TRANSCRIPT OF PROCEEDINGS

Transcription

1 STATE OF CALIFORNIA LOTTERY COMMISSION --ooo-- CALIFORNIA STATE LOTTERY COMMISSION MEETING TIME: :00 a.m. DATE: Thursday, September, PLACE: California State Lottery Commission Headquarters 00 North Tenth Street Sacramento, California --ooo-- TRANSCRIPT OF PROCEEDINGS --ooo-- Transcribed By: Cathy S. Dizon Daniel P. Feldhaus, C.S.R., Inc. Certified Shorthand Reporters Yermo Way, Sacramento, California Telephone.. Fax..0 Daniel P. Feldhaus, CSR, Inc...

2 A P P E A R A N C E S California State Lottery Commission NATHANIEL KIRTMAN Chair of the Commission GREGORY AHERN Vice Chair of the Commission ROWENA LIBANG-BOBILA Commissioner CONNIE PEREZ Commissioner JOHN SMOLIN Commissioner --o0o-- Participating Lottery Commission Staff PAULA LaBRIE Acting Director NICOLE SOLURI Chief Legal Counsel KIM CRESTELO Recording Secretary JIM HASEGAWA Deputy Director Business Planning Division JOHN KOYAMA Chief Consumer Marketing and Advertising Division RICHARD MAHAN Deputy Director Sales and Marketing Davison Daniel P. Feldhaus, CSR, Inc...

3 A P P E A R A N C E S Participating Lottery Commission Staff continued JOHN REILLY Chief On-Line and Digital Marketing Division CHRIS RIESEN Deputy Director Information Technology Services Division ELISA S. TOPETE Assistant to the Commission DOTTIE WALLACE Acting Deputy Director Human Resources Division --o0o-- PUBLIC TESTIMONY RANDY CHEEK SEIU Representative --o0o-- Daniel P. Feldhaus, CSR, Inc...

4 I N D E X Description Page. Call to Order. Pledge of Allegiance. Roll Call of Commissioners. Consider Approval of the Agenda. Approval of the Minutes of the June,, Commission Meeting. Director s Report a. Acting Director s Comments b. California Lottery Player Information. Consent Calendar [None]. Action Items a. Asian Consumer Market Advertising Services Contract b. Data Quality Software and Services c. Digital Agency Services Contract 0 d. Amended Lottery Regulations - Employee Recognition e. Scientific Games International Scratchers Contract Amendment No. - Player Rewards Program Daniel P. Feldhaus, CSR, Inc...

5 I N D E X Description Page. Commissioner General Discussion. Scheduling Next Meetings. Public Discussion. Adjournment --o0o-- Daniel P. Feldhaus, CSR, Inc...

6 California State Lottery Commission Meeting September, Thursday, September, Sacramento, California --o0o-- CHAIR KIRTMAN: Good morning. I will start with the Pledge of Allegiance. (The Pledge of Allegiance was recited.) CHAIR KIRTMAN: Secretary, please call the roll. MS. TOPETE: Commissioner Smolin? COMMISSIONER SMOLIN: Here. MS. TOPETE: Commissioner Ahern? COMMISSIONER AHERN: Here. MS. TOPETE: Commissioner Perez? COMMISSIONER PEREZ: Here. MS. TOPETE: Commissioner Libang-Bobila? COMMISSIONER LIBANG-BOBILA: Here. MS. TOPETE: Chairman Kirtman? CHAIR KIRTMAN: Here. Commissioners, does anyone want to suggest any changes to today s agenda? COMMISSIONER SMOLIN: That s okay. COMMISSIONER AHERN: No, sir. COMMISSIONER LIBANG-BOBILA: No changes. CHAIR KIRTMAN: Hearing none, do I hear a motion to adopt the agenda? Daniel P. Feldhaus, CSR, Inc...

7 California State Lottery Commission Meeting September, COMMISSIONER AHERN: Make a motion to adopt. COMMISSIONER PEREZ: I ll second. CHAIR KIRTMAN: Secretary, please call roll. MS. TOPETE: Commissioner Smolin? COMMISSIONER SMOLIN: Yes. MS. TOPETE: Commissioner Ahern? COMMISSIONER AHERN: Yes. MS. TOPETE: Commissioner Perez? COMMISSIONER PEREZ: Yes. MS. TOPETE: Commissioner Libang-Bobila? COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Chairman Kirtman? CHAIR KIRTMAN: Yes. The next item on the agenda is Item, approval of the minutes. Are there any corrections to the minutes? (No response) CHAIR KIRTMAN: Do I hear a motion to approve the minutes? COMMISSIONER AHERN: Motion to approve. COMMISSIONER SMOLIN: Second. CHAIR KIRTMAN: Secretary, please call roll. MS. TOPETE: Commissioner Smolin? COMMISSIONER SMOLIN: Yes. MS. TOPETE: Commissioner Ahern? Daniel P. Feldhaus, CSR, Inc...

