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Lotteries

Digital revenue surges for Tabcorp in annual results while retail revenue falls

Click here to access the full year results – investor presentation from Tabcorp. Overall, Tabcorp shareholders will, I suspect, be happy with the results as they contain plenty of good news.

Of interest to lottery retailers will be the growth in digital (online) from 23.5% in FY2018/19 to 28% in FY2019/20. It hit 20.9% of revenue in the fourth quarter of the financial year.

Growth in revenue overall for Lotteries and Keno was 1.8%. Growth in digital was up 19% on the previous year. I guess that puts a different light on their reasoning for the 4% decline in retail revenue noted in the report. While retail closures would have impacted, I’d be surprised if closures accounted for a major portion of the decline given that newsagencies were not required to close.

This annual report is not good news for lottery retailers. The transition of lottery customers to online continues. While Tabcorp will point to the omnichannel commission arrangements, they do not deliver sufficiently for the additional work required.

My advice to lottery retailers is – work on your business to attract non-lottery shoppers to purchase good margin products that you carefully select and that can play as a basis to attract return business from those shoppers. This is upside you can create.

While the lottery traffic and revenue are appealing, Tabcorp must put the needs of its shareholders ahead of everyone else.

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Lotteries

Tabcorp ASX announcement

Since some folks are commenting elsewhere, here is the full announcement by Tabcorp yesterday:

Expected non-cash goodwill impairment charges and FY20 preliminary unaudited results

Tabcorp Holdings Limited (Tabcorp or Company) today announces that, following the latest review of the carrying value of its assets and in accordance with relevant accounting standards, the Company expects to incur non-cash goodwill impairment charges in the range of $1,000 million to $1,100 million(1) in its financial results for the year ended 30 June 2020 (FY20) (2).

The non-cash goodwill impairment charges relate to the Wagering & Media and Gaming Services businesses. They reflect an assessment based on underlying assumptions which take into account, among other matters:

  • the direct impact of the Government and other measures to address the COVID-19 pandemic on these business’ operations;
  • the possible acceleration of retail contraction and uncertainty regarding any longer term impacts as an indirect result of the pandemic;
  • the level of competitive intensity and structural changes in the Wagering & Media business particularly in a digital centric market; and
  • the potential decline in consumer confidence and increased economic uncertainty.

    The goodwill impairment charges are non-cash and do not impact the Company’s financial covenants with its lenders. The book value of goodwill for these segments at 30 June 2019 was $2,945 million.

    In addition, Tabcorp announces that it currently expects FY20 EBITDA (before significant items) to be in the range of $990 million to $1,000 million (FY19: $1,124 million) and net profit after tax (before significant items) to be in the range of $267 million to $273 million (FY19: $396 million).

    Final FY20 results, including the goodwill impairment charges, are subject to completion of the external audit and Board review and approval of Tabcorp’s FY20 financial statements.

    Tabcorp’s Managing Director and CEO, David Attenborough said: “COVID-19 has materially impacted our Wagering & Media and Gaming Services businesses. We are facing into a challenging and uncertain environment, and the current operating conditions and those expected into the future are relevant factors in assessing the value of the goodwill in those businesses at this time.

(1) No tax effect. Assessment includes the impact of allocated corporate assets. (2) The Company’s final audited results will be released on 19 August 2020.

“We remain confident in the strength and resilience of Tabcorp’s diversified portfolio of assets and are pleased that integration is now substantially complete. We are focused on supporting our people and partners during these challenging times while ensuring that Tabcorp emerges strongly post COVID-19.”

This announcement was authorised for release by the Tabcorp Board of Directors.

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Lotteries

TheLott (Tabcorp) adding former Woolworths fuel outlets

I’m told that Woolworths has sold fuel outlets and that in NSW there between 15 and 20 of these that are applying for the right to represent The Lott.

From a Tabcorp notice I have been provided, I can confirm that the company behind the multiple sites for which lottery applications have been lodged is Euro Garages, an international company with more than 5,900 outlets worldwide. This, from their website:

Founded in 2001 by the Issa family, United Kingdom based EG Group is a leading independent global “C-Store” operator serving seventeen million customers worldwide each week.

