State lotteries losing revenue to 'jackpot fatigue' and casinos


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Insider BuzzInsider Buzz: State lotteries losing revenue to ‘jackpot fatigue’ and casinos

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The biggest loser in the lottery game? Increasingly, it’s the states that rely on lottery revenue, as fewer people are buying tickets of chance.

In 22 of the 44 states with lotteries, revenue declined between 2014 and 2015, the most recent year for comprehensive data, the Pew Charitable Trusts reported Thursday. Twenty-one states experienced declines from 2013 to 2014.

In 2016, lottery revenue fell 3.3% in Missouri, more recent data shows, while it fell 3.2% in Rhode Island and 2.6% in West Virginia. Officials in many other states are facing similar numbers.

The research blamed “jackpot fatigue,” which is a drop-off in regular lottery play until the pot reaches headline-making size. Demand is also in retreat as fewer millennials play and because of competition from other forms of gambling, especially casinos. Some states have increasingly allowed video slot machines in bars and restaurants.

Combined revenue in the 44 states that have lotteries was about $21.4 billion in 2015. That’s a fairly thin slice of the $2.2 trillion that states raised by all methods in 2015. Still, “it’s $21 billion in taxes they don’t have to impose on people, and that’s 99%” of the reason states operate lotteries, David Brunori, a professor of public policy at George Washington University who has written about state tax policy, told Pew.

Some states funnel lottery money into the general budget, but most earmark it for a specific purpose. Colorado uses it for environmental protection, for instance, while in West Virginia the lottery helps fund schools, senior services and tourism—a television ad there pipes out its push for lottery play over footage of white-water rafting. Some states are well aware of the pressure to keep players coming back; the Massachusetts treasurer this year asked the state legislature to increase the lottery’s advertising budget to help it compete with casinos.

One way to gauge lotteries’ importance to state budgets is to compare its revenue to what’s pulled in with corporate income taxes, another relatively small, but important, source of state dollars. Corporate income taxes amount to an average of 3% of state revenue, while the lottery contributes 1% of state revenue, according to Pew. In a handful of states, lottery revenue rivals or exceeds corporate income tax revenue.

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31 comments. Last comment 17 minutes ago by .
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Simpsonville
United States
Member #163189
January 22, 2015
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Posted: Yesterday, 11:11 am – IP Logged

I believe the big lotteries cut off their nose to spite their face.  PB raised the price and if memory serves me allegedly made it easier to win.  Now MM will follow suit in October raising the cost of a ticket 100%.  It doesn’t help with negative press about states not paying on this voluntary tax winnings due to state budget woes.

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United States
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September 11, 2011
417 Posts
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Posted: Yesterday, 11:27 am – IP Logged

yes i agree they keep upping the price and the odds 300 million to one or so is impossible to win to begin with,iits only fun to buy a ticket when the jackpot is high

its still my opinion all these games are rigged even though they dont have to be…or do they>

MillionsWanted's avatar - 24Qa6LT

Norway
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December 10, 2004
1335 Posts
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Posted: Yesterday, 11:34 am – IP Logged

Jackpot-fatigue is the punishment of the lottery companies for creating too-hard-to-win lotteries.

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Wyomissing, PA
United States
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November 15, 2014
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Posted: Yesterday, 1:08 pm – IP Logged

Lotteries, by and large, rely on most players being near totally ignorant of the odds of the games being offered combined with horrible payback low as 40%. For a long time the strategy has worked due in large part to the novelty of games offering higher and higher jackpots at a nominal cost. $1 for a dream.

However, that model is waning as the jackpot amounts no longer generate much excitement. $10 million annuity was once a big deal (yes really, way back), then later over $100 million (long lines and news coverage of PA Super 7 run up to $115 million in 1989 was crazy), and finally topping out at $1.5 billion annuity (nearly $1 billion in cash). Increased ticket price along with worse odds than ever dissuades many from even bothering with the lottery.

In many jurisdictions, casino games are legally required to payback anywhere from 80% to upwards of 95%. In contrast, lottery numbers games tend to be around 50% to 60% tops with instants generally paying back 60%-75%. The main reason casino payback is so high is to keep players coming back for more.

Lotteries need to do the same thing, if they wish to remain relevant. Many lottery officials are aware of this issue, but are often constrained by laws that strictly limit the percentage amount of sales proceeds that can be allocated to prizes with little to no room for compromise. Give back more and earn more. It’s worked for lotteries that have been able to do it, such as Pennsylvania. Though even PA Lottery payback, while improved marginally in recent years, still falls very short of what casinos offer.

