BUSINESS

Illinois Lottery cancels Northstar contract seven years ahead of schedule

TAGs: GTech, Illinois, Illinois Lottery, Iowa, Iowa lottery, Northstar, Scientific Games

illinois-lottery-northstarThe CEO of the Iowa state lottery has become the latest to suggest that the future lies in online sales. On Monday, Terry Rich told the Gazette that lottery players wanted “to have that convenience, and that desire or convenience factor continues to increase.” Rich said this desire was most prevalent in younger demographics, i.e. “the 21 to 30 age group that uses only cellphones.” However, Rich cautioned that he personally didn’t sense there was sufficient desire for online sales options for the state “to jump into it head first.” To date, only Illinois, Minnesota and Georgia have allowed their lotteries to offer online sales.

Meanwhile, Illinois has decided to bring a premature end to its experiment with private management of its lottery. In 2010, the state inked a 10-year deal with the Northstar Lottery Group – a joint venture of GTECH, Scientific Games and Chicago firm Energy/BBDO – to manage the affairs of the Illinois Lottery. However, the deal required Northstar to meet annual revenue growth targets, a goal Northstar has repeatedly failed to attain. Three years into the deal, Northstar was reportedly $716m shy of its projections, for which it has already paid the state $60m in penalties.

On Friday, Gov. Pat Quinn’s office confirmed to Chicago Business that the state was scuttling the Northstar contract seven years ahead of schedule. Quinn spokesman Grant Kinzman said the state “demands every state contractor be held accountable for their performance” and Northstar was no exception. State senate president John Cullerton echoed this critique, saying Northstar “haven’t delivered” as promised. The governor’s office didn’t offer any guidance as to whether Illinois would revert to state-run management of its lottery or seek a new private manager.

Northstar execs have yet to comment on the report, although both parties have reportedly been holding talks over the summer months about ending the relationship. It remains to be seen what fiscal ramifications will arise from this divorce, although with both parties apparently keen to move on, disengagement may be possible with a minimum of acrimony.

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