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Tue January 7, 2014
The Sidebar: Is Keno The Next Big Bet For The N.H. Lottery?
On a recent afternoon at the Common Grounds Cafe, 200 yards from the New Hampshire border in Methuen, Mass, a handful of men sit along a short counter or at several tables in the back of the cafe.
Eyes moving back and forth from their pink and white betting slips to two wall-mounted video monitors, they wait for the next drawing of a popular electronic lottery game called Keno.
“We’ve got some regulars who come in almost every day,” said Shane Bernard, who runs the cafe with his parents. “And we see a lot of people on their way to work, they’ll play 30 games and come back later in the day or go home to check the numbers on their computer.”
Common Grounds sold about $6 million worth of tickets last year, making it one Massachusetts’ top lottery retailers. Keno accounted for about a third of those sales. Bernard, who lives in Salem, figures most of his customers are from New Hampshire, which is why some lawmakers want to bring the game to the Granite State.
Rep. Keith Murphy, R-Bedford, and owner of Murphy’s Taproom in Manchester, is the lead sponsor of HB 485, a bill that would legalize Keno in bars and restaurants. Unlike casino gambling, which Murphy said would hurt local bar and restaurant owners, Keno would help these mostly small businesses by giving patrons an incentive to stick around and spend more on food and drinks.
“It’s not something we want at Chuck E. Cheese,” Murphy said. “But if consenting adults, out having a drink, find pleasure in this activity, they should be able to do it.”
Related Story: Keno Bill Sets Aside Funds to Treat Gambling Disorders
Charlie McIntyre, executive director of the New Hampshire Lottery Commission, predicts that 250 bars and restaurants with liquor licenses would adopt Keno. Annual sales would reach more than $43 million by 2015 and net close to $9 million a year for the state’s schools.
Bringing Keno to New Hampshire would capture some of the money the state’s residents already wager on the game. Six of the top 10 Keno licensees in the Bay State are along the New Hampshire border, and McIntyre estimates Granite Staters account for 3 percent of Massachusetts Keno sales, meaning they spent about $24 million last year.
McIntyre said adding Keno to the lottery’s mix would not represent a significant expansion of gambling in the Granite State - home of the nation’s oldest lottery, but where repeated efforts to legalize slot machines and table games have failed.
“For us, it’s more of a baby step, the natural next thing in the tool belt,” said McIntyre, a former deputy director of the Massachusetts State Lottery. “A lot of folks from New Hampshire already do it, they just do it someplace else.”
DOUBLING DOWN IN THE BAY STATE
A staple of casino lounges and restaurants, Keno is a multi-number lottery game similar to the draw games already offered by the New Hampshire Lottery. The difference is that numbers are drawn not once or twice a day or weekly, but 12-15 times an hour.
Players pick one or more numbers, or spots, between one and 80. Spots are recorded on a betting slip, which is presented to a lottery agent or fed into a machine, along with the player’s wager. Every four or five minutes, a computer randomly generates 20 numbers and displays them, one by one, on a video monitor. Players win by matching all or some of their spots to the computer generated numbers. The more matches, or “catches,” the higher the payout.
Lotteries in 15 states and the District of Columbia have adopted Keno, with Connecticut set to begin play in 1,000 locations later this year. The Maine and Vermont lotteries are also prepared to introduce the game if lawmakers give the go-ahead.
But no state has taken to it quite like Massachusetts. Of the $3 billion spent in the U.S. on Keno in fiscal year 2013, more than a quarter - $800 million - was wagered in Massachusetts. Per capita betting on the game in the Bay State is $120, versus a national average of $3.
Beth Bresnahan, director of marketing and communications for the Massachusetts State Lottery, said Keno accounts for roughly 16 percent of the lottery’s overall sales, second only to instant scratch games. “We see Keno and its growth over the last 20 years as quite a success story,” she said.
Indeed, to capitalize on Keno’s popularity, Massachusetts lottery officials have steadily expanded the game’s reach.
In 1996, after complaints that Keno was too ubiquitous in some communities, lawmakers began requiring a public-comment period before the lottery commission could issue a license. They also capped the number of licenses at 1,800 and restricted new ones to so-called pouring establishments - bars and restaurants that serve alcohol.
But, when budget shortfalls forced lawmakers to begin diverting lottery aid away from cities and towns to the general fund, the state lottery commission launched a series of “strategic enhancements” aimed at attracting new players and keeping existing ones engaged.
