But Minnesota lottery experiment thwarted by politics

Known by U.S. consumers only for its video game systems, Nintendo is keenly interested in moving into the market for home financial services. This shouldn’t surprise anyone, but apparently it does. Case in point: the good people of Minnesota recently had an allergic reaction to a scheme that would allow citizens to play the Minnesota State Lottery through their Nintendo Entertainment System decks.

The trouble apparently was that people had never conceived of a non-video game use for the Nintendo electronics. That the first such use should be gambling — well! Outrageous! (Previously condemned as brain rot, suddenly the NES deck became a family-and-children icon.) Laying Midwestern morality to one side, we think that in view of its long-term plans, Nintendo needs to do some creative repositioning of its gadgets.

The Minnesota story. Early in September, the Minnesota State Lottery announced that, beginning in 1992, it would conduct a market test of at-home lottery games using the Nintendo control deck with a special Lottery cartridge. The system would allow online access to popular games such as Lotto, Daily 3 and Gopher 5. There would also be games offering instant results that could be enhanced with on-screen graphics and animation.

The Lottery cartridge was programmed by Control Data Corp.’s Automated Wagering Division. CDC runs the wagering operations for eight states, two off-track betting operations in New York, and the Norwegian Lottery. Computer services are clearly a major aspect of its work, but it also handles marketing and support services.

The Minnesota State Lottery is its newest customer and has the newest equipment, making a market test of new technology relatively simple from a system and support point of view.

Security paramount. Both Control Data and the State are accustomed to high-security operations. After all, consumer confidence in the fairness of the system requires airtight procedures for all games. The Nintendo experiment was no exception. The Lottery cartridge had an impressive list of checkpoints.

• User access is by passwords. The user can change the password, and the change is confirmed by mail. To get a password, a player must register in person and show a photo ID.
• The cartridge, control deck and modem have unique, registered identifier codes built in. All codes must agree with the host computer records.
• Data transmission is scrambled. The modem is unique; ordinary data modems won’t work.
• The deck shuts itself off if an incorrect password is used or if it is left unattended. It also has certain anti-tampering features.
• All plays are recorded and the subscriber gets regular statements of all activity.
• All games are prepaid; there is no credit. Players can deposit up to $200, to which they can add winnings up to $1,000.
• Only $50 per day can be wagered.
• Prizes over $1,000 must be claimed in person at a Lottery office. Smaller prizes are paid by check.

Adults only. Besides ensuring security for the players, the State needed to prevent minors from using the system. It also wanted to assuage fears of enticing compulsive gamblers. In view of the small amounts of money that could be spent via the cartridge (and the ready availability of the existing big-stakes games), the State and CDC felt that security was adequate.

The State also pointed out that Nintendo control decks are in 32 percent of Minnesota households, and that 50 percent of current game-cartridge users are adults. By treating their Lottery password with the same care as their bank-machine PIN number, parents could be confident that their children were protected from temptation.

In the eyes of Lottery officials, the Nintendo market test was just another way of distributing Lottery services. It would be a convenience to the home-bound and a simple extension of the current practice of televising game drawings.

Vox populi. But the market test proposal ran into serious opposition. The anti-gambling forces in the state have been increasingly vocal in recent months. Minnesota, after all, is not an “anything goes” state like California. The chairman of the Senate Gaming Regulation Committee stated, “If there was a vote on the lottery today, it would be voted out.”

(We have our doubts about that. Legal gambling in Minnesota is projected to hit $2.4 billion this year –that’s $460 for every man and woman in the state. Those citizens are voting with their pocketbooks.)

The key objection, though, appeared to be the public’s cognitive dissonance between the idea of Nintendo as a toy for innocent children and gambling as an adult vice. Roger Moe, the Senate majority leader, was quoted in the St. Paul Pioneer Press as saying, “Converting a game which is immensely popular with young children into a gambling tool is not only unethical, but insidiously destructive to society.”

The potato was too hot. In mid-October, the Minnesota State Lottery announced it was dropping the whole idea. There was some grumbling from sympathetic politicos about the loss of jobs for Control Data, which is based in Minnesota. But Lottery officials recognized that this potato was just too hot.

The cartridge that Control Data programmed may have been beyond the pale for Minnesotans, but in Japan it wouldn’t even raise eyebrows. Nintendo decks are widely used there for home banking and stock-market transactions. Cartridges are also available for betting on bicycle races, which is very popular in Japan. In a few months, there will be a system for home betting on horse races.

Squeamishness notwithstanding. In the U.S., Nintendo plans to deploy a nationwide dialup network for Nintendo Entertainment System decks. No startup date has been announced, though. The network and the communication cartridge were originally designed to support multi-player games with coast-to-coast competition. But Nintendo quickly realized that online shopping, group chatting, electronic mail and news services were a natural extension of the facilities.

Nintendo has also signed a letter of intent with Fidelity Investment, a nationwide investment advisory firm, to develop financial services, including stock market information and real-time trading of securities. Fidelity has begun the market research for this project. However, no launch date for the service has been set.

The squeamishness of Minnesota’s anti-gambling faction notwithstanding, applying the Nintendo deck and its familiar television-based user interface to financial services of all kinds will have powerful appeal. But first, Nintendo will have to educate the consumers that NES is not a computer (a word that conjures fearful images of complexity and frustration) and it’s not just a game — it is a new kind of electronic appliance, perhaps a sort of very remote control box.

When that concept takes root, the public clamor for digital communications will take off.

Peter Dyson