8 California State Lottery Commission Meeting September, COMMISSIONER AHERN: Yes. MS. TOPETE: Commissioner Perez? COMMISSIONER PEREZ: Yes. MS. TOPETE: Commissioner Libang-Bobila? COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Chairman Kirtman? CHAIR KIRTMAN: Yes. The next item on the agenda is the Director s report. Paula? ACTING DIRECTOR LaBRIE: Good morning, Commissioners. CHAIR KIRTMAN: Good morning. COMMISSIONER AHERN: Good morning. COMMISSIONER LIBANG-BOBILA: Good morning. ACTING DIRECTOR LaBRIE: And welcome back to Sacramento. For today s report, I ll give a general business update, giving you our year-to-date sales picture, and go over a couple of other informational items that you might find of interest. Of course, go over the voting items. And then, as part two of the Director s report, Jim Hasegawa will give you some information on Lottery players. So, our sales through the first weeks of Daniel P. Feldhaus, CSR, Inc...

9 California State Lottery Commission Meeting September, this fiscal year totaled more than $. billion. That represents a percent increase over the same time last year. And we re traveling at percent of goal, even though the jackpot games have been relatively low; so they re not producing as much as we would like. But all said, we are on track right now to reach our $ billion goal for the end of the fiscal year. The new $0 game is doing fabulous. Scratchers are off to a tremendous start overall this year. And, as before, it s the innovation of the product, it s the sales and marketing efforts that are key to success of this product. The fiscal year started with a unique $ Scratcher, which was the deluxe playbook, which was the six pages of play, all contained in one booklet. And it was long-lasting and entertaining to our players. They enjoyed it very much, and it was something that we introduced to help with our traditional summer slump. So with that game being introduced, we had some really good sales over the summertime, which essentially was our goal. The new $0 ticket was introduced in August. And this is in honor of our 0 th photo of the ticket. anniversary. This is a Daniel P. Feldhaus, CSR, Inc...

10 California State Lottery Commission Meeting September, And in the first four weeks, consumers purchased $ million worth of these tickets. So it has surpassed records with respect to first four-week sales of both our $ game, when it was first introduced, and our $ game, when it was first introduced. CHAIR KIRTMAN: When were those -- when were those games introduced? ACTING DIRECTOR LaBRIE: When? CHAIR KIRTMAN: Yes, like the first $ and the first -- ACTING DIRECTOR LaBRIE: The first $ game was introduced in. And the first $ game predates me. Jim, do you have a? MR. HASEGAWA:. ACTING DIRECTOR LaBRIE:? Okay, so not too far., and then. Hold on. We are monitoring our profits on a weekly basis, as we do our sales. As you recall, we have set a profit goal for this fiscal year. So we will be monitoring that every week. So as previously reported, the sales through September th were running at about percent higher than sales during that same period of time last year. With the strong sales from the $0 Scratchers Daniel P. Feldhaus, CSR, Inc...

11 California State Lottery Commission Meeting September, game and the lack of really big jackpots so far this fiscal year, our estimated profits are running just -- just percent ahead of where we were last year. So there is some room for improvement there, and we hope we get some big jackpot rolls. Other informational items: I ll give you an update on our three-year strategic direction. So the process there consists of four areas. One is internal analysis and review of our business. And over the past six weeks, staff has completed a series of informational hearings that were presented on a number of topics that will help begin to guide and shape our priorities for the next three years. We re looking at consumer attitudes and perceptions, retailer performance, trends in digital marketing, et cetera. A plethora of topics that will be important to us. And we ve had some external presenters from the academic world, as well as some internal staff from the Business Planning unit. The next step will be for each division to go through their strategic planning, a SWOT analysis within their division. And that s going to start taking place within the next couple of weeks. The final SWOT analysis will be done by senior staff, with some approval of what the divisions have Daniel P. Feldhaus, CSR, Inc...

12 California State Lottery Commission Meeting September, done. And then the goal is to be completed by about mid to the end of October, with all of that analysis. We will be checking in with you as we go through the process, and reporting where we are on the status. The plan is to have a strategic direction for you to review and vote upon sometime in the late spring of next year. Mission is Message campaign is underway, so I hope you all have had an opportunity to either hear on the radio or see some of the good work that was done around that. So that is -- that continues on. Also, if you are at Levi Stadium sometime this fall, you ll see that we have a presence there. We are -- I probably could have gotten you a little better picture here; but if you can look in the little corner there, you can see that we have a concourse -- a California Lottery concourse. This is not the only sign, there are several signs; and there even is some visibility from the street. So on that concourse, on the seventh level, we have a number of Lottery signs and information. This is just one example of a sort of SuperLOTTO Plus that s going to taking over some of the pillars in that area. We also will be having our Mission as a Daniel P. Feldhaus, CSR, Inc...

13 California State Lottery Commission Meeting September, Message. We have two large poster areas where this is one that is being displayed, as well as the Little goes a long way, which is this pencil mural that was created by an artist. And you can see the little pieces there, are actually all of the ways that schools have spent the money that they receive from the Lottery. So you see various items there. And that will be displayed as well. And then finally, our 0-year anniversary. You may have noticed that the display cases in the Mola [phonetic] Room are covered up right now, and that s because we are getting ready to unveil, on next week, a new Mola. And staff has been working diligently to find a collection of artifacts that have been stored in our warehouse that represent the 0-year history of the Lottery. So through the walls here, we will be able to tell the story. And I hope that everyone will get a chance to come by and see it at some point. It will be on display until the end of the year, and then we ll go back to having our student art displayed there. So Paula Negrete has done an excellent job in leading, on getting that put together for us. So we hope you get an opportunity to see it. Voting items on the agenda today are the Asian Consumer Market Advertising Services contract. Richard Daniel P. Feldhaus, CSR, Inc...

