Since the first scratch-off lottery tickets started selling more than a month ago, sales have been declining.
That was expected as the initial euphoria with the lottery wore off. Sales volume has dropped to roughly 49% of what it was during the first seven days of the lottery.
"That usually happens after the first week," Rebecca Paul, Tennessee Education Lottery Corp.'s president and chief executive officer, said of what she had seen with other start-up lotteries.
By that measure, then, Tennessee's lottery, with its sustained buying, appears to be doing well through its first month.
A truer measure of the lottery's success will come April 15 when it has to make the first payment to the scholarship fund.
The state has mandated that by July the lottery has to have paid $88 million into the scholarship fund. If it had to pony up now, the lottery would be halfway to that goal.
The lottery's scholarship payment basically represents its profit from sales.
By today, sales were expected to exceed $150 million, which would deliver about $45 million in scholarships.
Today, the Tennessee Lottery will enter a new phase, one that lottery officials anticipate will add another significant revenue stream to build sales to fund college scholarships.
The new phase starts with the first numbers-picking game, Cash 3.
The game is the first of the "online" games for the Tennessee Lottery. Players choose numbers. Retailers run those numbers through terminals that are hooked up to lottery headquarters through a telecommunications network. Televised drawings randomly drop numbered balls, and players with matching numbers win as much as $500.
"Online sales start low and then tend to increase over time as the game gains more acceptance," said Bruce La Fleur, publisher of trade publication La Fleur's World Lottery Almanac, which tracks lotteries around the world.
By early summer, the Tennessee Lottery expects to drive online sales further by joining Powerball, which is now up to 26 participating lotteries.
Ticket sales in each lottery contribute to jackpots that average $60 million.
Players pick seven numbers, the sdventh being the Powerball. Players landing on the six numbers and the Powerball number win the jackpot, or at least a share of it.
At some point, online sales usually exceed scratch-off sales, La Fleur said.
Paul told her board Feb. 3, "The timing of (Cash3) is such that it hits as sales of instant tickets drop off."
In the first seven days of Tennessee's lottery, scratch-off tickets generated about $41 million in sales. Sales have steadily declined to about $21 million in the lottery's reporting period ended Feb. 21, the latest reporting period available.
Through last week, $75 million had been paid out in prizes, just more than half of total sales. That is in line with the average payout for the 39 other lotteries in the United States. According to La Fleur's 2003 World Lottery Almanac, payouts average 53% of sales.
Nebraska's lottery, one of the smallest in the country, had the highest percentage payout in 2002 with $432 million of $645 million in sales, or about 67%.
In Tennessee, scratch-off ticket sales didn't drop off as much as they have in other start-ups, Paul said, in part because of the number of games and the different prices introduced. Paul told her board last week that no other lottery had started with so many different-priced tickets $1, $2 and $5 tickets over 10 games.
La Fleur's almanac supports her claim. Most lotteries started with $1 tickets, or maybe a combination of $1 and $2 games. Different price points were added later.
"As the market matures, we get more and more price points," La Fleur said, adding that the varied prices draw in different players.
Tennessee's $1 games make up 60% of lottery sales, driven mostly by Lucky 7s, a Tic-Tac-Toe game in which a row of 7s can give a player as much as $7,000.
"Games with 7s tend to do very, very well," La Fleur said.
The $5-a-ticket $100,000 Jackpot game generated the second-highest amount of revenue, representing 17% of overall sales.
Tara Robertson, spokeswoman for the South Carolina Lottery, which has only $1 and $2 scratch-off games, said, "That $5 price point will definitely boost the (sales) number."
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