Brazilian Lotto Going Mobile, Others to Follow

5 October 2004

Hoping to tap into a market with 50 million mobile handsets, officials with UK-based ROK Corporation announced a new joint venture last week with Fingerprint, a Brazilian-based lottery ticket and game product provider.

ROK -- a creator, licensor and distributor of mobile phone content -- said the agreement with Fingerprint is part of a global expansion to bring lottery sales and operations to mobile phones worldwide.

With Brazil, the second international jurisdiction for the firm after launching a similar plan in China, ROK has an ideal market, according to Group Marketing Director Bruce Renny.

The joint venture company, ROK Brazil Technologies, will develop and operate the first mobile lottery in Brazil. ROK will provide the lottery technology and gaming engine with Fingerprint providing the business administration and implementation of the partnership in Brazil.

With every handset being, in effect, a lottery terminal, people are able to play the lottery via SMS without having to visit a ticket distributor. In addition, winners can be notified automatically.

Renny said Brazil is like many other markets where mobile phones have taken over huge segments of the population. He said Brazil has more than 55 million handsets and mobile devices in circulation, many of them belonging to the right target audience for ROK.

"A lot of young people have mobile phones and they are the ones that are playing the lottery," he said. "They are tech-savvy enough to embrace the new options on their mobile devices and frequent enough players of the lottery that doing it on their phone, instead of having to stand in line at the corner store, make it a very appealing market for us."

Similar factors are in play all over the world, Renny said, and ROK is in the final stages of negotiations with nine other firms to launch similar products within the next 12 months all across the globe.

Unlike other interactive gambling options like casino-style gaming and slot machines, which involve intense graphics and complicated algorithms, Renny said converting lottery sales to a mobile-based SMS platform is a less daunting task.

Back-end security issues, and tying the mobile lottery system in with the land-based outlets, remain the most daunting task for ROK and its partners, but Renny said even that has become a seamless process. The mobile system offers features not available to players using traditional brick-and-mortar sales outlets.

"It can be set up to where a user can play the same numbers everyday, every week, or every hour," he said. "If a player is stuck in a traffic jam and won't make it to the corner store on time they can buy their ticket while they sit in their car and then be notified by text message if they are the winner."

Brazil could be just the tip of the iceberg for ROK and others looking to impact the lottery industry through mobile channels. The Beijing Mobile Lottery was launched earlier this year and Jonathan Kendrick, Chairman of ROK, said there are numerous countries all over the world that have all the ingredients in place.

In Britain, for example, there are 50 million handsets in the marketplace where only 65 million people live.

"We would love to do it in the UK but Camelot seems to be on a different page than us," Renny said.

Sales for the mobile system are conducted through pre-paid channels. Renny said many users put a specific amount of money a month on their mobile phone (like $20) and then use it on airtime or other offerings.

Like Brazil, Britain has a large part of its mobile consumer base consisting of young people. Renny said worldwide the mobile marketplace is "young and lottery crazy."

That doesn't mean that paper tickets will become a thing of the past. "I am not so arrogant as to say that we will change the way lotteries are played and that brick and mortar sales will go by the wayside," he said. "There are a lot of people, like my parents, who would never buy their lotto ticket through their mobile phone. They couldn't understand it and wouldn't want to try to comprehend it. There will always be room for traditional distribution channels, we just see the mobile route as an ideal method to create new sales and increased revenues for the lotteries."

And it isn't jus the lottery operators who look to profit from going mobile, Renny said. Mobile carries and providers worldwide operate on the slimiest of margins with their airtime and rely on other enhancements for revenue. The content industry (ring tones, wallpaper, ect.) for mobile phones is a $8 billion industry, according to ROK, and will grow to a $35 billion one in four years, another segment of the industry that is fueled by young people.

"Their mobile phone is their most prized possession and they want to personalize it every chance they get," Renny said.

ROK will also supply the joint venture company in Brazil with an extensive portfolio of content for mobile downloads including ring tones, 'real tones,' wallpapers, logos and JAVA games as well as their library of film clips and animations. If there is any doubt about the viability of pre-paid phone plans being used to purchase lottery tickets, Renny has evidence to refute that.

He said more than $21 billion worth of prepaid minutes are in circulation worldwide, making it the third largest currency behind the U.S. dollar and the euro.

"And people are always looking for new ways to spend their pre-paid airtime," he said.

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