14 California State Lottery Commission Meeting September, Mahan will present. We have two items in the ITSD area, which is the Data Quality Software and Services, as well as Digital Agency Services contract. Chris Riesen will present that. We have an amended Lottery regulation, with respect to employee recognition, presented by Dottie Wallace. And finally, we have the Scientific Games International Scratchers contract with respect to a player rewards program. So if there are no questions, I will bring Jim up for Part. CHAIR KIRTMAN: I have one more question. I m sorry. ACTING DIRECTOR LaBRIE: Sure. Don t apologize. CHAIR KIRTMAN: On this $0 game slide, I have one other question on it. It s just not registering for me, and I apologize for that. Do we have any information on the number of tickets sold for each? Because I feel like that s a better comparison of strong Scratchers sales. Because if one is and one is 0, do you think it s going to outsell, anyway? Daniel P. Feldhaus, CSR, Inc...

15 California State Lottery Commission Meeting September, ACTING DIRECTOR LaBRIE: Oh, I hear your point. The exact numbers I don t have in front of me. I don t know that we can get those to you by the end of the meeting. Jim, do we have a -- we can get that information to you -- CHAIR KIRTMAN: No problem if you have to -- ACTING DIRECTOR LaBRIE: No, it s a very good point. No, we can get that information to you. CHAIR KIRTMAN: Okay. ACTING DIRECTOR LaBRIE: Yeah. MR. HASEGAWA: [Unintelligible] divide it. ACTING DIRECTOR LaBRIE: Oh, and divide it? Okay. So we can do that. And then just on another note, for the 0 th anniversary; so this is our state s first attempt at having a $0 product. And a number of other states have this already. I think Texas even has a $0 ticket. We don t know that this will always be part of our portfolio; but we did want to take the opportunity, given the anniversary, to give it a try, and see how the public responded to it. CHAIR KIRTMAN: Thank you. ACTING DIRECTOR LaBRIE: Okay, thank you. MR. HASEGAWA: All right, good morning, Daniel P. Feldhaus, CSR, Inc...

16 California State Lottery Commission Meeting September, Mr. Chairman, Commissioners. CHAIR KIRTMAN: Good morning. COMMISSIONER AHERN: Good morning. MR. HASEGAWA: I m here to talk a little bit about California Lottery players. First off, I wanted to give you a little information about how we determine the number of players that we have in California. We ve been serving California adults through a tracking study, pretty much ever since the early days of the Lottery. However, I do want to point out that the methodology by which we collect that information has changed, starting with fiscal year -. Previously, all of the interviewing was done via telephone. But with the advent of cellular phones and households no longer having land lines, back in fiscal year -, we began to use not only telephone surveying techniques, but also online surveying techniques, so that we really can properly represent all California adults. And, really, that is the goal for this tracking study, is to represent all California adults. The interviews are done both in English and in Spanish. And we collect probably over 00 interviews every month. And it s done on an ongoing basis, so that we have a Daniel P. Feldhaus, CSR, Inc...

17 California State Lottery Commission Meeting September, very large sample size during any given fiscal year. So with that information, what we do is we define a player as any person who has bought a ticket at least once during the prior months of their interview. And that s what constitutes for us a Lottery player. And using that definition, the survey shows that percent of all California adults are past-year players, meaning, that they again have bought a Lottery ticket at least once in the prior year. And when you combine that with the nearly 0 million California adults that are currently in the state, that means we have over million Californians who play the Lottery in a given year. So with that statistic, though, what s really important is to understand how do Lottery players compare with the population at large. And in general, what we find is that the demographics of Lottery players pretty much mirror the demographics of California adults. And we ll show you some specifics by looking at comparisons of the population -- the California adult population at large, compared to Lottery players demographics -- based on gender, based on income, based on race, ethnicity, age, and so forth. But, again, the conclusion that we come away with is that pretty much our players, our past-year Daniel P. Feldhaus, CSR, Inc...

18 California State Lottery Commission Meeting September, players, look pretty much like the California adult population in general. So, for example, here, the first one shows by gender. So just as in the population -- which is, roughly, about a 0-0 split between men and women -- our past-year players represent about a 0-0 split. Now, there are some minor differences. But, again, since we re only serving so many people, those are within kind of the sampling variation. An important slide is to look at how do the incomes of our players compare to the general adult population. And, actually, when you look at Lottery players, which is the pie chart on the right, you will see that players come from pretty much all income groups, and represent the population at large, which is represented by the pie chart on the left. Pretty much most of the segments of the pie are nearly identical. There are some minor differences. For example, actually, Lottery players are less likely to come from households where the household income is less than $,000; and a little bit more likely to come from households that are of middle income, ranging from $0,000 to $0,000 a year. When you look at race and ethnicity, again, the Daniel P. Feldhaus, CSR, Inc...

19 California State Lottery Commission Meeting September, two pie charts look very, very similar in terms of our players versus the California adult population in general. Again, there s some minor differences. Hispanics make up a little bit larger proportion of past-year Lottery players than the adult population in general. But there are very small differences in that, even. And even when it comes to age, although we do try and make sure we reach out and market to all ages, and particularly those that are between and, who are new to Lottery, really, when you look at the playership, again, the two bars there look pretty much identical. And, as such, Lottery players have very similar age profiles as California adults in general. We might skew a little bit less in those that are and older. So when we take the numbers of last year s fiscal year sales were about $. billion. And then from the tracking study of the interviews conducted, again, in fiscal year -, we had percent playership, which was a little bit over million players -- about. million players. When you divide the $. billion by the. million players, that comes to about $ in ticket purchases occurring, on average, per player over the course of the year. Daniel P. Feldhaus, CSR, Inc...