In 2003, the commission reduced the interval between drawings from 5 minutes to 4 minutes. They also allowed betting to begin at 10 a.m. most days, which added 22 hours of Keno drawings each week. In 2005, after a statewide smoking ban took effect at bars and restaurants, lottery officials introduced a “multiplier,” called Keno Bonus, which allows players to double their wagers.
Revenues rebounded, but the gains were short-lived. When an audit of lottery operations showed Keno sales were off $35 million in the wake of the smoking ban, auditors recommended that lottery officials look for ways to generate sales from people who don’t go to bars.
In 2007, the lottery commission launched a race-car themed version of Keno called the Daily Race Game. The game started every four minutes, alternating with regular Keno drawings on a separate monitor. When revenues fell short of projections, the Daily Race’s theme was changed to horse racing, and the game was expanded from 200 pouring establishments to 1,500 locations, including pizza shops and family restaurants.
Around the same time, lottery officials introduced Keno-to-Go, which allows players to check results on the lottery’s website. The new game stopped short of online gambling by requiring players to purchase betting slips from lottery vendors. But it expanded sales beyond pouring establishments to every lottery retailer in the state.
Today, bets on Keno can be made at 5,235 locations in Massachusetts - more than three times as many as when the game was first adopted in the Bay State. About a third are bars and restaurants with liquor licenses, although pouring establishments accounted for 49 percent of sales last year.
Players in the Bay State can now wager as much as $1,200 on a single, 30-game betting slip, starting at 5 a.m. seven days a week. And last June, lottery officials introduced yet another new version of Keno: Jackpot Poker, in which the payout is based on the best five-card hand from the player’s “catch.”
The “strategic enhancements” have certainly had the desired impacts: Since 2004, the percentage of Massachusetts adults who play Keno has more than doubled to 17 percent.
PLAYING THE ODDS IN CONCORD
HB 485, which was approved by the House Ways and Means Committee in November, will come to the floor later this month. If it gets past the full House, where gaming proposals seldom fare well, it faces an uphill battle in the Senate, which has generally supported expanded gambling; when presented with a House bill that would have created a committee to study Keno last year, the Senate rejected it.
“They would think, quite reasonably I think, that it would be competition for the casino that they want,” said Rep. Susan Almy, chair of the Ways and Means Committee and one of five Democrats who voted against the Keno bill (five Democrats supported it, along with nine Republicans).
Perhaps surprisingly, opposition to the bill by casino opponents has been muted. Neither the Coalition against Expanded Gambling nor the New Hampshire Restaurant and Lodging Association testified against HB 485 when they had the chance, and neither organization has taken a formal position on the bill.
The only testimony opposing the bill before Ways and Means was offered by Robert Kay, vice president of the board of the New Hampshire Council of Churches, which represents 10 religious denominations. He told the committee that, while some of the group’s members have come to accept the lottery and charitable gaming, they all oppose video lottery games such as Keno.
“Electronic Keno machines are clearly video slots, allowing continuous real-time machine gambling with wager results every few minutes,” Kay told the committee. “Gamblers can and do wipe out paychecks, family food budgets and worse in one evening at Keno locations, which over time would be located within a very short distance from virtually every New Hampshire household.”
Almy and other critics say they are worried that HB 485 could allow for more Keno in New Hampshire than residents would prefer. The bill clearly stipulates that licenses are restricted to establishments with liquor licenses, and it limits drawings to between 11 a.m. and 11 p.m.
The bill also spells out that 70 percent of sales - an estimated $30.6 million - would be paid out in prizes. Establishments that offer Keno would keep 8 percent of the proceeds, and another 1 percent would be earmarked for problem-gambling education and treatment.
Related Story: Keno Bill Sets Aside Funds to Treat Gambling Disorders
But there is no provision for communities to opt out of having Keno in their local bars and restaurants. And some key rules, such as the interval between draws and how much can be wagered, have been left to the lottery commission. Moreover, there is nothing in the bill that would prevent lottery officials from introducing new, Keno-style games without legislative approval.
McIntyre, however, said rules for the game will go through the Joint Legislative Committee on Administrative Rules, which he described as “an engaged and thorough process.” And he doesn’t anticipate the lottery will need to make any “enhancements” to the game in the foreseeable future.
“Certainly with any type of game we offer our players, in the long term, we always like to refresh a product and introduce new features,” he said. “But that is long term and years down the road.”
Murphy, the lead sponsor, said HB 485 specifically limits the game to bars and restaurants in an effort to preclude the expansion that’s taken place in Massachusetts. Any proposals to change that, he said, “will have to go through the whole process again.”
And, alluding to the Senate’s all-but-certain opposition to the bill, he added, “I don’t think that will be any easier than getting it through in the first place.”