We operate approximately 5,900 sites spread across three continents, which we believe will make us the third largest independent C-Store operator in the world, the largest independent C-Store operator in Europe and the fifth largest independent C-Store operator in the United States, in each case based on numbers of sites.

Our global operations span six of the ten largest fuel markets in Europe by fuel volumes sold, namely Belgium, France, Germany, Italy, the Netherlands and the United Kingdom, all six states in Australia and thirty-one states across the United States.

We seek to deliver a modern and convenient customer retail experience by providing a “one stop” shop retail destination that offers a broad range of products and services to address evolving customer needs. For the twelve months ended June 30, 2019, we generated pro forma revenue of €22.6 billion, Pro Forma Adjusted EBITDA of €1.1 billion and Pro Forma Run-Rate Adjusted EBITDA of €1.4 billion.

I am sure the folks at Tabcorp have done their research as to the applicant.

Some of the outlets are as close a 2 minutes from an existing newsagent lottery outlet.

It shocks me that Tabcorp would consider approving a new outlet in the middle of the coronavirus pandemic.

The only party to be adversely affected by approving such new outlets would be the independent small retail businesses that already serve TheLott locally.

My view is that Tabcorp proceeding would be socially irresponsible, harmful to small business, harmful to local communities.

Unfortunately, there is little evidence that any objection process plays in favour of the incumbent local retailer.

Some the objection grounds I would focus on include:

  1. The community is already well served.
  2. Approving the application would harm my business.
  3. Approving the application would reduce the return I achieve on my already substantial investment in The Lott products.
  4. The applicant is a multi national business, not a small business, not local.
  5. The applicant would, in all likelihood be given a franchise arrangement with different terms and conditions to existing franchisees.

My suggestions are:

  1. Object to TheLott.
  2. Object to Fair Trading.
  3. Write to your state local lower house and upper house member.
  4. Write to your local councillor.
  5. Write to the ACCC as your TheLott relationship is a franchise.

The alternative is to complain to any who listen but actually do nothing and that will only make you feel worse.

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Ethics

Will Tabcorp breach retailers who do not self assess?

Tabcorp pays a business to send people to lottery outlets to check (audit) compliance with signage and other requirements.

Through Covid, Tabcorp suspended this service and instead asked (encouraged) retailers self assess. The company offered no compensation for this. Indeed, it was put as a polite request.

Retailers have told me they have been threatened with a breach by a Tabcorp representative if they do not complete the self assessment.

If true, this is the company using a heavy financial weapon against these businesses because the businesses have not done for Tabcorp, for no compensation, something that Tabcorp wants only for themselves.

This would be appalling and bullying behaviour.

Tabcorp preferences paperwork over sales, it preferences keeping small business retailers performing like circus monkeys with threats if they do not complete the circus performance routine exactly as Tabcorp demands.

You can have a small business retailer delivering net sales growth to Tabcorp and yet the company will issue bullying emails and threats of breach if the retailer does not do the act that Tabcorp demands.

Making financially harmful threats to small business owners in the middle of covid is appalling and bullying behaviour.

The harm of threats by Tabcorp against small business retailers have been considerable emotional, but the compare does not appear to care. It takes a toll at a difficult time, in the middle of Covid, with challenges in-store and in local communities, but Tabcorp and its people do not appear to care.

Tabcorp has been no help through Covid, it has offered no support. 

I get that there will be people at Tabcorp who will say he is just ranting against us as he usually does. They’d be right for there has been plenty to rant about when it comes to Tabcorp and its treatment of small business retailers. They screw up time and again, hurting businesses and those who run them. Indeed, the personal emotional cost I have seen has been considerable.

Frankly, I don’t personally care as I don’t have The Lott (Tabcorp) in my businesses and never will. I cannot and will not work with that company as their treatment of small business retailers is unprofessional, disrespectful and bullying.

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Ethics

Saturday lottery game changes seek to invigorate sales

Lotterywest yesterday announced details of changes to the Saturday game to come into effect from October this year.

