Why Scientific Games’ 50th Anniversary Matters

In her book, Seeing Around Corners, Rita McGrath, Columbia Business School professor and corporate consultant, contends that inflection points in business may seem sudden but are not random. Smart businesses can see around corners to what has been building for some time, arming themselves with strategies to succeed during disruption. This kind of foresight has been Scientific Games’ mindset since the beginning – anticipating what’s next and identifying insight-backed solutions so lotteries around the world can rest easy knowing the company is future-proofing good cause funding.

“With many long-tenured experts in the lottery business, they know the evolutionary contributions that Scientific Games has made over our 50 years. But for those who may not know, it’s important to understand some of the advances that enable them to successfully do their jobs today. As a company, we will continue with our future thinking to invest in what’s next,” said Pat McHugh, CEO.

Whether through organic innovation or innovation by acquisition, the company’s rich history demonstrates how seeing around corners has enabled Scientific Games to innovate market-leading solutions in games, analytics, technology and more, generating hundreds of billions of dollars for lottery beneficiaries.

A Heritage of Organic Innovation

It all started with a board game. While at the University of Michigan, John Koza, a Game Theory graduate student, and Bill Behm, an Aeronautical Engineering undergrad, invented a board game called Consensus. The game was based on the U.S. electoral college system – the process by which voters select the U.S. President. Naming their fledgling company Scientific Games Development Corporation, the two mathematically gifted students somehow raised enough money to bring their board game to market.  

Upon graduation, fate brought Koza and Behm together with Dan Bower who had been working in the promotional supermarket scratch-off game business. Together, the game designers and the coupon guru saw around the first corner to an opportunity. They combined their expertise to develop scratch-off games for lotteries.

With a simplified name, Scientific Games was established in 1973. None of the trio could have known then that the company would grow to power a USD 348 billion global lottery industry. What they did know was that combining their understanding of what kind of game play excited people with scratch-off coating technology innovation was a path worth pursuing.

And what a journey it’s been. In 1974, Scientific Games and the Massachusetts Lottery introduced the world’s first secure instant “scratch-off” lottery game. This was no small event. Until then, lotteries only sold games based on scheduled drawings. Consumer demand for the colorful games based on algorithms quickly grew and by 1981, Scientific Games was a supplier to 85% of the U.S. lottery market.  

Instant scratch games were one of many industry-first organic innovations designed and commercialized by the company over the decades. In 1985, Scientific Games’ leaders looked around another corner and saw lotteries were experiencing an increasing need for assistance growing good cause funding due to government operating constraints. The result was the creation of a ‘shared risk’ model, with the New York Lottery partnering as Scientific Games’ first Cooperative Services Program customer.

Advancing Instant Products

Today, CSP has evolved to Scientific Games Enhanced Partnership, a data-driven program that optimizes instant products through portfolio management and game design services, analytics, advanced logistics, licensed brand services, and retail sales and marketing support. SGEP is used by more than 20 lotteries, including 10 of the Top 20-performing instant game lotteries worldwide. While no one could have foreseen the full extent of what was around the corner in 2020, SGEP lotteries benefited tremendously from the program’s existing infrastructure, with instant game sales levels hitting record highs despite a global pandemic.

Over the years the company has consistently enhanced the instant scratch game experience by adding augmented reality, premium inks, specialty papers and product enhancements, 3-D play symbols, and advanced game security with the new, patented KDS360 software and robotics system, extending instant game protection from data generation through prize balancing to the final delivery of the game to retailers.

Players around the world continue to embrace the science-backed games, with Scientific Games now touting 70% market share of USD 113.7 billion in annual retail sales in 2023

Revolutionary Lottery Retail Technologies

During the 1980s and ‘90s, Scientific Games aggressively pursued technology-driven breakthrough innovations including the industry’s first touchscreen self-service lottery kiosk. Seeing around the corner, its technologists began applying rapidly emerging computer science to the retail point-of-sale environment. This improved access for players and flexibility for retailers proved revolutionary.  

Today, the company’s award-winning PlayCentral line of sleek, self-service terminals has helped lotteries around the world attract new retailers such as Walmart and adapt to changing consumer shopping behavior.  

