An Industry You Can Bank OnIt doesn't take the hyperactive imagination of a weekly Lotto punter to figure out that an investment in either of these two companies is a lot smarter than playing the numbers. If you believe the growth estimates, which might actually be a little low, you should be able to earn 20% to 25% annually on Scientific Games over the next few years.
Limiting the PlayersTwo key types of games are run today: "Instant ticket," in which players scratch a rubbery coating from a printed ticket to determine whether it's a winner; and "online," in which a player picks five to seven numbers at random and learns whether he's a winner in a weekly televised drawing. GTech and Scientific Games make most of their money by skimming a percentage off all revenue of the games that they create -- typically $6 to $12 per 1,000 tickets. So they have incentive to try to create increasingly fun contests in dizzying variety with names like "10 Times Lucky" and "Payday Tripler," which draw in new players and encourage regular players to bet more.
- The need to prove the security of the ticket-printing process.
- The difficulty in managing the regulatory process and the need for proprietary software.
- Hardware terminals that interoperate across state boundaries with 99.999% reliability.