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"The Government as a Predator: A Troubling New Role in Troubled Economies"
by Robert Goodman
Excerpt from Chapter 8 of The Luck Business
Reprinted with permission of the author. All rights reserved.
This could be your ticket out.
-An Illinois State Lottery billboard
in a low-income Chicago neighborhood
The proliferation of legalized gambling in America is probably the only example of a situation where government is not simply legalizing a potentially harmful situation, but is actually promoting it. As Chapter 4 demonstrated, governments did not decide to allow new gambling ventures in response to rising popular demands for more gambling. This is not, for example, like the repeal of Prohibition, where governments found itself responding to a popular political movement to legalize the business of producing and selling liquor.
In the case of gambling, it is the government which is explicitly trying to get people to participate more, through advertisements, media promotions, and public relations campaigns. It is the government which is expanding the availability of more addictive forms of gambling like electronic gambling machines. The result is a dangerous shift in the fundamental role of government-- from regulator of gambling to promoter of gambling. Governments are getting regulations designed to protect the public, spending millions on promotions and advertisements, and in some cases even subsidizing private gambling enterprises. In the process, they are also recruiting millions of people into gambling who have never gambled before.
This stands in stark contrast to the role of government, especially since the 1930's, as a protector of citizens through a host of laws and regulations designed to protect workplace conditions, health and safety, environment, civil rights, and so forth. In sponsoring more gambling, governments do not even require accurate social and economic impact statements about their expansion plans, the way they do in the case of potential environmental impacts of an expanding industry or the construction of a new highway.
In this new promotional role, the government finds itself in a strange and contradictory position which makes it difficult to carry out its role of protecting the public. While it once regulated gambling in order to guard against gambling operators who might take advantage of its citizens, the government's own growing dependence on gambling revenues puts pressure on state officials to increase advertising and relax regulations. A 1986 New Jersey Governor's Advisory Commission observing what happened in Atlantic City put it simply: "The more entrenched is gambling in the budget process, then the more successful the industry may be in causing the relaxation of regulatory policies and procedures with which they do not agree."
As far back as the 1950s, politicians argued that by legalizing gambling, governments would capture money that was already being bet illegally, eliminate the role of organized crime, and ensure that players weren't being cheated. Yet criminals never promoted their gambling operations the way governments now do with multi-million dollar advertising campaigns, public relations efforts, focus group research, and penetration studies. "No matter what you do for a living," says a Massachusetts Lottery advertisement, "there's an easier way to make money." And in contrast to the ventures of organized crime, government-supported gambling is given extensive free publicity through newspaper and TV stories about incredible jackpots, happy winners, and transformed lives.
The State as Dream Merchant
From a psychological perspective, people's ability to dream and to hope for a better life can be a very healthy and useful human attribute. It helps them persevere under difficult circumstances, and it can motivate people to change and improve their lives. But by enticing people to spend their money on fantasies, governments are preying on people's ability to dream and hope. Rather than providing real hope for economic improvement, public officials are promoting the illusion of economic improvement-- becoming deeply involved in finding new ways of manipulating people's desire for a more secure future. They are enticing people into taking part in what should properly be called the "pathology of hope." When a government agency, like the New York State Lottery, says its players "whimsical fantasies" are being given "the hope of fulfillment" or that its gambling products offer people a chance to dream of paying off their debts or to dream about paying for their children's education, then governments have gotten themselves into playing a new and very dangerous role.
By 1994, state lotteries were spending over $350 million a year to advertise their products. In 1991, the California Lottery had become the largest purchaser of advertising in Los Angeles County. Gregory Ziemak, Director of the Kansas Lottery and the former director of the Connecticut State Lottery, reflected on government's schizophrenia of trying to both regulate and promote gambling. In his Connecticut job, Ziemak says, he was criticized by some legislators and community leaders for his advertisements. "They said just the fact that you're advertising the lottery is wrong." But the bottom line of keeping his job ultimately depended on pleasing politicians who were judging him by the revenues he generated. "My success or failure," he said, "was how sales were. Were sales better than last year, or were they worse?"
One of the most effective publicity techniques to promote more lottery play, according to Ziemak, was getting the media to produce stories about the winners. "People see a picture of a Lotto winner in the paper," said Ziemak, "You know he's a guy like you; he works in the shop, he has kids, he's going to use the money to put the kids through college. You say, 'You know maybe I could win'." When some winners shun this publicity, lottery officials find ways of persuading them. According to Ziemak:
What we tell the winners is, look you won $5 million, that's news. It's public information whether you agree to talk to the press, or allow us to release it to the press, we're still going to release your name, your town, and the amount won. And if we do that the press might call you because you're not saying anything. Sometimes they get more interested. What we suggest you do, is go downstairs and talk to them.