As the self-service world grew, so did consumers’ desire to be less cash dependent. With an early view of a cashless society around the corner, Scientific Games innovated the first debit/credit card payment solution in the lottery industry to be integrated with a lottery system and was the first to receive Payment Card Industry Data Security certification for the secure, cashless purchase of lottery games.  

In 2018, the company once again revolutionized lottery retail with SCiQ, the industry’s first tech ecosystem offering instant game inventory management, enhanced security and real-time, store-level sales analytics. Over the next five years, SCiQ would be integrated into self-service and in-lane lottery purchases, offering consumers even more convenience and retailers easier lottery product category management.

Innovation by Acquisition

While many Scientific Games innovations were developed inside its own walls, others were intentionally pursued by acquiring companies to accelerate the expansion of products and capabilities to keep moving its customers forward.

In 1982, Bally Manufacturing Corporation, one of the most successful slot machine and video gaming companies in the world, purchased Scientific Games, strategically launching the company into the lottery draw game business. As new draw games such as Pick 3 and Lotto increased in popularity, Scientific Games became known as the industry’s only full-service lottery company, a pivotal moment for customers who now had a partner with the same holistic view of their business.  

With its roots in engineering, Scientific Games had assembled a global team of experts across several engineering sciences. The mid-90s saw the company’s debut of AEGIS, a secure, open gaming system – technology that advanced over time and spurred development of the company’s latest central gaming system, SYMPHONY, an open interface that easily integrates third-party solutions and content.

Scientific Games was purchased in 2000 by Autotote Corporation, a leader in the pari-mutuel wagering business and a provider of lottery draw game technology and services. Retaining its legacy name, the company now offered customers more options for central gaming systems technology. This event propelled Scientific Games to launch a series of innovations that would continue driving the industry forward, including the first lottery satellite communications network.

Throughout the early to mid-2000s, the company ramped up its innovation by acquisition strategy, further strengthening its position as a powerhouse provider of games, technology, analytics and services. Acquisitions such as IGT Online Entertainment, Oberthur Gaming Technologies, Essnet, GameLogic, and MDI Entertainment all set the stage for what leadership saw coming around multiple corners.

Brands, Marketing Services and Data

Autotote’s purchase of Scientific Games led to an unexpected innovation – the company’s Marketing-Analysis-Planning tool.  Company leaders were already looking around the corner at the power of aggregating data and in 2001 saw an opportunity to piggyback off an existing handicapping platform designed for horseracing. This early version of business intelligence established the DNA of the company’s own brand as the industry leader in analytics and insights. By gaining the cooperation of their customers to provide data, Scientific Games team members were able to give growth-leading insights back to those customers like they had never before seen. Today, MAP contains more than 3.5 million weeks of sales and 67,000 games and serves as the foundation for the company’s enterprise business intelligence platform, Infuse.

Data was a key player in the acquisition of MDI Entertainment in 2003. Scientific Games’ decision-makers knew that applying MDI’s impressive library of licensed brands would add value to any lottery product because they had been using a unique combination of winners’ files and geodemographic data to research those who had played branded instant scratch games. They knew that this expanded entertainment value would bring in new lottery players while also engaging core players. Today, 100+ entertainment, sports and pop culture brands like GAME OF THRONES, MONOPOLY and THE PRICE IS RIGHT add excitement to the company’s omnichannel games and promotions. Scientific Games evolved the industry beyond the game winnings by creating Linked Games, multi-jurisdictional instant scratch games enhanced by once-in-a-lifetime winners’ events.

Combining branded games, like WILLY WONKA GOLDEN TICKET, with winners’ events and data science drove massive industry growth in the instant game category in the coming decades. Scientific Games continues to apply this winning blend of art and science across both its traditional and digital games and solutions.  

Global Growth and Expansion of Insights

The company’s strong organic innovation and innovation through acquisitions panned out. Its science-infused products and services drove more growth than other offerings in the marketplace. As a result, more lotteries were choosing Scientific Games as their partner of choice which led to significant market expansion.  