20 California State Lottery Commission Meeting September, Now, while every player doesn t play weekly, but just to take the numbers and divide $ by the weeks, that equates to just over $ per week, per player. Now, one thing I want to mention is, as I talked about the $, that was pretty much the ticket purchases. And that really isn t their out-of-pocket expenditures. Because, typically, what happens is, if a player wins a smaller prize -- a $, a $, a $ prize -- they traditionally, for the most part, over time, churn those -- the winnings back into buying more tickets, either on that occasion or a future occasion. And such a lot of the ticket purchases made by consumers are done with winnings that they have from other Lottery tickets. So this $ is not necessarily coming directly out of their pocket, per se. It s their own dollars, but also augmented by the Lottery winnings from their prior purchases. So, again, in kind of summary, you know, really, this was to show that, you know, much to some, you know, urban legends or myths, that Lottery players really do come from all walks of life and pretty much represent the California adult population. And that s what we wanted to provide, this information to the Daniel P. Feldhaus, CSR, Inc...

21 California State Lottery Commission Meeting September, Commission, so you have, you know, the hard facts in front of you, so that if confronted or asked, you know what the data actually says. And with that, I d be happy to entertain any questions from the Commission, if you have any. COMMISSIONER LIBANG-BOBILA: I have a question. There is also a lot of players who are not living in California, who are living in, you know, the borderlining neighboring states, like in Nevada. How are they calculated into this -- MR. HASEGAWA: Well, we don t survey those in Nevada, to understand their playership. We have looked at -- and I don t have it with me, but I can get it -- we did do an analysis of how much our estimate of sales from out-of-state residents are. We did that by looking at claims; you know, by people who have to claim a prize, and looking at what share of sales are likely to come from Nevada and Oregon residents. And for our state, at least, it s a very relatively small percentage compared to some other jurisdictions, and what they were telling what they have. Mostly, because there really aren t any -- Las Vegas, you know, and Reno are about the closest cities to the California border. And even those, you know, they re not, like, scrambling to buy Lottery tickets, since they Daniel P. Feldhaus, CSR, Inc...

22 California State Lottery Commission Meeting September, are residents of a state that has pretty much gambling throughout. They do come -- because, obviously, Prim Valley, which is on the border with Nevada on Interstate -- is the single largest Lottery retailer. And that s mainly fueled by large jackpots, when our Mega Millions, Powerball, or SuperLOTTO Plus jackpot really grows, then residents of the state come in to Nevada to buy tickets. But I can get that percentage for you. COMMISSIONER LIBANG-BOBILA: I actually know a few who participate regularly, and who are living in the Reno area but they work in Lake Tahoe, so they re frequent participants. That s why I asked the question. MR. HASEGAWA: Okay, all right. CHAIR KIRTMAN: Is there any -- is there any concern -- and I m not sure if I m going to ask this question correctly. Is there any concern about that two hundred and -- the fact that it seems to break down so evenly, is there any concern that that $ affects half that segment a little bit more than the other? MR. HASEGAWA: Yeah, oftentimes, you know, other people who use data will take, like you did, the, and divide it by the different income levels. Daniel P. Feldhaus, CSR, Inc...

23 California State Lottery Commission Meeting September, And, yes, $ for a person making, say, $0,000 a year represents a much larger percentage of their income than $ divided by somebody who makes $0,000. But, you know, I guess I would -- that would pretty much apply for most products in general. Everything takes up a larger share of someone s income. CHAIR KIRTMAN: Is that a number that plays out in averages? For example, is there any documentation or research that shows that someone that plays 0 plays, you know, spends a lot more money, versus what someone who makes $,000 spends per year; and so sometimes that average makes it, which seems pretty high for anyone below the median? MR. HASEGAWA: Yeah, we do find that the sales or the heavier players, are probably more likely coming, mostly from the middle incomes. Yes, the most affluent tend not to play as frequently, because they have very many -- a lot of other entertainment and gaming options available to them, compared to those of more modest means. And so they probably actually do buy Lottery to a lesser extent than those more middle-income households. COMMISSIONER LIBANG-BOBILA: And -- CHAIR KIRTMAN: No, go ahead. COMMISSIONER LIBANG-BOBILA: Is there a way to -- like, in improving our digital capabilities, or Daniel P. Feldhaus, CSR, Inc...

24 California State Lottery Commission Meeting September, data capabilities, given what s up for approval today, is there any way that they can factor that in, where we can -- they can -- we can -- we can determine what funds are being used -- I m sorry, I m not asking this correctly. For example, if they re using the money that they have won to buy Lottery tickets -- again, if they re using their winnings to purchase the tickets, is there any way that they can track that? MR. HASEGAWA: Not directly. I mean, you know, the claiming happens through the gaming system. Typically, the prizes I was talking about is at retail. COMMISSIONER LIBANG-BOBILA: Right. Like, let s see if they win five dollars, and they decide to turn around and use that five dollars to purchase that -- to purchase a new ticket, just to make our calculations even more accurate, is there any way that we can track that? MR. HASEGAWA: Currently, there is not, because we really don t identify at retail the individual player. COMMISSIONER LIBANG-BOBILA: But can it be suggested to the vendors that -- do you see what I mean? Just to make it more accurate for us, so that when we have these numbers, we can really show how much Daniel P. Feldhaus, CSR, Inc...

