he private manager award is the first of its kind in the U.S. lottery industry.
As the private manager, Northstar will be responsible for the day-to-day operations of the Illinois Lottery and its core functions, including lottery game development, supply of goods and services, and marketing and advertising, among other services, subject to oversight by the lottery. The private management agreement is expected to be signed within the next several weeks. Operations under the new arrangement are scheduled to commence on July 1, 2011 following a transition period.
Scientific Games will be responsible for the design, development, manufacturing, warehousing and distribution of instant lottery tickets and will be compensated based on a percentage of retail sales. Scientific Games will also be entitled to its pro rata share of Northstar's earnings.
Under the contemplated terms of the private management agreement, Northstar will receive annual incentive compensation payments to the extent it is successful in increasing the Illinois Lottery's net income above certain target levels, subject to a cap of 5% of the applicable year's net income. Northstar will be responsible for payments to the State of Illinois to the extent such targets are not achieved, subject to a similar cap. Northstar is expected to be reimbursed for most of its operating expenses under the arrangement.
"As a member of the Northstar Lottery Group, we look forward to the opportunity to responsibly drive sales growth and returns to Illinois," stated Michael R. Chambrello, President and Chief Executive Officer of Scientific Games.
"This award represents a paradigm shift for the U.S. lottery industry as it is the first instance that a commercial enterprise has been charged with the duty of fulfilling a state's statutory mandate that a lottery responsibly generate additional revenue for good causes. We are proud to be a part of the Illinois Lottery's progressive efforts and we see this as an opportunity to prove to policy makers across the country how meaningful a commercial business model can be to their State and its residents," Chambrello added.