one casino in each of the three defined regions (correlating to Scenario 4). Each scenario will be described in further detail later in this section.
Possible Approaches to Forecasting Impacts Having established the nature of declines in lottery sales in states affected by casinos, an approach to forecasting possible impacts in Massachusetts must be established. The Innovation Group considered two main factors in addressing the projections: (1) The multi-year trajectory of decline in growth rates described in the prior section; (2) A more immediate year-over-year decline in actual revenue (versus growth rates) in states as experienced in each year following the introduction of casinos. Summary Impact of States Showing Declines The chart below is an assessment of impacts in those states which saw direct revenue declines for the years following the induction of casinos into the state. These three states, Indiana, Illinois, and Delaware each witnessed either small growth or decline in year over year revenue from the first year a casino was operational (noted on the chart as introductory year). Notably, with the exception of Illinois, these were all small lotteries in total revenue. This may explain why Illinois saw the largest year over year growth in the introductory year and the smallest decline in revenue in Year 2. More important, however, than a single market, is the aggregate experience of the three states post the introduction of casinos. Where as many of the states experiencing declining growth trends after the introduction of gaming showed fluctuation, three states, identified below, showed remarkably similar patterns of decline and rebound in response to the legalization of casino gambling. As the below chart shows, Year 2 saw very similar decreases in revenue. The range for decline in this year was 2.2%, remarkably small in comparison to revenue changes in other years. Year 3 saw a rebound for Indiana and Delaware, of 15.2% and 12.0%, respectively. Noticeably, markets which saw two years of decline from the introduction of casinos were also those to see the largest growth in Year 4. Year 5 shows nominal movement in Illinois and Delaware, but a 14.5% decline in Indiana, potentially connected to its second wave of casino openings, primarily in the Chicagoland market.
Innovation Group Project #044-10
June 2010
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