25 California State Lottery Commission Meeting September, money are people spending for -- MR. HASEGAWA: I mean, technologically, it is probably feasible; it s just that the infrastructure required, you know, might be quite a bit. And also, it would require probably, like, players having some type of card or identification as a Lottery player that gets scanned and so forth. COMMISSIONER AHERN: That might put a lot of strain on the clerk at -Eleven -- MR. HASEGAWA: Right. COMMISSIONER AHERN: -- to ask the person, Hey, you re -- you just won, are you paying? and go track that, would be awkward. MR. HASEGAWA: Exactly, yeah. Yeah, and they would have to scan it -- do extra -- there would be extra steps at retail to do that. Exactly. So that s something that may be, as Paula talked about, our strategic planning effort; and those are things that we would want to consider and look at, and see if that is in our future at all. COMMISSIONER PEREZ: I would think, if we do that, it s not going to make it easy for the players to buy our products. If you make it, you know, time-consuming, probably, I believe our sales might go down, if we do something like that. Daniel P. Feldhaus, CSR, Inc...

26 California State Lottery Commission Meeting September, MR. HASEGAWA: The fact of how -- I say that most players at those low-level winnings do buy subsequent tickets with it, that comes mostly from survey research, just asking people, you know, the prizes they won and what they do with it. And that s how we came to that conclusion. But, yeah, it wasn t directly through observational data with the actual purchases. COMMISSIONER LIBANG-BOBILA: Thank you. MR. HASEGAWA: Uh-huh. CHAIR KIRTMAN: Thank you. MR. HASEGAWA: All right. CHAIR KIRTMAN: The next item on the agenda is the consent calendar. There are no items under the consent calendar. So we ll proceed to action items. Action Item.a. Richard? John? MR. MAHAN: Commissioners, I m here just very briefly to introduce John Koyama, who has been appointed to be the new chief of Consumer Marketing and Advertising unit. I m thrilled that he has accepted this position because it allows me now for the last three months not to have to be filling in that position as well. So I d like you to welcome John Koyama who will make the presentation. Daniel P. Feldhaus, CSR, Inc...

27 California State Lottery Commission Meeting September, CHAIR KIRTMAN: Thank you. COMMISSIONER SMOLIN: Welcome. CHAIR KIRTMAN: Welcome. MR. KOYAMA: Thank you. Thank you very much. Good morning, Mr. Chairman, Commissioners. Yeah, it s my opportunity to present Item.a, which is the Asian consumer marketing and advertising services, and the award of that particular contract. And staff is seeking approval to award the Asian consumer marketing and advertising services to Time Advertising. This is a five-year contract, and with a two-year extension. And the expenditure authority is not to exceed $ million, and that includes all of the extensions as well. And just to give you a little bit of background, in terms of our advertising efforts as the Lottery, in addition to the advertising campaigns that we do for the general market and also our Hispanic consumers as well, we also do actively in-language advertising to support our Asian community as well. And that s in-language advertising in not only Chinese in two different dialects, in Mandarin and also Cantonese, but also in Vietnamese and also Korean as well. So this will continue our efforts to continue to advertise towards our Asian consumers as well. Daniel P. Feldhaus, CSR, Inc...

28 California State Lottery Commission Meeting September, So, you know, for this new contract, the RFP process started in 0; it was actually put out for notification with the public in December of -- excuse me, that began in. It s been a long process. So, actually, that notification went out. We sent that out to about a hundred proposers, and also advertising agencies as well, in addition to posting it on our Lottery Web site, in addition to our DGS BidSync Web site as well. And we also advertised it thoroughly through trade publications and also consumer magazines as well, to generate interest behind the RFP. The results of that was, we received three bids from Asian advertising agencies -- prominent ones. And that was three bids from Gravity, The IW Group, and also Time Advertising. We went through an evaluation process that really started off with just kind of the minimum qualifications of each one of these firms, that included not only their minimum years of experience with the Asian language advertising and marketing, but we also looked at their agency location in California, and also their ability to do business in this state as well, in addition to some other business criteria as well. All of the agencies moved into the real evaluation phases. That was conducted in a couple of Daniel P. Feldhaus, CSR, Inc...

29 California State Lottery Commission Meeting September, different ways. In the Phase process, it was really looking at some of the more minimum qualifications that we looked at. And it was really looking at some of the information that they provided for their agency, looking at agency profiles, some of their case histories, in terms of campaigns, and also media case histories as well. And all of those were evaluated on a number of different criteria that not only included the agency size, history, and staff and location for the right fit with the Lottery, but also looked at the caliber of their strategic thinking, their creativity and innovation, the quality of their media capabilities, which is an important part of each one of these campaigns. Their buying, their planning, their research and their analytics ability, as well as their ability in digital and social, since much of our marketing is moving in that direction as well. We also looked at relevant experience within the gaming and entertainment categories, as well as the low-cost consumer goods categories as well. And all of those vendors actually did very well. This is really a simple pass/fail type of evaluation; and all three agencies moved into the Phase or the finalist competition. And that was a Daniel P. Feldhaus, CSR, Inc...

