In recent years, the Lottery faced Video Lottery Terminal (VLT) inventory shortfalls for many reasons. This led the Lottery to stop processing applications for new Video Lottery retailer locations and paused adding VLTs to current retailer locations. The Lottery has worked hard to address short-term inventory issues and develop a comprehensive plan to ensure the long-term sustainability of the Lottery’s Video Lottery Program.
Oregon Lottery plans to lift the pause on new applications in July and begin working on adding and removing VLTs to current retailer locations. With this policy direction, we are proposing rule changes that require approval from the Oregon Lottery Commission in June.
Proposed Rule Changes
- Raise the sales floor from $2,667 average dollars played per week per terminal to $10,000 per week per terminal. Lottery may remove a Video Lottery Terminal (VLT) if the average of $10,000 per week is not met. This rule was developed so Lottery can best manage VLT inventory and ensure they are placed to meet customer demand. The sales floor will not be used as the threshold for retailers to add. Lottery does not remove a VLT based on sales if a retailer only has one VLT.
- Repeal the pause on processing new Video Lottery retailer applications. Lottery is lifting the pause on processing new video retailer contract applications. Under the proposed rules, any interested and eligible applicant can submit an interest form online to be added to the waitlist. Each quarter, the Lottery will process applications from the waitlist based on available inventory and whether additional contracts will raise revenue commensurate with the public.
- Amend requirements for new Video Lottery Retailer applications. Lottery will establish a waitlist and online interest form, set new requirements for starting an application, including that a business be open and operating at least nine months (unless they receive a waiver), and direct Oregon Lottery to pull the applications in the order received unless other criteria are prioritized. This may include prioritizing current retailers or certain geographic areas.Current retailers may be eligible for a waiver from the requirement to be open and operating for at least nine months before initiating an application. The waiver criteria are:
- Applicant has two or more current active Video Lottery locations and has had these locations for at least two years.
- Applicant’s new location will have the same ownership and business model as their other
- Lottery has no FISH (Fairness, Integrity, Safety, Honesty) concerns about contracting with
- Limit the use of Temporary Contracts. Lottery will limit use of temporary contracts to only certain types of applications (including applications for traditional products and (for Video) sale of business, change of ownership, and 100% stock buyout when the network line is not removed from retailer premises).
In recent years, the Lottery faced Video Lottery Terminal (VLT) inventory shortfalls combined with budget constraints and outdated equipment management strategies and thresholds. This led the Lottery to stop processing applications for new Video Lottery retailer locations in December 2021. The Lottery has worked hard to address short-term inventory issues and develop a comprehensive plan to ensure the long-term sustainability of the Lottery’s Video Lottery Program.
The threshold was calculated as the minimum amount a VLT needs to earn to cover high level operating expenditures including prizes, cost of the VLT itself, parts, Economic Development Fund transfer, personnel expenses of support staff, game vendor charges, retailer commissions, and content/game costs.
Additionally, consideration was given to the amount of time players spent on each VLT daily. Locations with less than $10,000 per week, per terminal dollars played typically averaged 54 minutes of play per day on each VLT. There is a reasonable expectation that if one terminal is removed the remaining terminals will be able to absorb the play and as a result, minimize the revenue reduction for these locations.
The Lottery has not updated the weekly sales requirement in well over a decade. Increasing the threshold ensures Lottery is maximizing revenue consistent with our mission.
Account Managers will be provided access to dollars played information of all Video Lottery retailers and their standings.
The spirit of the removal threshold is to provide Oregon Lottery the ability to reallocate terminals from accounts below the threshold depending on need, opportunity, and operational capability. It is anticipated that some removals would begin in October 2023, starting from the lowest-performing retailers and moving upward.
The timing and quantity of removals will occur based on statewide inventory needs, reallocation opportunities, and Oregon Lottery operational capacity. Oregon Lottery will consciously avoid removing terminals in the months following payment of the VLT Amusement Devices Taxes (July, August, September). If Lottery determines the need to remove VLTs, this will happen in Quarter 2 and Quarter 4 each year. Account managers will have access to data that will enable them to communicate with retailers potentially at risk.
Depending on Oregon Lottery needs, removed terminals may be used to supplement high-performing accounts, provision new Video Lottery retailers, and/or supplement equipment replacement efforts.
Yes, there will be an opportunity. Oregon Lottery is continually looking to provide terminals where there is the greatest demonstrated need based on dollars played per terminal per week. If a retailers per-terminal performance is among the highest during the evaluations and inventory is available, they will be considered for a VLT addition.
In February 2023, Oregon Lottery identified the highest performing 50 sites under these criteria and is adding supplemental terminals to these establishments.
The $10,000 threshold was developed to enable Lottery to exercise removals as business needs dictate. It is not intended as a criterion for adding VLT’s. As mentioned above, Lottery will conduct routine evaluations and add VLT’s to locations with the highest performance based on available inventory and operational capacity.
The process of adding VLTs began earlier this year when Lottery offered an additional VLT to 50 top-performing retailers. On July 1, 2023, Lottery will offer another 50 VLTs to the top-performing retailers in the state. As of April 13, the top 50 retailers range between $27,275 and $47,155 dollars played per VLT per week. Beginning in October 2023, a quarterly evaluation of inventory will be done to determine the quantity of VLTs that are available to allocate across various business needs. The evaluation will also consider whether adding more VLTs to some locations will maximize revenue commensurate with the public good. Based on the evaluation, the Lottery may offer additional VLTs to high-performing retailers. It is possible that no additional VLTs will be offered in a particular quarter depending on terminal availability, operational capacity, or competing terminal needs.
For More information and Questions
For questions, please contact your Account Manager or our Customer Service team at 1-800-766-6789.