Online lotteries: A scramble to gamble

By , agencyfaqs! | In | October 20, 2003
As more players see merit in venturing into the online lottery business, the future of the one-and-a-half-year-old industry seems to lie in a quick conversion from the paper lottery system to the online version

When Playwin, the online lottery brand of the Subhash Chandra-promoted Essel Group, took its first tentative steps in March last year, the novelty of participating in a draw on television, was too good to resist. Here was a concept that was raking in close to $130 billion in turnover across 100 countries, and Chandra wasted no time in tapping the potential of the Indian market, estimated to be in the region of Rs 30,000 to Rs 50,000 crore.

Of the 13 lottery-playing states in the country, bulk of the business comes from Kerala, West Bengal, Karnataka, Maharashtra, Punjab and Haryana (the balance in the list of 13 includes the six northeastern states and Goa). However, much of the business emanates from the paper lottery sector with online lotteries yet to corner a significant market share.

Playwin set foot on the strength of its licence to market and distribute the online lottery of the government of Sikkim and started operations with a weekly game called Super Lotto, carrying a Rs 200-crore jackpot. Subsequently, daily versions of the game were also launched, however, Playwin, which is controlled by Pan India Infravest, went on to acquire licences for the states of Karnataka, Maharashtra (which was revoked) and Arunachal Pradesh with Mizoram being its latest addition.

Soon to follow were corporate entities such as Essar (under the brand name Fortune), Shapurji Pallonji group (Dhan Dhana Dhan) and Smartwin, promoted by Chennai-based Santiago Martin who controls SS Music and has a thriving paper lottery business. Indeed, as an analyst points out, Martin of Smartwin is the only "pure player" to have migrated to online lotteries with others being first-time entrants.

A year and a half since staring operations, Playwin, according to Sanjay Das, CEO, Pan India Infravest, is looking to touch Rs 1,000 to 1,100 crore by the end of the current financial year. "As on March 31, 2003, we stood at Rs 660 crore," he says.

Essar, on the other hand, which launched operations at the end of last year (it has the licence for the state of Nagaland), is looking at a turnover of Rs 750 crore in the first 12 to 18 months from the time of going national. "Currently, we are restricted to the states of Nagaland, West Bengal and Kerala," says Amit Misra, head - corporate affairs and communications, Computer Aided Information and Research Services or CAIRS, which controls the online venture. "We plan to go national in the coming months," he states.

Typically, online lotteries are a high-investment business with project break-even taking anywhere between three to five years from the time of commencement. A sound distribution and marketing strategy coupled with constant innovation in games is the cornerstone of the business with potential increasing as more number of people especially in socio-economic classes ABC start indulging in the pastime of playing lotteries.

"Traditionally, lottery-playing has been restricted to the lower strata of society with SEC D making up 80 per cent and E constituting the balance 20 per cent," says AV Suresh, CEO, Dhan Dhana Dhan Infotainment. "Potential clearly exists, if SEC ABC also join the ranks of playing the game," he says. Misra of CAIRS adds, "Monies can come only when lottery-playing is omnipresent and acceptable to all sections of society. The fact is that the online version is the fairer form of the game, transparent, tamper-proof and entertaining."

Apart from the issue of acceptance and conversion to the online version, technology plays a critical role in the business. Playwin, for instance, has tied up with US-based ILDS for procurement of technology while Fortune and Dhan Dhana Dhan have turned to Editec in France and Winsytems in Spain, for the same.

Playwin terminals far outnumber those of its rivals with more than 4,200 retail outlets connected via VSAT to the central server, claims Das. Fortune has 1,500 retail outlets to Dhan Dhana Dhan's 1,000, which has licences for the states of Arunachal Pradesh and Meghalaya. Smartwin is also a licensee in these states.

According to Misra, acquisition of retailers is a key issue with most attempting to bring down deposits as more players step in. "Omnipresence demands a string of retailers and as competition increases, retailers are attempting to bring down deposits," he says.

Besides the existing four, Videocon's V1, Modi group's Sunshine and Apollo group's Lottus are set to make a splash. Lottus, incidentally, has been launched in Kerala last month with plans to gain ground aggressively.

The next step in the evolution process, besides expansion and consolidation, is to go mobile, which is a key strategy to penetrate the higher SECs. "We would like to leverage our technology and captive base of mobile subscribers (Essar operates the Hutchison-Essar telecom business in 11 circles) to achieve this," says Misra.

Playwin, meanwhile, set the ball rolling late last year, when it tied up with Orange and BPL in Mumbai to provide the Sikkim Super Lotto to its subscribers. Currently, the company is fine-tuning its distribution and marketing mix with an additional infusion of Rs 100 crore. "We have invested Rs 450 crore so far and plans are in place to increase the number of terminals to 10,000 in the next eight to nine months," adds Das. © 2003 agencyfaqs!

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