30 California State Lottery Commission Meeting September, two -- a three-part process that looked at a work assignment, specifically to look at how they would promote our Hot Spot product to Asian consumers. And looked at their agency recommendations, their creative capabilities, as well as their analytical thinking and strategic thinking as well. And we also included in there, their staff plan and their compensation plan as part of the Phase compensation -- or the evaluation, excuse me. And the work assignment, in terms of the scoring overall, it looked like Time Advertising did a real good job in terms of being able to show their strategic thinking and integrating it into an integrated marketing plan to support the Hot Spot product. And they were actually ranked by the evaluation team with a significantly exceeds scoring. Gravity came in what you would call, I guess, a second position with an exceeds rating. And then The IW Group came in at a meets. Based on that, all three, again, moved into the staff plan and compensation proposal. But on initial review of both of those documents, it was decided that Time and Gravity were the two competitors that, you know, should be -- or within the competitive range. So those were the two cost proposals and staff-planning documents Daniel P. Feldhaus, CSR, Inc... 0

31 California State Lottery Commission Meeting September, that were examined. And based on that, Time, in terms of the tipping point on this, it really came down to the full-time equivalents that were put against the agency staffing, in terms of account management and also account service. And Time came in at four times the level of the full-time equivalents, in terms of staffing in that area versus the other agency that was looked at or evaluated as well. So based on that, and also their work assignment, the evaluation team felt that Time was the clear winner of this particular bid. And with that, I would like to put up the -- get the Commission s approval to approve the contract at a five-year commitment at $ million, with a two-year extension, and all of those costs would be included in that $ million as well. And that would be for Time Advertising. So I ll open up for any questions and any comments you may have. CHAIR KIRTMAN: Any commissioners have any questions? COMMISSIONER PEREZ: Just a quick question. I don t know if you would know, probably the accounting department, the amount is in compliance with the Daniel P. Feldhaus, CSR, Inc...

32 California State Lottery Commission Meeting September, approved budget. Yes? Okay, that s it. CHAIR KIRTMAN: And remind me again how we re defining Asian consumers. MR. KOYAMA: Asian consumers? CHAIR KIRTMAN: Yeah. MR. KOYAMA: Well, Asian, Pacific Islander. CHAIR KIRTMAN: Okay. MR. KOYAMA: Yeah, that s how we re -- and we also look at -- although we don t advertise towards it, you know, South Asians as well, in terms of Indian, as well as included as an Asian. CHAIR KIRTMAN: Oh, so you re including Indian as well? MR. KOYAMA: Yes. CHAIR KIRTMAN: Got it. COMMISSIONER LIBANG-BOBILA: I have another question. MR. KOYAMA: Yes. COMMISSIONER LIBANG-BOBILA: The languages, are you also going to have it in Tagalog? MR. KOYAMA: That, we have probably looked at in the past; but it doesn t raise, in terms of the -- some of the prominent languages that our locations are in, and some of the languages in terms of how we need Daniel P. Feldhaus, CSR, Inc...

33 California State Lottery Commission Meeting September, to communicate our message to the Asian community. But that s something that definitely we ll continue to look at as well. COMMISSIONER LIBANG-BOBILA: Okay. CHAIR KIRTMAN: Any other questions? (No response) CHAIR KIRTMAN: Does any member of the public want to address the Commission at this time regarding action Item.a? (No response) CHAIR KIRTMAN: Do I hear a motion to approve action Item.a? COMMISSIONER LIBANG-BOBILA: Motion to approve. COMMISSIONER PEREZ: Second. CHAIR KIRTMAN: Roll. MS. TOPETE: Commissioner Smolin? COMMISSIONER SMOLIN: Yes. MS. TOPETE: Commissioner Ahern? COMMISSIONER AHERN: Yes. MS. TOPETE: Commissioner Perez? COMMISSIONER PEREZ: Yes. MS. TOPETE: Commission Libang-Bobila? COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Chairman Kirtman? CHAIR KIRTMAN: Yes. Daniel P. Feldhaus, CSR, Inc...

34 California State Lottery Commission Meeting September, MR. KOYAMA: Thank you very much. CHAIR KIRTMAN: Thank you. Next up, action Item.b. MR. RIESEN: Good morning, Commissioners. CHAIR KIRTMAN: Good morning. COMMISSIONER AHERN: Good morning. COMMISSIONER PEREZ: Good morning. MR. RIESEN: Chris Riesen, Deputy Director of Information Technology Services. So I have both.b and.c. Both of these are contract approvals and contracts that support our - business plan. So starting with.b, this is the Data Quality Software and Services contract. And I m requesting your approval today to make use of Experian for this contract. In - -- or in our - business plan, we established a project to expend the value of data and information in the organization. And this project focuses on making improvements to how we manage data, and particularly regarding our players. So in the future, we ll be looking to expand the use of what we re putting in place; but initially, player data is where we want to spend our time. And so, for example, we re looking to make improvements, or specific improvements around mailing Daniel P. Feldhaus, CSR, Inc...

35 California State Lottery Commission Meeting September, addresses, addresses, birth dates. So some of the general types of data that we collect around our players. Putting in software and services around this allows us greater ability to implement standards in our data, clean up any problematic data that we have, and generally make it something that s more -- a more usable asset for us. So, for example, improving the quality of the data allows us to do -- produce better information out of our Business Intelligence program. So some of the research that Jim was mentioning earlier, having better quality data on our players allows us to do better, maybe more focused surveying, create more accurate results. And so even some of the research we may not have been able to do in the past because of the quality of our data, it will become more accessible to us. In addition, there s one additional area that we will benefit from in implementing this, which is -- and this will be talked about by John Reilly in item.e -- but in relation to our rewards program, there s a requirement that we identify or verify the identity of players, and ensure that we have a one-to-one understanding between a player and the accounts that we re tracking; and that we know more specifically who they are. The rewards program wants to ensure that a Daniel P. Feldhaus, CSR, Inc...