Government promotion of its gambling products not only persuades people to gamble at legal operations, but, according to William Jahoda, a former gambling operator for organized crime in Chicago, also benefits illegal ventures. "[Public] agency marketing and media advertising blitzes promoting gambling," he told the Chicago Gaming Commission, give people the perception that gambling is a "healthy entertainment." Jahoda characterized the public officials involved in promoting government gambling ventures as "our unwitting front men and silent partner."
Manipulating Psychological Needs
In finding new ways to stimulate more demand for their gambling products, government officials have become increasingly adept at manipulating player behavior through the use of sophisticated market research analysis, consumer surveys, penetration studies, and focus groups. They continuously monitor player attitudes and behaviors in order to design new sales pitches which are closely attuned to people's psychological needs and fears. One Massachusetts Lottery television ad focused on a real fear of many hard-core players-- that they won't play their number on the day it finally comes up. In the staged commercial, a newsman attempts to interview a number of distraught players who would have won on the day they forgot to play. Lance Dodes, the operator of a Massachusetts treatment center for problem gamblers, described such government-promoted ads as ones which lead to more problem gambling. "[Players] are terrified not to play their number," he explained, "and the Lottery preys on those fears."
Despite this obvious manipulation, in 1991 Jim Hosker, Kentucky's lottery director, said that lottery players tend to absolve government of responsibility for their losses. Since people know they are playing against enormous odds, he said, they tend to blame themselves and not the state when they lose. Their psychological reaction, according to Hosker, is, "I didn't pick the right numbers."
The goal of lottery advertising is not only to increase the amount of money that people gamble, but also to increase the number of people who gamble-- what those who market gambling call "expanding the player base." To accomplish this, lottery managers are constantly trying to find new ways of getting people to shift their spending away from other consumer products and services and into gambling at lotteries. As the marketing director of a Canadian lottery said, "We believe any promotion that can alter the regular purchasing habits of the consumer is viewed as significantly benefiting our long-term success."
According to Jim Davey, a former Oregon State Lottery director, "We're a market-driven organization and I mean we're going to go out and expand this business." The way to increase sales, according to Davey and other lottery managers, is to constantly change games. "Offer something that looks new," said Davey, who later became president of Automated Wagering International, an electronic gambling machine manufacturer. "At Christmas we do Holiday Cash. With Lucky Stars we play on people's astrological signs. We find that if you run two or three, four or five games at the same time, you'll sell more tickets."
The late Ralph Batch, director of several state lotteries and a pioneer in the industry, once described lotteries as "living things." "They have to be massaged," said Batch, "to retain the excitement of the public." The Director of Kentucky's lottery said his tickets needed to be aggressively marketed just like other consumer products. "You've got to come up with the 'Improved Ivory Snow' and the 'New and Improved Ivory Snow.' We've got to change the product. People get sick of anything." Eric Turner, executive director of the Massachusetts Lottery, similarly said his lottery's games must be advertised like other consumer products-- "People get tired of them over time," said Turner. In 1994, he predicted that if his agency was forced to eliminate its advertising budget, revenues could go down as much as 20 percent.
The Difficulties of Expanding the Gambling Market
But by the late 1980s lottery officials discovered that in spite of large expenditures for advertising and free publicity about winners of mega-jackpots, it was still difficult to generate ever-increasing amounts of betting. For most people gambling at unskilled games like lotteries is not inherently interesting. What does make this kind of gambling attractive is the possibility of winning money. High levels of play could only be maintained by state lotteries through aggressive advertising, and the continued infusion of higher jackpots, more frequent drawings, and new games. These enterprises have also come to depend on a small group of people spending larger amounts of money on the games. Nationally, by 1992, only 15 to 20 percent of lottery players accounted for about 70 to 80 percent of all sales.
When a lottery is initially introduced, it will typically bring a state vast amounts of new money in the first few year-- sometimes increasing revenues from 30 to 50 percent in a single year. But this initial euphoric rise is usually followed by much slower sales increases-- typically in the yearly range of 3 percent. According to Deloitte and Touche, an economic analysis and accounting firm that prepares studies for the gambling industry, lottery games tend to have "rapid product life cycle curves, approaching maturity quickly." Players become bored with these games and those who play for long periods get tired of not winning and stop playing. "The most successful lotteries," they reported, "counter life cycle maturity by changing the product mix, altering the product, and, in large part through marketing, providing the customer with a greater perception of value."
Lottery directors in the early 1990s, complaining of increased competition for the consumer's discretionary dollars, needed to find more innovative ways to expand their revenues. Jerry R. Crandall, Commissioner of the Michigan Lottery, told a group of gambling industry executives in 1992 that lotteries no longer had their "uniqueness and mystique," and that lottery agencies and their advertising agencies were having to work much harder than ever for any sales increases.
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