A Billion Dollar Christmas Present – No Laughing Matter By Ken Adams December 18, 2013 at 10:17 pm If you haven’t heard some version of this as a joke, you probably will: “How sad, I will not get a billion dollars for Christmas this year or even half a billion. I had my hopes; I owned 50 percent of 20 Mega Millions lottery tickets for the drawing on Tuesday, December 17th. But alas, the Mega Millions jackpot hit – there were two winning tickets – neither of which was mine.” None of us really thought we would win, but who could resist the chance? Not winning makes a great holiday joke; I can laugh because the loss will not impact my life. But that jackpot and others of its kind are no laughing matter for the casino industry. The jackpot was a whopper; a ticket buying frenzy drove the jackpot to $648 million; the second largest lottery jackpot ever. It was only $8 million less than the $656 million Mega Millions jackpot of March 2012. Close, but not quite enough, that March 2012 jackpot is still the reigning king of all jackpots in the world. Winning tickets for an estimated $636 million Mega Millions jackpot, the second biggest in U.S. lottery history, were sold in San Jose, California and Atlanta, Georgia, lottery officials said late on Tuesday evening. Lottery Post, 12-17-13 It’s the most wonderful time of the year for Ira Curry. The Stone Mountain woman purchased one of two winning jackpot tickets in Tuesday’s $648 million Mega Millions drawing…Curry selected the cash option, which amounts to $173,819,742.50 before taxes for each jackpot winner…After final game sales were calculated, the jackpot increased from an advertised $636 million to $648 million. Lottery Post, 12-18-13 There have been quite a few jackpots since that one in March bidding for the title; all of them were Powerball jackpots. In the last 20 months, there were seven Powerball jackpots over $300 million and two over $500 million. The reason is simple, Powerball was reengineered to grow the jackpots – the odds were increased to 175 million to 1 and the price was increased to $2. Nationwide, lottery directors have come to understand that it takes really big jackpots to drive the ticket sales and to increase revenues year over year. Mega Millions: $656 million, Mar. 30, 2012 – Illinois, Kansas, Maryland Powerball: $587.5 million, Nov. 28, 2012 – Arizona, Missouri Powerball: $337 million, Aug. 15, 2012 – Michigan Powerball: $336.4 million, Feb. 11, 2012 – Rhode Island Mega Millions: $636 million, Dec. 17, 2013 – Preliminary estimate, not won yet Powerball: $590.5 million, May 18, 2013 – Florida Powerball: $448.4 million, Aug. 7, 2013 – Minnesota, New Jersey (2) Powerball: $399.4 million, Sep. 18, 2013 – South Carolina Powerball: $338.3 million, Mar. 23, 2013 – New Jersey Lottery Post, 12-17-13 Powerball was so successful with its changes that Mega Millions followed suit. Mega Millions kept the price of the ticket the same – a dollar – but raised the odds to 259 million to 1. The new game was launched in October. The change worked exactly as the lottery had hoped. It took just two months to reach $648 million and it was on the verge of a truly gigantic jackpot – a billion dollars or more. Just one more drawing and we would have been in that untouched region of the billions. I was really hoping there would be no winner in that drawing; I wanted to see what would happen when a jackpot reaches a billion dollars. In Powerball’s last two run ups to $500 million a billion dollar prize seemed also reachable, almost. However, the analysts said that nearly 100 percent of the 175 million combinations had been purchased, making a winner almost certain and with no possibility of the jackpot reaching a billion dollars. In fact at that point, reaching a billion was as unlikely as any one person holding a winning ticket – getting struck by lighting is more likely. But for Mega Millions that was not and is not true – when this jackpot hit the analysts said that only about 70 percent of the 259 million combinations had been purchased. That means the jackpot could have gone higher, much higher. This was only the first major jackpot since Mega Millions was reengineered, there will be other big jackpots and it is highly likely that in 2014 or 2015 we will see a billion dollar jackpot. As I have said before, I think Powerball and Mega Millions are important to the gaming industry for several reasons. The money being spent chasing those jackpots is money that will not be spent chasing jackpots in a casino. Besides taking the disposable income of players, those jackpots threaten to change players’ behavior, moving players from casinos to lotteries. I also believe lotteries are Trojan horses for the gaming industry. They are slowly, but surely beginning to break down the line between the two by offering competitive and sometimes equivalent products as casinos offer. And lastly, I think those jackpots are important to the gaming industry in the lesson they teach; the Mega Millions jackpot illustrates the importance of the size of the player market. The official jackpot estimate for tonight’s Mega Millions drawing has been raised for the second time in two days, due to heavy demand for the mind-blowing jackpot. Certainly the state lotteries expected the multi-state Mega Millions October rules changes to increase jackpots, but it’s fair to say the first jackpot run under the new rules exceeded their wildest expectations. Todd Northrop, Lottery Post, 12-17-13 Tonight’s Mega Millions jackpot may surpass the $656 million record set in March 2012 to become the biggest lottery prize in U.S. history…Mega Millions is played in 43 states, the District of Columbia, and the U.S. Virgin Islands. With 259 million possible number combinations, by Tuesday night’s drawing players will have purchased 65 to 75 percent of the possible numbers to hit the jackpot, said Otto. …Before October 22 of this year, the odds of winning Mega Millions were 1 in 176 million. Laura Sesana, Washington Times, 12-17-13 Powerball is played in 45 states and Mega Millions is played in 43; when you count the people in the non-participating states stepping across state lines to buy a ticket, 80 or 90 percent of the people in the country are able to buy a chance to win hundreds of millions of dollars. All of those people buying lottery tickets drive the jackpots into the stratosphere. The casino industry has nothing comparable. Just before the jackpot hit South Dakota voted to allow its slot machine operators to connect with other states to form a “mega” jackpot. That is the only way slot machine jackpots will ever be able attract the kind of play the mega lotteries are getting. Currently jackpots are linked between casinos, but only within the state. The most recent Megabucks jackpots in Nevada were in the neighborhood of $10 million dollars, nothing to sneeze at, but a long ways from the hundreds of millions of dollars that lotteries can offer. That is a complete reversal of conditions a few years ago. When Megabucks first started in Nevada, by linking a few casinos together it was possible to produce really large jackpots – in 1980s terminology. The linked systems jackpots have been an important source of revenue for casinos and slot manufacturers. But those jackpots no longer seem large; the largest of the statewide progressive jackpots is less than the reset amount of Powerball. For casinos to compete with the lotteries it is going to be necessary to link as many casinos as possible; even online casinos will need a larger customer base than one state can offer. At that point, playing a slot machine in a casino could be nearly as exciting as buying a lottery ticket. Actually, it could be much more exciting. Playing a slot machine you can hundreds of decisions a minute, as opposed to two a week for the lottery. Who would ever have believed that in 2013 buying a lottery ticket would be more exciting than playing a slot machine? No one in 1985, that is for certain. We laughed at the lotteries in those days – today the mega lotteries are no laughing matter, they are serious competition for casinos.