Bigger Division 1 prize
The Division 1 prize will increase from an estimated $4 million to an estimated $5 million.

Change to Division 6 winning combination and improved odds
The Division 6 Winning Number combination will change to 3 Winning Numbers (from 1 or 2 Winning Numbers and 2 Supplementary Numbers), which improves the odds of winning a Division 6 prize.

More overall winners
The odds of winning any Saturday Lotto prize have improved, meaning more winners in every draw.

Price increase
To support the increased Division 1 prize and more overall winners, the subscription price for Saturday Lotto will increase from 65 cents to 75 cents per game (plus retailer commission).

There is no change to the game matrix (drawing 6 Winning Numbers and 2 Supplementary Numbers from a barrel of 45) so players won’t need to update their Favourite Numbers.

Lottery retailers I have spoken with are happy with the changes, most felt changes were overdue given changes to other games.

With the gambling space more competitive than ever, continued evolution of these more traditional games is important to their future.

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Lotteries

Tabcorp misses an opportunity to respect and support its retailers

Tabcorp last week wrote to retailers asking that they self-assess as the company was not putting its assessment team in the field. This team usually visits outlets to judge them on their look at the time they visit. The judgements can have dire business impacts if they are bad. Tabcorp appears to place more value on appearance, often to odd criteria, over actual sales performance. The assessments cause considerable anxiety.

Rather than taking the opportunity to say something along the lines of – hey retailers, stay safe and well, we are giving everyone a gold stay assessment this round, you’re all 100% in our view. We appreciate you and hope this small step by us demonstrates the respect we have for you as front line retailers – Tabcorp asked retailers to do the assessments themselves:

Subject: COVID-19 Interim Measures – Compliance Self-Assessments 

Hi Retailer, 

Thank you for your ongoing commitment. COVID-19 has impacted us all in many ways, and as we navigate our way through this uncertain time, we must continue to be nimble and adaptive in the way we operate, support you to maximise sales, and meet our regulatory obligations. This is essential to help ensure we continue to protect our business whilst continuing to operate and deliver the best customer experience possible. 

The environment in which we operate in is complex with a lot of different rules and regulations, compliance to these regulations is core to our integrity in providing exciting games customer know and love. However, with COVID-19 the way we monitor compliance needs to adapt. As such, we have been working on alternative ways to ensure compliance monitoring continues and incorporates the additional COVID-19 requirements. 

From Friday 1st May 2020, we will be introducing a Compliance Self-Assessment to outlets who have not yet been Site Surveyed in Cycle 3 (Monday 2 March 2020 to Sunday 28 June 2020). The Compliance Self-Assessment will be sent to selected outlets each week via an email and link from retailcompliance@tabcorp.com. This assessment will temporarily replace Site Surveys for an interim period. 

The Compliance Self-Assessment will take approximately 10 minutes to complete and, we will be asking outlets to upload a series of photos of their lottery outlet only. Further details on how to do this will be shared via a Training Manual when you receive the Compliance Self-Assessment. 

All Products Outlet Photos Required 

1. Outlet Customer Capacity Customer Notice 

2. Social Distancing Stand Here sign 

3. Responsible Play sign 

4. Internal point-of-sale posters, as per your weekly POS Plan. 

5. Instant Scratch-Its Dispenser point-of-sale, as per your weekly POS Plan. 

6. External blade 

7. Free standing Lucky Lotteries Cat stand (if applicable) 

8. Street stand (if applicable) 

9. Syndicate board 

10. Writing bench (including brochures, coupons and draw slips) 

11. Customer Ticket Checker 

12. Responsible Play Guide folder 

What a dumb and selfish move by this big business supplier against small business retailers who are already in tough situations.

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Ethics

Adjustments in WA on lotteries

This announcement from the premier has details:

  • Laws to protect retailers, players and the community during and after COVID-19

  • Temporary powers to enable Lotterywest to provide additional grants and fund other worthy grant programs

  • Prize payout period extended and claims made easier as part of social distancing measures and minimises retailers contact during COVID-19

  • Players to be able claim prizes regardless of travel restrictions, community isolation or due to temporary closure of retail outlets

  • New laws to further support the $159 million community COVID-19 Relief Fund

This information was sent to retailers:

Today, Wednesday 15 April 2020, Premier Mark McGowan announced some temporary changes, giving players more options to claim their prize. This is currently subject to legislative approval.

