The Massachusetts Lottery is looking for companies that could help it roll out daily fantasy sports and other digital games, hoping to reach young people who are more likely to tap on a smartphone screen than scratch off a paper ticket.  The Lottery is still in the early stages of studying the market for digital games and doesn’t plan any new contests without backing from elected state officials, Lottery director Michael Sweeney said.  But the Lottery, which supplies a key stream of revenue to Massachusetts cities and towns, needs to grapple with technological and demographic trends that could eat into its next generation of players, he said.  “We’re trying to avoid getting so far behind the changes in technology and consumer preferences that revenues and sales start to get marginalized,” Sweeney said Wednesday. “I don’t see that happening now, but I could see that happening in five to six years.”  In an information request issued Tuesday, the Lottery sought interest from private vendors of software systems, payment processing, data management, and other services that could help it offer digital games with cash prizes.  Daily fantasy sports games are among the specific games mentioned in the document, which is not a request for formal bids or business proposals.  The Lottery’s interest in daily fantasy sports reflects the sector’s fast growth in recent years into a multibillion-dollar industry backed by investors such as Google Ventures, Fox Sports, the NBA, and Wellington Financial Management.  Two companies, Boston-based DraftKings Inc. and New York-based FanDuel Inc., account for more than 90 percent of the market. The daily fantasy sector is projected to collect about $3.1 billion in entry fees this year from a player base that is overwhelmingly male and largely between the ages of 18-35, according to estimates from Eilers Research LLC.  Meanwhile the Lottery is grappling with slow growth of its traditional drawings, and Sweeney is worried fantasy sports may be siphoning off customers. In a presentation to the state Lottery Commission in early November, he identified daily fantasy sports as “the biggest current challenge facing the Lottery.” Adding a competing product, the report said, could bring in new revenue without threatening its existing games.  The Lottery’s interest in daily fantasy also coincides with a period of intense legal scrutiny for the private daily fantasy sector.  DraftKings and FanDuel were effectively banned from Nevada earlier this year. The two companies are now fighting court battles with the attorneys general in New York and Illinois, who have said the companies’ games amount to illegal gambling.  Massachusetts officials also have weighed the legal status of daily fantasy sports companies but have stopped short of trying to shut the industry down. Attorney General Maura Healey has taken the biggest step, proposing a series of consumer-protection regulations that could take effect next year.  A Massachusetts state senator has proposed legislation that would explicitly allow the state Lottery to introduce “online games of skill, including, but not limited to, fantasy sports.”  The Lottery’s revenues topped $5 billion in the last fiscal year, which concluded in June. But sales grew at just 3.1 percent, which Sweeney said was part of a troubling trend of slow growth.  “If I was in private industry, that’s not a number that I’m going to bed at night feeling comfortable about,” he said.
The Massachusetts Lottery is asking private companies whether they could provide all or parts of a potential system for offering digital games, which could include a state version of daily fantasy sports. But the Lottery is just in the fact-finding stage, and doesn’t plan to add new games without agreement from state elected officials.