An adolescent lottery arms race; my jackpot is bigger than your jackpot

The second largest lottery jackpot in the history of the world hit on Saturday, May 18, 2013; it was $590.5 million.  The run-up to the record levels of mega jackpots has been much faster since the Powerball officials figured out a way to increase the size of the jackpot by raising the price of the tickets.  Powerball is not alone in the giant jackpot lottery world.  There are two national lottery systems, Powerball and Mega Millions; they each have over 40 states participating.  Having a network of 40-plus states means a very large pool of the lottery ticket buying citizens.  When California joined Powerball it brought some 18 million potential ticket buyers into the network.

Just six months ago, Powerball seemed certain to generate billion dollar jackpots sometime soon, or so I thought.  I was not alone there were lots of other who predicted the same thing, but then the statisticians stepped in and corrected us.  Interestingly, they waited to step in until the week before the last drawing; when they did, they predicted the jackpot would be hit on Saturday – it was, according to them, an 80 percent certainty.  How could they know?  Well, they are statisticians; they calculated the total number of possible combinations and then calculated that the majority of those combinations had been purchased.  When all of the combinations have been purchased the jackpot is guaranteed to hit, the only question remaining is how many people bought the same numbers?  On Saturday, one lucky ticket holder earned all of the loot; unless it was a pool of players which held the luck ticket; a group of players that bought a bunch of tickets together. That is a phenomenon that is getting increasingly more popular; a group can afford to buy more tickets than an individual.  So while my share is smaller, my chances are greater.

If the statisticians are correct then the jackpot will most likely never get higher than $600 or $700 million – still huge, but maybe not enough to fuel the fires once the lottery players begin to understand the dynamics. Just two or three years ago anytime the jackpots exceeded $200 million the feeding frenzy started, now it takes $400 million before the players and media started to get really excited.  When the jackpot hits $200 or $300 million, the sales are still great. But just not as dynamic or as frantic as when the jackpot hits that magic dollar amount. It has not started to worry the Powerball executives yet.  However, it has started to worry the Mega Millions guys.  Mega Millions jackpots are lagging behind; Mega Millions hit the same weekend as Powerball, but its jackpot was a measly $190 million, not even enough to get people excited.

However, Mega Millions is going to make some adjustments to put them back in the game; the changes are not going to be the ones Powerball made, raising the ticket prices and/or the beginning amount.  No, Mega Millions has another strategy, it is going to raise the odds. Yep, they are going to make it harder to hit the big jackpot – those longer odds means more possible combinations and that will mean bigger jackpots.  Of course, what Mega Millions wants is jackpots that are bigger than Powerball’s jackpots.  Since Powerball made its changes, Powerball has been stealing all of the headlines.  And those big jackpots and headlines translate directly into ticket sales.

Big jackpots mean big sales, and I suspect big bonuses for someone.  And that brings up an interesting question; If Mega Millions is successful with the longer-odds strategy, what do you suppose Powerball will do next?  Lotteries are games of numbers and each has fixed number of possible combinations; the lotteries can raise the ticket prices, they can raise the odds and they can add more people to the pool of players, there are not many other options. I can see it now, Powerball signs up Indonesia and Mega Millions counters with Pakistan. Who will get India? Who will get China?.  The situation has all of the elements of great theater; it could become like the nuclear arms race in the Cold War, each lottery doing everything possible to create a bigger jackpot than the other.  But, that is the way business is conducted – this is economic competition at its purest.  A thing of beauty to watch; and hell, who knows, someday I might win one of the trillion dollar jackpots.

The largest Powerball lottery jackpot in game history has been won Saturday night by a single ticket sold in the state of Florida. The record $590.5 million Powerball jackpot, which is the second-largest of any lottery game in history, started as a $40 million prize on April 3, 2013, and continued accumulating prize money for 13 consecutive drawings, until it was finally won Saturday.  On Friday the game’s organizer pegged the jackpot estimate at $600 million, but the actual total fell a bit short of that number.  Still, it was enough to secure second place on the list of all-time highest lottery jackpots, and the top Powerball jackpot in history. Todd Northrop, Lottery Post, 5-18-13

It’s all about the odds. With the majority of possible combinations of Powerball numbers in play, someone is almost sure to win the lottery game’s highest jackpot on Saturday night, a windfall of hundreds of millions of dollars – and that’s after taxes.  Of course, the chances of winning the $600 million prize remain astronomically low: 1 in 175.2 million. And lottery officials said Saturday that 80 percent of the possible combinations have been purchased. Barbara Rodriguez, Associated Press, 5-17-13

Come this fall, winning the multi-state Mega Millions lottery jackpot will become even more difficult in the 45 states and jurisdictions that offer the lotto game.  The consortium that operates Mega Millions is upping the odds to 1 in about 258.9 million that someone picks all six numbers right.  The current odds are 1 in about 175.7 million…The odds will change under a new format for the Oct. 22 drawing. Players will choose five of 75 white balls and one of 15 gold balls.  For comparison, the odds of winning either Powerball or Mega Millions are about the same right now. Powerball is 1 in about 175.2 million.  The goal is to increase sales. Making winning more difficult might seem counter-intuitive to selling more tickets, but big jackpots drive sales. Lottery Post, 5-20-13


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