Many lotteries are betting that on-line play options will be the ticket to growing revenues. And they’re likely right. Though, key is to proceed in such a way that the games are unique from other gaming options to avoid cannibalization, such as by online casinos and remote video gaming (at bars, clubs, airports, etc). Be interesting to see how it plays out.

winsumloosesum's avatar - Lottery-060.jpg

Pennsylvania
United States
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September 1, 2003
5560 Posts
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Posted: Yesterday, 1:42 pm – IP Logged

Jackpot-fatigue is the punishment of the lottery companies for creating too-hard-to-win lotteries.

I agree.  And maybe people don’t trust lotteries anymore.  RNG draws don’t help either.

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dunn, nc
United States
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November 26, 2013
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Posted: Yesterday, 2:07 pm – IP Logged

The lotteries Have gotten more greedy over the years with the addition of extreme stratch off prices.These games are being pursued by people of low poverty to the fading middle class. Being a player of pick 4 &pick 3 games, I have constantly listened to fellow players complain about how difficult it is to win in the lotteries drawings. If an individual does’nt win from time to time they simply give up playing regularly or quit all together. remember the rich dont generally play.They dont need the money they already have it. Cater to the players that have to go to work everday to make financial ends meet!

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United States
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March 12, 2015
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Posted: Yesterday, 3:06 pm – IP Logged

People rarely win my state lottery —  1-2 a year and the lower prizes are an embarrassment.  It didnt use to be that way, so of course they are going to lose money.  The second chance promo was good initially but they managed to ruin that, too. 

No Nod

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United States
Member #164725
March 12, 2015
824 Posts
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Posted: Yesterday, 3:08 pm – IP Logged

The lotteries Have gotten more greedy over the years with the addition of extreme stratch off prices.These games are being pursued by people of low poverty to the fading middle class. Being a player of pick 4 &pick 3 games, I have constantly listened to fellow players complain about how difficult it is to win in the lotteries drawings. If an individual does’nt win from time to time they simply give up playing regularly or quit all together. remember the rich dont generally play.They dont need the money they already have it. Cater to the players that have to go to work everday to make financial ends meet!

Yep, besides people rarely winning the large state jackpot, my biggest gripe is that even the smaller prizes are rare and chintzy. 

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michigan
United States
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November 17, 2013
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Posted: Yesterday, 3:38 pm – IP Logged

Good because if they spread the love and actually let many

win instead of just one or two people like they always do then you’d 

have a line out the door waiting to buy tickets.

konane's avatar - wallace

Atlanta, GA
United States
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March 13, 2003
3625 Posts
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Posted: Yesterday, 3:56 pm – IP Logged

Yep, besides people rarely winning the large state jackpot, my biggest gripe is that even the smaller prizes are rare and chintzy. 

I Agree!  That along with a higher matrix to drive prizes higher have created substantial jackpot fatigue. State coffers are demanding more money which as stated above lowers % prize pool creating less incentive to play in the first place.. States legislators need to realize to get the population to spend more they increase lower end payouts.

GiveFive's avatar - Lottery-026.jpg

NY State
United States
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June 10, 2010
3982 Posts
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Posted: Yesterday, 3:57 pm – IP Logged

Lotteries, by and large, rely on most players being near totally ignorant of the odds of the games being offered combined with horrible payback low as 40%. For a long time the strategy has worked due in large part to the novelty of games offering higher and higher jackpots at a nominal cost. $1 for a dream.

However, that model is waning as the jackpot amounts no longer generate much excitement. $10 million annuity was once a big deal (yes really, way back), then later over $100 million (long lines and news coverage of PA Super 7 run up to $115 million in 1989 was crazy), and finally topping out at $1.5 billion annuity (nearly $1 billion in cash). Increased ticket price along with worse odds than ever dissuades many from even bothering with the lottery.

In many jurisdictions, casino games are legally required to payback anywhere from 80% to upwards of 95%. In contrast, lottery numbers games tend to be around 50% to 60% tops with instants generally paying back 60%-75%. The main reason casino payback is so high is to keep players coming back for more.

Lotteries need to do the same thing, if they wish to remain relevant. Many lottery officials are aware of this issue, but are often constrained by laws that strictly limit the percentage amount of sales proceeds that can be allocated to prizes with little to no room for compromise. Give back more and earn more. It’s worked for lotteries that have been able to do it, such as Pennsylvania. Though even PA Lottery payback, while improved marginally in recent years, still falls very short of what casinos offer.

Many lotteries are betting that on-line play options will be the ticket to growing revenues. And they’re likely right. Though, key is to proceed in such a way that the games are unique from other gaming options to avoid cannibalization, such as by online casinos and remote video gaming (at bars, clubs, airports, etc). Be interesting to see how it plays out.

Ron,

Please pardon my ignorance, but it’s not completely clear to me what you mean when you say “payback.” 