Throughout its history, Scientific Games’ global expansion allowed the company to generate insights from new experiences and new markets. It’s not a stretch to see around the corner to the opportunities presented through global expansion. The stretch, however, comes in being willing and able to localize alternative business models. And that’s exactly what the company has done, particularly over the last two decades in places such as China, Mexico, Switzerland, the Philippines, the UK and so many more. To accommodate the growth, the company expanded its physical footprint with major facilities outside the U.S. in Leeds, Vienna, Santiago and Montreal. All the while, a close eye was kept on the biggest corner yet. One that continues to redefine daily life. The Internet.  

The Internet

Scientific Games had already launched the first internet lottery game in the U.S. in 2004. From there, innovation teams continued creating one-of-a-kind linked instant game winners’ events as the company pioneered digital solutions in second-chance games, loyalty programs and mobile apps that tied to retail.  

To accelerate its digital offerings, the company entered into a strategic partnership with Playtech in 2010 to form Sciplay, providing Scientific Games and its global lottery customers with a proven internet platform and a robust portfolio of web-enabled games and promotional content.  

Digital innovation at the company made waves with back-to-back firsts, including a lottery iPhone app, a lottery tie-in to a social media game, a mobile phone check-in promotion and a fully integrated instant scratch game and HTML5 mobile game. To date, Scientific Games has launched 24 mobile apps for lotteries – more than any provider. In 2014, the company launched the first eInstant games in the U.S., developed through 40 years of expertise in creating instant win experiences for lottery players.

Focusing innovation on meeting market demands, Scientific Games was the first to provide a points-based lottery loyalty program with a rewards store which has evolved to the NextGen Loyalty solution offering the only achievement-based program in the industry. Today, the company continues its diligence to innovation from player insight and offers the industry’s most comprehensive internet-based player loyalty program, offering an entire portfolio of games, second-chance drawings, merchandise, coupons and more. Player insight doesn’t just inform the company’s offerings, it also drives its commitment to responsible gaming, particularly as 1:1 digital marketing expands.  

In 2015, Scientific Games was one of the first suppliers to achieve the World Lottery Association’s Responsible Gaming Certification. Today, the company boasts its custom Healthy Play toolkit to help lotteries educate all stakeholders on the healthy enjoyment of lottery games.

The company has continued to advance its world-class digital offerings with the acquisition of NYX in 2018 and SidePlay Entertainment in 2021, both leading providers of digital games and technology to the lottery industry.

Change-driven Innovation

The most recent decade has been no exception to the company’s innovation by acquisition strategy. With the growing insight that gaming was converging for consumers and ‘content is king’, Scientific Games leaders knew that accelerated investment was more important than ever for meeting its customers’ needs.  

In back-to-back moves across 2013 and 2014, Scientific Games acquired WMS Industries, a slot machine manufacturer with market-leading game content, and Bally Technologies, a global provider of casino games, table game products, systems, mobile and iGaming solutions. With similar R&D cultures, the blended organization built upon innovation using data to create highly desirable omnichannel games. Learning how lottery and other forms of gaming coexisted for players was invaluable, if not sometimes at odds.  

After reaping the benefits of this integrated learning, the company’s highly successful lottery business was sold to Brookfield Business Partners in 2022. The sale returned Scientific Games to its early beginning as a 100% lottery-focused company. Foresight from the view around another corner came at the perfect time as iGaming began encroaching and the lottery industry needed 100% focus on its business, players and protecting good cause funding.

An integral component of this recent sale was retaining the Scientific Games name. That’s because the company’s five decades of staying power is a direct result of its commitment to evolving the science inside its products and services. Players around the world continue to delight in well-designed game experiences. Retailers continue to embrace user-friendly, sales-optimizing technology. And lotteries continue to seek a partner that not only provides what they need today but keeps a watchful eye on what’s around the next corner.  

With opportunities at a historic high to help lotteries adapt to a rapidly changing world by advancing their games, player engagement, the retail and digital environment and gaming systems technology, Scientific Games has no plans of stopping its smart, future-proofing business practices. Decades of experience helping lotteries increase good cause funding has taught the company how to successfully navigate the challenges of today and tomorrow.  And that is why Scientific Games’ 50th anniversary celebration matters.