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KY Floyd

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Apr 7, 2012, 12:31 am

Quote: Originally posted by maximumfun on Apr 6, 2012
The last 2 jackpots were in the red? The lottery actually LOST money on those 2 jackpots? So what level does the jackpot have to reach for them to be in the black? Will tomorrow's draw - at 80M$ be black or red?

They didn't really lose money, but they didn't make the 50% profit that they normally do.

For the last PB run that resulted in a winner at $70 million sales for the first drawing were $32.4 million, not including powerplay sales. Roughly 32% of sales go to the jackpot prize pool. That gave them a bit lerss than $10.4 million in cash for a $40 million annuity jackpot with a cash value of about $24.3 million. If somebody had won the starting jackpot the available funds would have been about $14 million short. The 50% that is normally kept as profit was juist over $16 million, so even if somebody had won there would have been about $2 million left over after all of the prizes were paid.

Of course even if they actually lost a bit they still make a fat profit in the long run. Individual runs will be won with fewer or more tickets sold, but in the long run PB expects to have 1 winner for every 175 million tickets they sell. Figuring about a dozen jackpots are won in a typical year they can expect profits of $175 million x 12 jackpots = $2.1 billion.

The point at which they actually make their expected 50% will vary, based on actual sales and the number of winners for lower prizes. As a general rule, $70 million is abit short, and $80 million is a bit past that point. If sales for tonight's drawing are $30 million (it should be reasonably close to that) total sales for this run will be about $156 million. That means $50 million for the jackpot prize pool, and the cash value of the $80 million is $48.7 million.
maximumfun

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Apr 7, 2012, 12:38 am

Quote: Originally posted by KY Floyd on Apr 7, 2012
They didn't really lose money, but they didn't make the 50% profit that they normally do.

For the last PB run that resulted in a winner at $70 million sales for the first drawing were $32.4 million, not including powerplay sales. Roughly 32% of sales go to the jackpot prize pool. That gave them a bit lerss than $10.4 million in cash for a $40 million annuity jackpot with a cash value of about $24.3 million. If somebody had won the starting jackpot the available funds would have been about $14 million short. The 50% that is normally kept as profit was juist over $16 million, so even if somebody had won there would have been about $2 million left over after all of the prizes were paid.

Of course even if they actually lost a bit they still make a fat profit in the long run. Individual runs will be won with fewer or more tickets sold, but in the long run PB expects to have 1 winner for every 175 million tickets they sell. Figuring about a dozen jackpots are won in a typical year they can expect profits of $175 million x 12 jackpots = $2.1 billion.

The point at which they actually make their expected 50% will vary, based on actual sales and the number of winners for lower prizes. As a general rule, $70 million is abit short, and $80 million is a bit past that point. If sales for tonight's drawing are $30 million (it should be reasonably close to that) total sales for this run will be about $156 million. That means $50 million for the jackpot prize pool, and the cash value of the $80 million is $48.7 million.

Ok - so the PB guru's set up a game with poorer odds than they want because they expect that they will not have to pay out at that level. However, there is still the very real chance that the jackpots will be won at lower levels than they "wanted", which will make them find this to NOT be as profitable of a game-change as they wanted/expected.

Am I getting this correct here?
maximumfun

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Apr 7, 2012, 1:04 am

ok... so the new MM is 31M$ with a 22.3M$CV. This is growing faster than normal. I am getting the 'halo effect' from the last big jackpot, but since MM is growing faster than expected, and PB is being won at lower levels that expected... this must mean that there are alot of newly BALD execs who work with PB from pulling their own hair out.

So, in lottery terms, this is becoming the 'perfect storm' of worst possible scenario's for PB...

The faster a 1$ game grows the less argument there can be for the 2$ price tag... am I right?
THRIFTY

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Apr 7, 2012, 11:00 am

Quote: Originally posted by maximumfun on Apr 7, 2012
Ok - so the PB guru's set up a game with poorer odds than they want because they expect that they will not have to pay out at that level. However, there is still the very real chance that the jackpots will be won at lower levels than they "wanted", which will make them find this to NOT be as profitable of a game-change as they wanted/expected.

Am I getting this correct here?