To my mind, payback means the amount of money any state lottery would return to players via winnings.  So if any given game pays back 40%, then out of a pool of $100,000 wagered by players, the state would keep $60,000, and return to players $40,000 via winning tickets.  Maybe I’m correct, but my gut is telling me that’s overly simplistic. Thanks!  G5

About playing the lottery —  You will lose more than you win. Until you hit a jackpot.  Then everything changes!

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The Quantum Master

West Concord, MN
United States
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December 7, 2001
3860 Posts
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Posted: Yesterday, 4:09 pm – IP Logged

For us it’s the lack luster lower tier payouts.

The payouts don’t reflect the odds (probability of win).

This is in addition to devaluing the hard earned dollar and crippling a player’s purchasing power by jacking the price of a play to $2.00; $3.00 if you play the multiplier.

Nope, we’re playing some our last Mega Millions till Oct 31; then there’s a ghost of a chance they’ll get our money again.

Maybe when it’s at $3 Billion we might consider.

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GiveFive's avatar - Lottery-026.jpg

NY State
United States
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June 10, 2010
3982 Posts
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Posted: Yesterday, 5:25 pm – IP Logged

The lotteries Have gotten more greedy over the years with the addition of extreme stratch off prices.These games are being pursued by people of low poverty to the fading middle class. Being a player of pick 4 &pick 3 games, I have constantly listened to fellow players complain about how difficult it is to win in the lotteries drawings. If an individual does’nt win from time to time they simply give up playing regularly or quit all together. remember the rich dont generally play.They dont need the money they already have it. Cater to the players that have to go to work everday to make financial ends meet!

Last Saturday, The Pennsylvania Lottery conducted it’s twice per year “Millionaire Raffle”.  The PA Lottery has been holding this raffle since 2004.  This time, the raffle was enhanced with 9 “Early Bird” drawings which was an effort to entice players to buy tickets early in the sales cycle. By purchasing a ticket during the any given  week of sales, all tickets sold during that particular week were entered into a special drawing where one ticket number was drawn, and if you had it, you won $100,000, and your ticket was still eligible to win the top prize of one million dollars at the end of the raffle. The odds of winning $100,000 during each of the nine weeks of Early Bird Drawings were approximately 30,000 to 1.

It seemed to work, the average number of tickets sold per day was approximately 4,000.  (Usually in these raffles, players hold off until the bitter end, and buy their tickets immediately before the drawing – when ticket sales skyrocket to a rate of 20,000 per day.)  I would also point out that even with the addition of Early Bird drawings, all 500,000 tickets were not sold.  Instead approximately 400,000 were sold, so it wasn’t a sellout.  Although that sucks for The PA Lottery, it was good for players. Even so, congratulations are in order to the PA Lottery for doing a little innovating. I might add too, that an excellent suggestion to further improve the raffle  appeared in a thread here at The LP regarding this particular PA Millionaire Raffle. 

My point is this; If the state lotteries want to lure the players back, then listen to the players and implement some new and innovative approaches that award more smaller prizes. The players will come back, but ya gotta treat ’em good if ya want their money.  IMHO, players are just a tad smarter than state lotteries give them credit for being. 

As for me personally, I vote with my feet. I live in the State of New York (60 miles from The PA border) and because NY doesn’t offer a raffle, I’ve no problem driving an hour over to PA, and spending my money over there. G5

About playing the lottery —  You will lose more than you win. Until you hit a jackpot.  Then everything changes!

Dead_Aim's avatar - canstock2002989

United States
Member #6363
August 20, 2004
4350 Posts
Offline

Posted: Yesterday, 5:36 pm – IP Logged

For us it’s the lack luster lower tier payouts.

The payouts don’t reflect the odds (probability of win).

This is in addition to devaluing the hard earned dollar and crippling a player’s purchasing power by jacking the price of a play to $2.00; $3.00 if you play the multiplier.

Nope, we’re playing some our last Mega Millions till Oct 31; then there’s a ghost of a chance they’ll get our money again.

Maybe when it’s at $3 Billion we might consider.

lower tier payouts are trash…

example: I have gotten 4/5 in Show me cash 3 or 4 times over my years of playing. And while the top tier is multi-thousands of dollars. the best I can get is $250 bucks for 4/5? Really? I mean the last 1 I missed was 400,000.00 and I got $250 bucks?

Even got 5/6 once in a game where the 6/6 was 2.1 million at the time. so what do you think my take would be for 5/6? I didn’t even break a thousand bucks. So I went from 2.1 MILLION dollars to less than a 1000?. yeeeah.

I mean I don’t care if the top prize only increments at a snail’s pace as long as the lower tiers makes it worth while to play at all.

Don’t Chase… Compare and Narrow

The Cheaper the Cost the Higher the Profit

Many Winners to You.

D_A



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