These changes include temporarily extending the prize claim period on selected valid winning tickets from 12 to 24 months, and also introducing the option for Lotterywest to receive prize claims from players via email, as well as claiming their prizes in-store or via post. You can read the Premier’s full media statement here.

The health and wellbeing of Lotterywest retailers and players is important to us. Due to COVID-19, health guidelines have encouraged cashless payments. We’re making these temporary changes in response to health concerns, and to support those who are not comfortable handling cash.

We’ll send you an email and terminal message confirming all the details once legislation has been approved. We expect this will be in the coming weeks.

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Lotteries

Terrific email from Lotterywest

Lotterywest retailers received an email from the company that included this:

Your first $10,000 payment
Yesterday you received the first $10,000 monthly payment as part of the COVID-19 Retailer Incentive Package. This amount was credited into your nominated bank account and will be reflected on your Recipient Created Tax Invoice (RCTI) week ending Monday 6 April.

What a terrific start to Easter. Well done Lotterywest.

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Lotteries

Tabcorp stands down 700 people

In an announcement to the ASX this morning, Tabcorp announced it was standing down 700 employees.

The temporary standing down of over 700 Tabcorp employees to 30 June 2020 in businesses of the Group where there is no work as a result of COVID-19 shutdowns. Our focus is on retaining jobs for the long term. During the temporary stand down period, affected employees can access their accrued leave benefits and are expected to resume work when business activity returns to normal levels.

Tabcorp is currently exploring its eligibility for the Federal Government’s Job Keeper Wage Subsidy.

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Lotteries

Lotterywest to pay every Lotterywest retailer $30,000

Lotterywest sent this email to their retailers today:

Today we are announcing a $17.5 million COVID-19 Retailer Incentive Package to assist Lotterywest retailers during this very difficult time.

The package includes $30,000 for each Lotterywest retailer, which will be paid in three $10,000 monthly instalments, starting from Wednesday 8 April 2020. We will also suspend terminal and service fees for every store for six months.

Premier Mark McGowan and Lotterywest have also established a $159 million COVID-19 Relief Fund to provide support to organisations that are helping people experiencing hardship, announced by the Premier earlier today. Read the full media statement here.

Lotterywest responds to COVID-19

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Here is a list of Questions and Answers we’ve put together about the package.

You can also access all the information on the Retail Link website.

We’ll continue to keep you updated. In the meantime, please direct your questions to your Retail Relationships Officer, or contact our Customer Services team on 133 777.

Thank you and please take care.

Kind regards

Susan Hunt PSM
CEO Lotterywest and Healthway

———

What an extraordinary move for WA newsagents and lottery retailers. I know from calls already tonight that this announcement has delivered extraordinary personal relief in addition to the money that will flow.

Kudos to Susan Hunt and the Lotterywest board and to Premier Mark McGowan for delivering on his election promise to Lotterywest retailers.

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Leadership

Online Powerball $80M winner helps Tabcorp and not retailers

The winning ticket in Thursday’s Powerball $80M draw was purchased online. Given the usual rush to the retailer of the winning ticket, online purchases will increase.

While Tabcorp cannot control the purchase location of the winning ticket, they can control the level of support for their physical retail network. My view is that it is grossly inadequate, as it has been for years.

Their focus is on compliance and not proactive support and encouragement. The margin paid to retailers is also inadequate. Retailers stick with it out of fear for what business might look like without it and in the hope that Tabcorp will behave better.

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Lotteries

Powerball $80M jackpot a test for Tabcorp, lottery retailers and Australians

Typically, today and tomorrow, ahead of the $80M Powerball jackpot tomorrow night, we would see and hear a ton of media coverage about a surge in ticket sales, there would be photos and videos of happy shoppers in-store buying. media reports would be excited, urging on the purchase surge.

Such images would pitch the wrong message in these days.

