NASHVILLE - The Board of Directors of the Tennessee Education Lottery Corp. today approved a recommendation to select GTECH Corp. and Scientific Games International Inc. as the providers of online and instant-ticket products and services for the Tennessee Lottery.
The selection of GTECH for online and Scientific Games for instant-ticket products and services follows a month-long evaluation of thousands of pages of technical proposals submitted by multiple vendors competing for the Lottery's two major contracts.
"GTECH and Scientific Games each offered the most comprehensive proposals at the best overall value," Board Chairman Denny Bottorff said. "Both companies are industry leaders with strong track records in the U.S. and around the world. No doubt, they'll help ensure a successful lottery startup in Tennessee."
The Tennessee Lottery expects to sell its first ticket on or before February 10.
The combination of GTECH and Scientific Games is common within the lottery industry. Lotteries in 14 states, including neighboring Kentucky, Missouri and Georgia, rely on both vendors to supply reliable products and services.
Both vendors will be awarded seven-year contracts that will be based on a percentage of the Lottery's sales. GTECH will earn 1.24% of all sales, and Scientific Games will earn 1.139% of instant-ticket sales.
"These are among the very best rates ever obtained by a startup lottery and even better than some lotteries with established track records," said Rebecca Paul, president and CEO of the Tennessee Lottery. "At the end of the day, these low costs will translate to more scholarship dollars for the students of Tennessee."
Based on initial annual revenue projections of $900 million, the online contract could be worth $10.5 million in the first year. The instant-ticket contract could be worth $5.6 million. The total value of the contracts will depend upon sales growth over the full terms of the contracts.
In addition to offering competitive pricing, both vendors agreed to provide substantial levels of minority business participation. The statute creating the Tennessee Lottery calls for a target goal of 15% minority business participation. GTECH agreed to ensure levels of at least 20%, and Scientific Games agreed to ensure levels greater than 15%.
The vendor evaluation process that led to the selection of GTECH and Scientific Games moved at a swift but deliberate pace.
The Lottery's six-member evaluation committee, comprised largely of senior staff members, began examining multiple vendor proposals on October 27. Late Wednesday, the committee submitted recommendations to Paul, who presented them to the Board this morning. Following two hours of discussion, the Board voted unanimously to approve the committee's recommendation to award the online contract to GTECH and the instant-ticket contract to Scientific Games.
Under terms of the online contract, GTECH will provide computer equipment and services necessary for the Tennessee Lottery to offer games in which players pick numbers prior to jackpot drawings. Under its contract, GTECH will provide participating retailers with training and high-tech equipment, including computer terminals necessary to operate the games and satellite dishes connecting those terminals to a central data center that stores information related to the games. GTECH's online system also will play an integral role in managing the instant-ticket games.
Under terms of the instant-ticket contract, Scientific Games International will provide a wide array of instant products as well as a range of "associated services" including ticket warehousing and distribution. Scientific Games also has committed to provide marketing staff to assist in the initial retailer recruitment efforts.
GTECH, West Greenwich, R.I., handles an estimated 63% of the U.S. online lottery business. GTECH is publicly traded with shares listed on the New York Stock Exchange.
Scientific Games International, which has an estimated 65% of the U.S. instant-ticket market, is a subsidiary of Scientific Games Corp., New York. The parent company is publicly traded with shares listed on the Nasdaq Stock Exchange.
The Tennessee Lottery is charged with raising at least $88 million by June 30 in order to fund scholarships for an estimated 65,000 students attending Tennessee colleges and universities next fall.
EDITOR'S NOTE: "Online" is lottery industry terminology that refers to retail computer terminals linked to a telecommunications network. It is not a reference to the Internet or the World Wide Web.
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