June 12, 2017

Keno puts up $70M in first year

HBJ PHOTO | Matt Pilon
HBJ PHOTO | Matt Pilon
Kelly’s on Campbell owner Sue Kelly with regular customer Charlie Sarzynski, who was up more than $400 playing Keno on a recent Friday evening.
HBJ PHOTO | Matt Pilon
At Bella’Gio lounge in Berlin, bar manager Louise Jacques and her daughter, bartender Bianca Jacques.
HBJ PHOTO | Matt Pilon
Winning numbers of a Keno draw shown on screen.

When West Haven bar owner Sue Kelly decided to start selling Keno last April she had reservations.

Kelly's on Campbell is a neighborhood bar, with lots of loyal regulars. Kelly likes to think of it as a living room for her patrons.

"I wasn't sure I wanted an onslaught of people I didn't know," said Kelly, a Yale New Haven Health nurse by day who co-owns the watering hole with her husband Kevin Kelly.

Now, just over a year later, the decision has paid off.

During Keno's first year of operation in Connecticut — from April 2016 to April 2017 — Kelly's on Campbell sold $665,000 in Keno tickets, making it the highest grossing Keno seller among the Connecticut Lottery Corp.'s new retailers, many of which are bars and restaurants, according to state officials.

"It has been [a boon] because the bar business itself is very tough," Kelly said. "It's made a huge difference."

Retailers receive a 5 percent commission on gross ticket sales, which for Kelly's amounts to approximately $33,000, plus additional bonuses, including 1 percent on the prize value of every winning ticket between $1 and $599 cashed on-site.

The strong sales encouraged Kelly to install a second flatscreen TV — paid for by the Lottery Corp. — for the bingo-like game.

In addition to the 2,900 retailers that sell Keno in Connecticut, the game's inaugural year has also provided a boost to the Lottery Corp. and state government, generating $70.1 million in revenue in its first year of operation, according to figures provided to the Hartford Business Journal.

Of that amount, $13.6 million goes to the state's general fund, helping to bolster revenue at a time when Connecticut faces multibillion-dollar deficits over the next two years.

Keno was adopted by the legislature in 2015, but didn't become operational until April 2016. The game is performing $5 million ahead of the lottery's current annual budget, according to officials, and is also outpacing some previous revenue projections.

In 2015, as lawmakers were weighing Keno legalization, lottery officials testified that they hoped to hit $70 million in gross sales by the game's third year.

The results are a bright spot for the lottery itself, whose longtime CEO Anne Noble resigned last year in the wake of the Department of Consumer Protection shutting down the lottery's 5 Card Cash game, after it was discovered that some retailers had been able to identify winning tickets and keep them for themselves. The cheating scandal led to more than a dozen arrests, according to published reports.

Now, lottery officials are hopeful Keno can grow and continue to prop up overall revenues, which are at peak levels but face threats from expanded casino gaming.

Chelsea Turner, interim CEO of the lottery, said in an interview that Connecticut's per-capita Keno revenue ranks eighth among the 15 states that offer the game.

"We think there's tremendous growth potential in Keno," Turner said. "We've only begun to scratch the surface."

Keno has allowed the lottery to add a new base of retailers — restaurants and bars — to its more common mix of convenience stores and gas stations.

Approximately 500 of the 2,900 Keno retailers in Connecticut have TV monitors that display the game, a number lottery officials are working to increase since they believe monitors lead to higher sales volumes.

Nearly 200 of the 500 Keno retailers with monitors are eateries and bars.

Among them is Berlin's Bella'Gio lounge, which began selling Keno and other lottery games last year.

Bar manager Louise Jacques said most customers have reacted positively to the game's availability.

"There's people that come in here like clockwork and they have fun spending $10, $20, $30, $40," Jacques said.

Bella'Gio sold approximately $29,000 in Keno tickets between July 2016 and late April, according to lottery data.

Jacques said there are residual benefits: Keno might keep paying customers in their seats a bit longer.

"I think it's brought in [extra] business," she said.

Michael Hunter, the lottery's chief operating officer, estimated that there are another 1,500 potential restaurants and bars that could sell Keno in the state, though he admits the game isn't a match for every establishment.

By the numbers

To play Keno, bettors fill out a slip, indicating the number of games they want to play and the amount to be wagered per game (between $1 and $20). They also choose how many numbers or "spots" (between one and 10) they want to try to hit out of a possible 80.

Every four minutes, the lottery's system randomly selects 20 numbers, which are displayed on all Keno screens and the lottery website. Bettors can win depending on how many of their numbers match those on the screen.

The largest single prize so far, $200,000, was won in Groton, when a bettor matched all seven of his selected numbers.

While Kelly's on Campbell has put up the biggest Keno numbers among new lottery retailers, the top overall Keno retailer in the first year was Newtown Convenience in Newtown, which sold approximately $1.2 million in tickets, according to officials.

As of last week, lottery retailers had sold nearly 11 million Keno tickets. Of the games played, 83 percent were for $1 or $2 wagers, and the average number of games played per ticket was 2.7, lottery officials said.

Turner points to those statistics to counter criticism from gambling opponents, who argue that lotteries are akin to a tax on the poor (or poorly informed) and can lead to addiction and even financial ruin for some.

The average Keno player is wagering a relatively small amount and spending less than 15 minutes playing, according to the lottery.

"I think there's a lot of misconceptions out there about Keno," Turner said.

However, not everybody is a small-stakes player.

At Kelly's, for example, some regulars have an appetite for larger wagers, Kelly said. Some might bet a few hundred dollars in a night.

To help those who might have a gambling problem, the lottery licensed the GameSense program, which promotes responsible gaming through messages on Keno screens and elsewhere. As of late February, all Keno retailers in the state also gained the ability to print Keno tickets with a gambling help line printed on them.

Bolstering revenue amid uncertainty

Despite the boost from Keno, lottery officials say they are expecting overall fiscal 2017 revenues to be lower than last year's record-breaking $1.23 billion.

Of that amount, $335.4 million was returned to the state's coffers.

It's not clear if Keno has hurt sales of other lottery games, Turner said, because there are many variables — from the economy to jackpot sizes — that impact the industry.

As of last week, the lottery was expecting to return $325 million to the state's coffers for the fiscal year ending June 30 — the second highest total ever, after last year.

Thomas Trella, director of portfolio strategy and analysis, said the lottery has seen some softening this year in its scratch ticket and Powerball sales, following an unusual spike last year.

Many other state lotteries saw similar increases in 2016, perhaps driven in part by large jackpots, he said.

"It was extraordinarily weird," said Lottery CFO Paul Granato. "We really can't put our finger on those."

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