While we need reports of people purchasing in-store, we need to see stores setup for the required distance between shoppers, recast shop floors that are not cluttered, orderly management for the health and safety of all shoppers and retail business employees.

Lottery retailers should be pitching on social media the ease of safe shopping in-store … anything to hold back what I suspect will be a surge online, enriching Tabcorp at the cost of their retail network.

All of us in business are part of the messaging, especially as plenty of our politicians fail at clear messaging.

We are open for business, offering safe shopping for you, your neighbours and our team members.

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Lotteries

Tabcorp writes to lottery retailers

And here is what they said…

 Dear Retailers, 

Firstly, I hope you, your families and your teams are well. 

As you may have seen, late yesterday the Federal Government announced restrictions on indoor gatherings, including pubs and clubs. The New South Wales and Victorian Governments also announced further restrictions aimed at curbing the spread of COVID-19. 

We are currently seeking clarity from each government about what these restrictions precisely mean for our outlets. 

In New South Wales and Victoria, it is understood outlets in pharmacies, grocery stores, convenience stores and petrol stations will be able to continue to operate. We also believe newsagents may be classified as a “convenience store” and be entitled to continue to trade, however we are still discussing with the relevant authorities in order to have that confirmed. We will confirm this position as soon as we know more. Outlets that fall outside of these types of essential service stores will not be allowed to continue to trade. 

In Queensland, South Australia, the Australian Capital Territory, Tasmania and the Northern Territory, there are currently no government-mandated restrictions on outlets trading outside of those restrictions announced by the Federal Government yesterday evening. As you’ve no doubt experienced yourself, this is a swiftly evolving issue. 

We understand you will have lots of questions in relation to your business, ranging from whether you can or can’t continue to trade through to fees and charges, Site Surveys and managing Instant Scratch-Its stock. 

Our team has been working across the weekend to understand the best path forward in this ever-changing environment and will continue to do so this week. We are investigating each issue as quickly as we can with the latest information available and will provide regular updates and Frequently Asked Questions (FAQs) on the Urgent Information section on Retailers Web’s homepage. 

For you and your teams safety, please ensure you are following the current social distancing requirements in your outlet which is available on Retailers Web. 

We will also be posting links to information about the Federal Government’s small business support package on Retailers Web. 

Many thanks once again for your support at this challenging time. 

Best wishes,

Antony Moore
General Manager Lotteries Retail

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Lotteries

Urgent proposal to Tabcorp

Here is a proposal I put to Tabcorp early this morning following Powerball jack potting to $80M last night:

I write on behalf of newsXpress members as well as the 1,700 newsagent retailers using the Tower Systems POS software.

We are concerned that the $80M Powerball jackpot will prove to be challenging for retailers impacted by restrictions such as no gatherings of more than 100 people, nursing home access in or out, offices emptying as people work from home and entertainment precincts that are shut down. We also expect sales will be a challenge in shopping centres where traffic is down significantly.

We propose urgent, and by urgent we mean today, consideration of:

  1. Relaxing your rules and allowing retailers to pre-print tickets so they can be taken and sold offsite, such as in a nursing home or at the front of the shop to people who do not want to enter the shop. This relaxation of rules could be limited to 7 days to mitigate any concerns within the company about abuse.
  2. Releasing to Tower Systems and any other channel connected software company your API along with approval to develop an online sales ability for local stores to sell lottery tickets to regular / local shoppers. We anticipate that Tabcorp has an API for securely accessing the vending of tickets.

While this may challenge your OzLotteries relationship, as a shareholder inn that company I expect Tabcorp could prevail.

Should you release the API and permit existing Tabcorp franchisees to sell online, we would fast track this development for retailers for any individual store website. We would also look at a group wide solution for newsXpress members and urgently work on it if it possible.

I am concerned that in locations where traffic is down because of COVID-19, regular shoppers in those stores will try your website or app, establishing the risk of migration of that shopper from in-store to online.

