Record Powerball result of changes to boost sales

DAVID PITT

Asso­ci­ated Press

DES MOINES, Iowa — The his­toric Power­ball jack­pot boosted to $500 mil­lion on Tues­day was all part of a plan lot­tery offi­cials put in place early this year to build jack­pots faster, drive sales and gen­er­ate more money for states that run the game.

Their plan appears to be working.

Power­ball tick­ets dou­bled in price in Jan­u­ary to $2, and while the num­ber of tick­ets sold ini­tially dropped, sales rev­enue has increased by about 35 per­cent over 2011.

Sales for Power­ball reached a record $3.96 bil­lion in fis­cal 2012 and are expected to reach $5 bil­lion this year, said Chuck Strutt, exec­u­tive direc­tor of the Des Moines, Iowa-based Multi-State Lot­tery Asso­ci­a­tion, the group that runs the Power­ball game.

There has been no Power­ball win­ner since Oct. 6, and the jack­pot already has reached a record level for the game. It was first posted at $425 mil­lion but revised upward to $500 mil­lion when brisk sales increased the pay­out. It’s the sec­ond high­est jack­pot in lot­tery his­tory, behind only the $656 mil­lion Mega Mil­lions prize in March.

It took nine weeks for the Mega Mil­lions jack­pot to get that high, before three win­ners — from Kansas, Illi­nois and Mary­land — hit the right num­bers, each col­lect­ing $218.6 mil­lion for their share of the split.

With soar­ing jack­pots come soar­ing sales, and for the states play­ing the game, that means higher revenue.

“The pur­pose for the lot­tery is to gen­er­ate rev­enue for the respec­tive states and their ben­e­fi­ciary pro­grams,” said Norm Lin­gle, chair­man of the Power­ball Game Group. “High jack­pots cer­tainly help the lot­tery achieve those goals.”

Of the $2 cost of a Power­ball ticket, $1 goes to the prizes and the other dol­lar is kept by the state lot­tery orga­ni­za­tion, said Lin­gle, who also is exec­u­tive direc­tor of the South Dakota Lot­tery. After admin­is­tra­tive over­head is paid, the remain­ing amount goes to that state’s ben­e­fi­ciary programs.

Some states des­ig­nate spe­cific expen­di­tures such as edu­ca­tion, while oth­ers deposit the money in their gen­eral fund to help sup­ple­ment tax revenue.

The fed­eral gov­ern­ment keeps 25 per­cent of the jack­pot for fed­eral taxes.

Most states with­hold between 5 per­cent and 7 per­cent. There’s no with­hold­ing in states with­out a state income tax such as Delaware, Penn­syl­va­nia, South Dakota, and Texas. A New York City win­ner would pay more than 12 per­cent since the state takes 8.97 per­cent and the city keeps 3.6 percent.

Power­ball and Mega Mil­lions games are see­ing jack­pots grow faster and higher in part because the states that play both games agreed in 2010 to sell to one another.

Both games are now played in 42 states, Wash­ing­ton, D.C., and the Vir­gin Islands. The larger pool of play­ers means jack­pots roll over to higher num­bers faster, which tends to increase the buzz about the jack­pots which increases sales. It all can result in higher jack­pots sooner.

“It really hap­pened with both of these games became national games,” said Terry Rich, CEO of the Iowa Lottery.

Still, just seven of the top 25 jack­pots occurred after Jan­u­ary 2010 when the cross-selling began. That just points to the unpre­dictabil­ity of games of chance like lot­ter­ies. It still comes down to the luck of the num­bers, Rich said.

It has been proven that once the jack­pot reaches a cer­tain thresh­old more play­ers buy.

The Quick Shop in Ottumwa, Iowa, is one of the state’s highest-volume lot­tery ticket sell­ers due to its loca­tion across the street from a John Deere farm imple­ment factory.

“It’s pick­ing up by the minute,” said store owner Mark Ebelsheiser. “We’re sell­ing prob­a­bly 60 to 70 per­cent more than nor­mal. When it gets up this high they really come out and get them.”

Bob Alli­son, a retired Indian Hills Com­mu­nity Col­lege instruc­tor and admin­is­tra­tor, buys tick­ets weekly for a group of peo­ple at the col­lege in Ottumwa. On Tues­day he and two golf­ing and fish­ing bud­dies went in together to buy addi­tional tick­ets. Alli­son said he usu­ally buys a few addi­tional tick­ets when the jack­pot gets so high.

He said he’d make a lot of peo­ple very happy if he won.

“My kids would prob­a­bly retire quick,” said the father of three daughters.

Between $20 and $30 mil­lion in tick­ets were sold between Wednes­day and Sat­ur­day draw­ings for most of Octo­ber. Once the jack­pot hit $100 mil­lion on Oct. 27, nearly $38 mil­lion worth of tick­ets were sold by Oct. 31. As the jack­pot grew to more than $200 mil­lion on Nov. 17, sales surged by nearly $70 mil­lion by the next Wednes­day. Then the jack­pot reached over $300 mil­lion on Nov. 24 and ticket sales over the next four days sur­passed $140 million.

“Some­where around $100 mil­lion those occa­sional play­ers seem to come back into the stores in droves,” said Rich, the Iowa Lot­tery CEO. The lot­tery also notices a sig­nif­i­cant increase in work­ers and other groups join­ing together in pools to com­bine resources to buy num­bers, he said.

Trina Small, man­ager at the con­ve­nience store in Bon­durant, Iowa, where a cou­ple bought a $202 mil­lion ticket on Sept. 26, said sales have been heavy. She said Mon­day night Power­ball sales were at about $800, at least $200 more than nor­mal. She expects Tues­day and Wednes­day sales to be even more.

“It’s kind of like Black Fri­day all over again,” she said.

Small doesn’t usu­ally play the lot­tery her­self but said she may buy a chance at the record jack­pot. She’s just try­ing to decide if her chances are bet­ter buy­ing it else­where since a jack­pot ticket was sold at her store just two months ago — the old adage about light­ning strik­ing twice.

“The odds are against you any­way but I’m pretty sure they’re more against you get­ting one from this store,” she joked.

Power­ball has posted sales exceed­ing $714 mil­lion in the cur­rent jack­pot run since early Octo­ber and it’s pos­si­ble more than $1 bil­lion in tick­ets will have been sold by the end of Wednes­day when the next draw­ing is held.

A sin­gle win­ner choos­ing the cash option would take home more than $327 mil­lion before taxes.

Strutt said the chance of get­ting a win­ner this Wednes­day is approach­ing 60 percent.

Posted by AP News on Nov 27 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.