36 California State Lottery Commission Meeting September, player doesn t have multiple rewards accounts, in essence. So this -- this contract is really for two pieces: One is data quality software, which is sort of what allows us to clean up our existing data; and then an identity verification service, that allows us to check the identity of an individual when they register with us, say, for Second Chance, rewards, et cetera. So we went through a thorough evaluation process in order to select the software and services. We identified our needs, so we started there. And examples of this include the ability to parse and standardize our data, which is really about formatting values into consistent standards, applying business rules and knowledge to that data, to ensure that it s good quality. General cleansing of the data, all right, making sure that there s no inconsistencies or really problems within what we have. Doing profiling of the data, which you can think of as ongoing analysis around what the data means to us and knowing when data-quality issues are arising or where they re arising. Enrichment. So being able to add additional data to make it more usable. Daniel P. Feldhaus, CSR, Inc...

37 California State Lottery Commission Meeting September, And then other things that are maybe a bit more simple, but doing validation, right; making sure addresses are good, and mailing-address validation, matching up to, say, the U.S. Postal Service, and making sure that the address that we have is a valid mailing address, and that it s formatted correctly. So after identifying our needs, we looked out across the vendor landscape to look at the possible vendors that could match up to us, and see that they provided services and software to meet our needs. And we performed an initial narrowing down to the ones that were more specific to us, and matched more closely. And then based upon those requirements that I went through, we further narrowed down the field to, roughly, different vendors that provided the software and services we were looking for. And more specifically -- and part of this is particularly in terms of size -- so the vendors that are out there are really broad. Some are really large and some are much smaller. And our needs sort of fit in the middle, right. We don t track an extensive amount of data on our players or ask them for it; and so we don t need a really extensive, broad service. So we wanted to make sure we were going after Daniel P. Feldhaus, CSR, Inc...

38 California State Lottery Commission Meeting September, vendors that fit us and fit our need from a size and cost perspective. And so asked -- so we narrowed down to four, that sort of fell within this range, and asked them to come in and provide demos, provide cost information, go through the rigor of really looking more closely at what they offer; and ultimately, came down to selecting Experian for this. They provide both the data quality software and the identity-verification services. And then are going out to resellers for the competitive-bid process. So just to summarize, we selected Experian, particularly because their product suite and their identity-verification services met our needs, and were sort of the best value for us. And this contract is a three-year contract. And there s, like I mentioned before, the two components of it: The data-quality software, which has a price set not to exceed $0,000 over the course of the three years; and then the identity-verification services, again, over the course of three years, which is set not to exceed $00,000. And so we re asking for your approval on this contract today. Questions? Daniel P. Feldhaus, CSR, Inc...

39 California State Lottery Commission Meeting September, CHAIR KIRTMAN: Any questions? (No response) CHAIR KIRTMAN: Does any member of the public want to address the Commission at this time regarding action item.b? (No response) CHAIR KIRTMAN: Do I hear a motion to approve action Item.b? COMMISSIONER SMOLIN: Motion. COMMISSIONER AHERN: Second. CHAIR KIRTMAN: Roll? MS. TOPETE: Commissioner Smolin? COMMISSIONER SMOLIN: Yes. MS. TOPETE: Commissioner Ahern? COMMISSIONER AHERN: Yes. MS. TOPETE: Commissioner Perez? COMMISSIONER PEREZ: Yes. MS. TOPETE: Commissioner Libang-Bobila? COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Chairman Kirtman? CHAIR KIRTMAN: Yes. MR. RIESEN: Great. All right. On to.c? CHAIR KIRTMAN:.c. MR. RIESEN: All right, so this is the Digital Daniel P. Feldhaus, CSR, Inc...

40 California State Lottery Commission Meeting September, Agency Services contract. And I m excited to ask for your approval today for Olson Company to fulfill the services in this contract. So during the - fiscal year, we began developing a request for proposal that would ultimately be to replace the contract that we have with SolutionSet. And so as a quick refresher, Solution -- we went into contract with SolutionSet five and a half years ago, and they provided services, including Web development, maintenance, and operations of our public Web site, and hosting of the Web site. And for most of those five and a half years, they provided all of those services. However, back in February of, we took over the responsibility of hosting the Web site. And so today, they are focused on Web development and maintenance of the public Web site. So as we began developing this RFP over a year ago, we realized that it was time to make some changes to it. That we were looking for someone to provide services that went beyond just Web development, and went beyond just making sure that the Web site was up and running, or responding if problems were to occur. It s important that as we move into taking better advantage, or more advantage of what we can offer through digital means, that we have someone that s Daniel P. Feldhaus, CSR, Inc... 0

41 California State Lottery Commission Meeting September, working more strategically with us, and provide services and the opportunity to have more discussions that expand our thinking on how we can make better use of digital in order to communicate about products, about the message, and our mission, and all of those things. So similar to how we engage other marketing companies, like David&Goliath and Alcone and such, and Time, as you approved earlier, we wanted a company that understood both the marketing aspect of what we do, but also had deep, technical knowledge to continue to provide, for example, the Web development side of things, but also move into other areas, such as how do we take better advantage of mobile, how do we take better advantage of social media. A more integrated and seamless experience for our players, as we move into the future -- and even beyond players. Retailers and other key stakeholders that we have. And so it s really about elevating our brand across the various digital channels that we have. And so we are looking for a company that would be part of the group that sits at the table when we re looking at these sorts of things, and strategizing. So to facilitate this change, like I said, we began developing this RFP over a year ago. And on March nd,, we posted the RFP, and notified roughly 0 vendors Daniel P. Feldhaus, CSR, Inc...