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Lotteries

Lottery retailers are frustrated that Tabcorp (TheLott) offers some games online that are not available over the counter

In another move that appears to indicate a push to migrate over the counter lottery customers online, Tabcorp’s TheLott has allows customers to setup online only games. That is, customers can setup games on their profile that retailers do not see when customers present their card. This can create frustration at the counter. There are instances of shoppers criticising retailers for what they, the customers, have setup online – since the retailers encouraged the customers to go online.

Games setup in-store are available online.

Games setup online are not available in-store.

A spokesperson at TheLott says it is due to a “system limitations”. I suspect it is due to inadequate management consideration of the fair treatment of retail partners when evolving their online capabilities.

This move by Tabcorp is on the back of extraordinary pressure on lottery retailers to encourage lottery shoppers to sign up for online purchase access.

While I have heard of some discussion on social media, in response to approach from retailers I mention it here for lottery retailers to comment in a more public place.

16 likes
Ethics

Australian Banking Association is looking at the use of credit cards for gambling

This news, from the ABA website:

Today the Australian Banking Association has released a consultation paper on the use of credit cards for gambling.

Banks have introduced a range of initiatives to help customers better manage their financial arrangements and mitigate harms related to problem gambling – technology solutions such as tools to help customers track their spending, customer directed blocks, trained customer support teams, referrals to support services.

The ABA is seeking views from the public on the place of a credit card and its use for gambling. Currently credit cards can be used when gambling online, however when in a gambling venue of a licenced venue or casino patrons cannot use credit cards or make ATM cash advance on their credit card.

CEO of the Australian Banking Association Anna Bligh said that banks had an important role to play in helping tackle the issue of problem gambling and were seeking feedback from the community.

“For many Australians gambling is a form of entertainment and recreation, however for some it can become a problem that potentially has devastating consequence for the individual and their family,” Ms Bligh said.

“As an industry we are currently assessing a number of options to help tackle problem gambling.

“We are seeking feedback across the community on a number of important questions, which will then help banks as they each consider further reform on this issue,” she said.

The ABA is seeking community views on the following questions:

  1. What are the risks and concerns associated with gambling with credit cards?
  2. Should the use of credit cards for gambling be restricted or prohibited?
  3. If so, should the restriction or prohibition apply to all forms of gambling?
  4. What are the potential consequences of prohibiting or restricting the use of credit cards for gambling?
  5. Should there be a transition period if banks choose to implement changes relating to credit cards?

For a copy of the consultation paper click here. Submissions on the topic are due by March 4, 2020. Submissions can be emailed to submissions@ausbanking.org.au. The ABA requests that submissions make use of empirical evidence as far as possible. A survey option is also available on the ABA website here.

For this to work, banks will either need access to what’s in a shopping basket to assess whether it is approved, or they will require POS software through which cards they issue are used to undertake such basket assessment – if this project of theirs moves forward.

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Lotteries

A positive message for WA lottery retailers

Lotterywest continues to lead in the communication and community engagement stakes in the lottery category in Australia. Their comms, sent every Thursday, are focussed, optimistic and updating retailers on promise delivery. Here is a note from their email yesterday afternoon:

A message from the Premier and Lotterywest CEO
This year has been an exciting one for us all, delivering record sales and increasing our return to the Western Australian community.

We’re pleased to announce that as of last Friday, the planned one percent increase in retailer commissions has fully come into effect.

The commissions increase is part of a larger package of initiatives to build a successful retail network.
Early in the new year Lotterywest will be working with you to shape what this looks like so we can develop the right model to support these initiatives together.

We look forward to another fantastic year ahead and wish you and your loved ones a very happy festive season and New Year.

Kind regards,
Premier Mark McGowan and Susan Hunt, PSM, Lotterywest CEO

There is a lot to be said for government ownership and management of state licensed lotteries.

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Lotteries

Is there an issue with the in-store digital advertising screens for The Lott?

Several retailers have told their their in-store ad screens for The Lott have been down for more than two weeks and that they have been told  they cannot put promotional posters in front of them.Instead, there screens remain of no promotional value to the businesses of The Lott.

While there are consequences for retailers when they do something wrong or have something go wrong, there are no such consequences for The Lott.

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Lotteries
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