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Thursday, April 15, 2010

California Lottery Opts To Raise Net Revenues By Decreasing Takeout

"There are more prizes to give out, so people are going to win more often," said lottery director Joan Borucki. "When people win more often, they feel like playing more often, which in turn will increase sales, and as sales go up . . . our contribution to education goes up."


In the world of gambling, the psychology of the gambler is king. Increase their payout, and they will keep coming back, and they will come back faster, even if they aren't even cognizant as to why they are compelled to come back so fast.

For example, Vegas figured it out. They found that they made more in net revenues when the payback on slots is set between 92-95% as opposed to 85-88%.

Unfortunately, in most instances, horse racing as yet to figure it out. Even though some have, it is like pulling teeth to get the track operator, the horsemen, and the state all to come to the same realization, and it does take all three of these entities to agree.

It appears that another group has figured it out now. The California State Lottery has decided to increase the payout (lower the takeout) on their Scratchers from 57.5% to 61%. Yes, it is still a takeout of 39%, but lotteries have a different optimum takeout than horse racing, as does blackjack and slots.

It was apparent that a 57.5% payout percentage for Scratchers is below the optimum payout level for Scratchers: "Of the 10 most populous states with lotteries, Borucki said, California has had the lowest per capita sales and overall payout percentage."

"In other states where prize pools were enlarged, sales went up, Borucki said.

In Florida, sales and profits from Scratchers tickets more than tripled between the 2002 budget year and 2006, after that state's lottery increased prizes, she said.

Other states whose sales rose when prize pools increased include New York, North Carolina and Texas, (Bill) Ainsworth (lottery spokesman) said."


Well at least somebody in California gets the gambling business. Lets hope it is contagious.

HT "Breakage" on the Track Champions Forum

3 comments:

Anonymous said...

Here in this State, it didn't take a rocket scientist to figure this out, everyone knew this but the State. However, it took economics to get them going.

This State has always been, an hour late and a dollar short.

California is of the State, for the State, by the State. Nothing else counts until people are hurt by them and the people fight back by not using their products.


Please remember, I believe that Scientific Games runs the program out here and they also run the interstate wagering on horses.


Correct me if I am wrong.
__________________

Scott Ferguson said...

sheesh, if the lottery company can work it out before a racing pari-mutuel company then there really is no-hope for racing...

Anonymous said...

And today (meanwhile in racing) the CHRB is meeting to hear how great the RAISE in takeout is working out for Los Alamitos.

When lotteries show more common sense than racing, heaven to God help us.

P