42 California State Lottery Commission Meeting September, that, through various means, including BidSync and other online tools, and the lists that we have. And so on April th of we received questions from bidders. We provided them an opportunity to ask us questions about the RFP before they actually submitted their bids. And so on April rd,, we received proposals from eight bidders. And those bidders included Alcone Marketing, Deloitte Digital, Epsilon, EVB, FuseIdeas, IBM, Olson, and Ocean. And so the evaluation that we went through, once we received the bids, was a three-part process. And it included various parts of the organization, including Corporate Communications, the Executive division, mostly in the form of Business Planning and Research, Information Technology services, and sales and marketing. And we had multiple levels of staff involved, including four of the deputy directors. And so Phase of that evaluation was really a simple pass or fail : Did they submit everything that they were expected to submit, and did they meet the minimum qualifications that we had put out there? Phase was the actual rating of the proposals. And we looked at references, personnel, and resumés of the people that they were submitting to be particularly Daniel P. Feldhaus, CSR, Inc...

43 California State Lottery Commission Meeting September, key individuals on the account. Case histories, which was really to provide us some understanding of work that you ve done in the past, and particularly important work that you think is relevant to us. We had developed an extensive bidder questionnaire. This was, I think, close to 0 questions if I remember correctly, that they had to provide answers to. And those questions covered everything from information about the company, to the individuals, to the work that they ve done in the past, and how it applies to the Lottery. And they also had the ability to recommend or propose any additional services that they thought we might have missed through our development of the RFP. And so on June th,, we notified three finalists that they would be moving forward into the final phase of the evaluation. And those three finalists were Epsilon, IBM, and Olson. And each finalist was provided instructions on the finalist presentation. They were asked to provide us a road map of the next three years. So their view of what it is that we would be working on and how they saw us growing our digital side of what we do over the course of those three years. And then the second part of the presentation Daniel P. Feldhaus, CSR, Inc...

44 California State Lottery Commission Meeting September, was really to provide to us an understanding of what they thought a Scratchers campaign would look like two years into that road map. So the intent was to demonstrate how they were taking advantage of what they were proposing to us in the road map. And so those presentations were rated on the technical solution that they presented, the unique and creative concepts and ideas that were part of the campaign, and their overall use of communication channels in support of our digital vision. In addition to all of that, we did a cost analysis based upon what they proposed; and based upon the best value analysis that we did, Olson was selected. And they were selected because they demonstrated a solid understanding of not just California Lottery s business, but the lottery industry as well. In particular, they have several other lotteries that they provide similar services to, including Minnesota Lottery, Ontario Lottery and Gaming, and Atlantic Lottery. In addition, they clearly demonstrated their ability to think strategically; provided clear vision on what they thought was important to us, and where we should go; and thoughtful leadership around how that would be executed. And they also demonstrated a solid Daniel P. Feldhaus, CSR, Inc...

45 California State Lottery Commission Meeting September, bench from which to pull. We have a lot of projects going on; and so the ability to draw on enough people and skills and knowledge to execute those projects that are related to digital was important. And so this is a five-year contract. It has five potential one-year extensions. And the contract amount is not to exceed and a half million. And that and a half million only covers the first five years; it doesn t cover the extensions. So we re coming to you today to ask for your approval on this. Are there any questions? COMMISSIONER AHERN: I have a couple questions. MR. RIESEN: Okay. COMMISSIONER AHERN: On SolutionSet -- MR. RIESEN: Yes? COMMISSIONER AHERN: -- did their contract expire? MR. RIESEN: So their contract was set to expire in May. We extended it out. And specifically, we have it extended out to the end of this calendar year, December st. But the last two months of that is really only in case we have any troubles with the transition that we do from them to Olson s. Daniel P. Feldhaus, CSR, Inc...

46 California State Lottery Commission Meeting September, COMMISSIONER AHERN: And they weren t listed as one of the eight people that put in a bid. Were they even interested in bidding? Or did they -- MR. RIESEN: So, they actually were. So during the course of the time when we ve been in contract with them, they were bought by a company called Epsilon. And Epsilon was one of the bidders. So it s just a name change. And like I had mentioned, they were actually finalists. COMMISSIONER AHERN: Okay. CHAIR KIRTMAN: Any other questions? COMMISSIONER SMOLIN: Is this going to cause any additional staffing needs in the Lottery? MR. RIESEN: So, I would say no, not the contract in particular. But overall, the move to making more use of digital, whether it s Web or mobile or whatnot, that impacts our staffing, and really, in terms of how we gear our staff and what work they re doing. So there s some shift happening; but I would say that s where the impact comes, not particularly from this contract. Because we already have the mechanisms in place to manage this sort of contract and interact with Daniel P. Feldhaus, CSR, Inc...