High-priced scratch-off tickets have revived lottery sales, restoring growth to a state-run business that had sagged in the face of casino and Internet gambling.
The introduction of instant-win tickets that cost $10, $20 and $30 - and offer top prizes of $1 million or more - has set lottery sales on fire in many states. Scratch-off ticket sales soared 59% from 2001 to 2005. That's six times as much as the 10% increase during that time for Powerball, Mega Millions and other traditional lottery games that are decided by drawings.
Casino-gambling revenue, meanwhile, increased 49% since 2000 to $55.3 billion in 2005, according to the 2006-07 Indian Gaming Industry Report.
Lotteries contributed $16 billion to state budgets last year, or about 1% of the total. Two-thirds of that revenue went to education. That makes the games an important funding source for schools in many states.
Scratch-off tickets have outsold traditional lotteries since 2004 and now account for 55% of lottery revenue, according to La Fleur's Magazine, which tracks lotteries.
The trend is likely to continue as more states introduce pricier scratch-off tickets. Fewer than half of the 42 states with lotteries have introduced $20 tickets. California's most expensive ticket is $5 because of legal restrictions.
The popularity of $10, $20 and $30 scratch-off tickets caught many lottery officials by surprise. The games, which have limited numbers of tickets, have sold out unexpectedly quickly.
"It's instant gratification," says Bobby Heith of the Texas Lottery. "People like big prizes, and they want to know immediately if they've won."
Texas has two $30-ticket instant games underway, including the "Vegas Action" game, which offers a $3 million prize. The state also offers three $20-ticket and six $10-ticket games.
No research has been done on who's buying the expensive tickets. But lottery critics say they probably hurt the poor.
"The poor spend more of their income on lotteries, so it's likely they'll be hurt by expanding this regressive, deceptive way of raising money," says Alicia Hansen of the Tax Foundation, a research group.
States have dedicated more money to prizes to make high-priced tickets attractive. In the case of a typical $2 scratch-off, about 60% of proceeds from ticket sales goes for prizes. The expensive tickets return about 75% in prizes, although that portion varies by state.
"It's all about delivering gambling excitement," says Jim O'Brien, vice president of Scientific Games, a creator of scratch-off games. "In these $10 and $20 games, people may not expect to win $1 million, but they feel they've got a good chance to win more than $1,000 and certainly more than $100."
- Georgia: Weak lottery revenue forced the state in 2004 to tighten eligibility for its HOPE scholarships, which have paid tuition for 900,000 college students since 1993. The program is flush again: Instant-game sales are up 17% in a year, to $1.9 billion in the first nine months of fiscal 2006.
- Florida: Instant-game sales have nearly tripled since 2002.
- Massachusetts: The state launched the biggest scratch-off game ever: $1 billion in $10 tickets and $800 million in prizes.