Where oh where has the Powerball frenzy gone?

Where oh where has the Powerball frenzy gone?

  • Ken Adams, CDC Gaming Reports
September 12, 2021 8:06 PM
  • Ken Adams, CDC Gaming Reports

As of this writing, the jackpots of Powerball and Mega Millions are each approaching $400 million. Should one or both not be won over the next week, the jackpots should be near $500 million. That’s a lot of money, but not the biggest jackpots on record by a long shot. In 2016, a Powerball jackpot hit at $1.5 billion; since 2012, nine Powerball jackpots have gone over $500 million.

Mega Millions has a comparable history. A $1.5 billion jackpot was hit in 2018 and since 2013, five Mega Millions jackpots over $500 million have been won. The size of those jackpots is not an accident, but the product of mathematical engineering. Early in the history of multi-state lotteries, lottery directors realized that bigger prizes stimulated lottery sales significantly. Both lotteries increased their odds from 1 in 50-some million to one in 250 million to 300 million and upped their prices.

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It worked. As the advertised top prize rose from $100 million or $200 million to more than $300 million, lottery sales increased dramatically. And when the jackpots started to surpass $400 million, $500 million, and even $600 million, sales went through the roof. When the two jackpots combined for more than $1 billion, it affected sales even more than those smaller jackpots. Now, however, the jackpots have seemingly plateaued and reaching $500 million is becoming rare; sales don’t respond to a $400 million jackpot the way they once did.

The lagging sales are concerning for the management of both Powerball and Mega Millions. They are trying to find a rejig that will bring back the buying hysteria of those billion-dollar jackpots. A billion-dollar jackpot would do the trick, but that is beyond their control. Powerball’s latest attempt to create more excitement and ticket sales was the addition of a Monday drawing to its lineup. It has been only a couple of weeks, but so far the extra drawing does not seem to be the solution.

The sales problem has a number of potential causes. For example, it is possible that in some way, the pandemic is having an impact. There is also the possibility that jackpot fatigue has set in and nothing less than record-level jackpots will shake lottery customers out of their lethargy. One other possible reason is legalized sports betting. Since 2018, sports betting has been on the move.

By now, it is an old story, but in May 2018, the Supreme Court changed the gambling landscape forever when it ruled that the federal law against sports betting was itself illegal. That decision opened the door to sports betting in any state that chooses to legalize it. In the latest count, 31 states have some form of legalized sports betting. The monthly handle nationally is in the $3 billion range, but it should increase to at least $5 billion, if not more, during this NFL season.

Except in the broadest sense, betting on sporting events and buying lottery tickets are not the same activity. However, they may have more of a shared customers base than most casino gambling does with lotteries. While sharing customers with lotteries, sports betting also exposes a key weakness in lotteries. Except for video lottery terminals, which are essentially slot machines, waiting for a lottery drawing is like waiting for grass to grow. And there is nothing to watch while you wait.

Quick decisions and something to watch are key elements in all gambling. A slot machine is not only the fastest action a player can get, but while a player waits for the results of each wager, the spinning reels provide visual entertainment. Sports betting does not provide a payoff as quickly as a slot machine, but it can offer moment-by-moment decisions that can result in payment. Every play in a game is a possible decision for the bettor and the gambler has something exciting to watch. Sports has another advantage: It is not a random drawing, depending on luck alone. A gambler’s knowledge and choices are important. With the wide array of broadcast and streaming options, a dedicated gambler can watch his/her bets in action 24 hours a day. In many states, the gambler can bet remotely in the midst of the action.

The really big lottery jackpots captured the attention of the nation. During the runup to both of the $1.5 billion jackpots, the country was on pause. Traffic was halted by the lines of cars waiting to buy a ticket. Discretionary spending on anything, including casino gambling, was disrupted when everyone was buying Powerball tickets. Random groups of people banded together to buy as many tickets as possible, hoping for a life-changing miracle. Anyone with the slightest inclination to make a bet was eager to buy a ticket that might result in a billion-dollar windfall. The media could not get enough of the story.

That frenzy is what the directors of Powerball and Mega Millions are trying to recreate. However, now, they have competition for those dollars and those customers. The big Powerball jackpot hit in January, the Super Bowl month. If that same jackpot were available in January 2022, it would attract attention, but nothing compared to the Super Bowl. The next Super Bowl will offer most Americans an opportunity to make a legal wager on the game. The number of people making a wager will be in the tens of millions and the number of wagers many times that number.

The excitement a sporting event, much less a championship, can generate is almost certainly to exceed that of a lottery drawing. And if in the process the gamblers win, all the better. It is not a zero-sum game, so there is no limit on the number of winners; in the mega jackpots, one and only one set of numbers wins. Powerball and Mega Millions will not disappear because of sports betting. But if they want to be the center of attention again, they had best schedule their big jackpots for July and August when sports bettors have little to interest them.