It is hard for a jackpot not to be won very often nowadays because millions of players are spending billions to win a life changing jackpot.
Stack47

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Apr 7, 2012, 3:45 pm

Quote: Originally posted by maximumfun on Apr 7, 2012
ok... so the new MM is 31M$ with a 22.3M$CV. This is growing faster than normal. I am getting the 'halo effect' from the last big jackpot, but since MM is growing faster than expected, and PB is being won at lower levels that expected... this must mean that there are alot of newly BALD execs who work with PB from pulling their own hair out.

So, in lottery terms, this is becoming the 'perfect storm' of worst possible scenario's for PB...

The faster a 1$ game grows the less argument there can be for the 2$ price tag... am I right?

This isn't the first time a starting $12 million jackpot has jumped to $20 million for the second drawing, but this time the sales are averaging almost $25 million a drawing compared to around $18 million after other large jackpots were won. Sales don't usually hit $25 million until the jackpot reaches $80 million. It usually takes four drawings to get the jackpot over $30 million and this time it only took three.

It's very possible many PB players came to the conclusion the $1 MM ticket is a better bet even when the jackpot is just starting to grow.
THRIFTY

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Apr 7, 2012, 7:15 pm

Quote: Originally posted by Stack47 on Apr 7, 2012
This isn't the first time a starting $12 million jackpot has jumped to $20 million for the second drawing, but this time the sales are averaging almost $25 million a drawing compared to around $18 million after other large jackpots were won. Sales don't usually hit $25 million until the jackpot reaches $80 million. It usually takes four drawings to get the jackpot over $30 million and this time it only took three.

It's very possible many PB players came to the conclusion the $1 MM ticket is a better bet even when the jackpot is just starting to grow.

PB is generating more jackpot winners than MM below $100M annuity.

What's the point of playing MM below $100M annuity if lottery players do not win it very often.
maximumfun

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Apr 7, 2012, 10:04 pm

Quote: Originally posted by THRIFTY on Apr 7, 2012
PB is generating more jackpot winners than MM below $100M annuity.

What's the point of playing MM below $100M annuity if lottery players do not win it very often.

Not winning it very often means that some win it seldomly.

I don't need a 100M$CV j/p in order to make all my dreams reality.

Simple dreams, expensive (paying for school for all kids and g'kids is expensive! - let them all get as many degrees as they want and then go into basket-weaving for all I care - a mind once stretched...)

A nice annual family vacation for 2 weeks to visit extended family who are stationed in Argentina.

Fully funding the retirement account (first priority).
KY Floyd

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Apr 7, 2012, 11:42 pm

Quote: Originally posted by maximumfun on Apr 7, 2012
Ok - so the PB guru's set up a game with poorer odds than they want because they expect that they will not have to pay out at that level. However, there is still the very real chance that the jackpots will be won at lower levels than they "wanted", which will make them find this to NOT be as profitable of a game-change as they wanted/expected.

Am I getting this correct here?

Not at all. They aren't very concerned with what happens in a small number of drawings at minimum or low jackpots. They have 104 drawings per year and they're trying to find the balance that makes them the biggest yearly profit. Wouldn't you be happy to work the first week of the month for free in exchange for getting paid 25% more the 2nd and 3rd week and 75% more the fourth week? How about if you only had to work the first week for free 2 months of the year? That's about what PB is going for.

By doubling the price and raising the starting jackpot PB is hoping to trade the occasional low profit drawing for a higher average profit. The record MM jackpot is a great example. In 17 drawings leading to a jackpot of $290 million MM sold about $650 million dollars worth of tickets over a period of almost 2 months. That $290 million jackpot was already unusually big, so their 2 month profit was already unusually big The final MM drawing then sold $651 million worth of tickets in 3 days. 3 days to make more profit than they would normally make in 2 months. Since PB puts about twice as much money towards the jackpot for every ticket sold and has essentially the same odds, PB is about twice as likely to reach any given jackpot amount as MM.

The consecutive low jackpot wins is an anomaly, and in the long run they'll be balanced by some unusually large jackpots. That's the game the PB managers hope they've set up. Probability is on their side. The only thing that can screw it up is players deciding that a MM ticket for half the price is a better deal, but so far that doesn't seem to be a serious issue.

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