Tuesday, January 7, 2003

Lottery sales up, but profit misses goal

Mega Millions hasn't lived up to expectations

By Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - Seven months after Ohio joined with eight other states to create the new Mega Millions game, Ohio Lottery sales have risen $43.5 million over the same time period a year earlier.

But even with the 4 percent sales increase, the lottery is still $8 million short of its projected profits.

An Enquirer analysis of lottery data shows that Mega Millions has lured players and ticket sales away from Ohio's Super Lotto Plus - a similar game in which the jackpot gets bigger each time there's no winner.

The analysis also reveals the lottery's revamped assortment of instant scratch-off card games and another game called Buckeye 5 were bigger moneymakers.

"Mega Millions has taken some of the sales away from Super Lotto," acknowledged Dennis Kennedy, state lottery director. "But we're ahead from where we were."

In December 2001, lawmakers gave the lottery permission to join a multistate game to provide an estimated $41 million to help balance the state's two-year $44 billion budget.

The legislators and Gov. Bob Taft were scrambling to find new revenue to erase a $1.5 billion deficit spawned by the state's souring economy. Lottery officials, meanwhile, were looking to stop a five-year sales skid brought on by lottery and casino competition that saw revenues drop by $400 million.

Any new lottery money goes to schools. But lawmakers approved Mega Millions knowing it would free up an equal amount of general funds to help preserve other state agency programs and services from cuts.

Although the sales are again rising, the new game has yet to live up to its hype.

Mega Millions was supposed to help boost lottery profits - the amount of money transferred to Ohio schools - by about $16 million through the first half of this fiscal year. The fiscal year began July 1.

Actual lottery profits fell $8 million short of that goal, said Lottery spokeswoman Mardele Cohen.

Sales figures show players purchased $105 million worth of Mega Millions tickets since the game's first drawing in May. But Super Lotto Plus, the lottery's flagship game for years, lost $91 million in sales over the same period. The lottery's Pick 3 and Pick 4 games also dropped a combined $5.2 million.

The lion's share of the lottery's new revenue actually comes from a $34 million increase in instant game sales and from Buckeye 5, a game that offers $100,000 top prizes to players who pick the right combination of five randomly drawn numbers.

The state expanded Buckeye 5 from four drawings a week to six drawings in May, boosting sales by $9.8 million, or 28 percent.

Lawmakers also let the lottery offer bigger cash prizes in its scratch-off instant game cards, a move that helped the state ring up another $24.3 million in sales, or 4 percent more than the same period the year before.

While those two changes produced the biggest overall growth in the lottery's bottom line, Mr. Kennedy said Mega Millions is expected to do much more.

With the odds of winning the top prize 135 million to 1, Mega Millions is designed to be so tough to win that it would create nationally record-breaking prizes of up to $300 million to $500 million. But Mega Millions' biggest award to date was $163 million in July.

Officials say bigger jackpots would draw more sales, not just from Ohioans, but from people in nearby states.

Kentucky officials once estimated $1 of every $10 spent on Powerball comes from Ohioans. Powerball's $315 million Christmas jackpot is once again expected to bolster Kentucky finances with the help of Ohio bettors.

"We've not been fortunate enough to get one of those huge jackpots," Mr. Kennedy said. "We're hopeful to get one of those in the last six months."

If no big jackpot comes, Mr. Kennedy is optimistic that the increased sales from the other games will help the lottery meet its profit goals despite the drop in Super Lotto sales.

"I think we're fine for this year," Mr. Kennedy said.

And if Mega Millions does produce a mega-jackpot? "We're going to be more than fine," he concluded.

None of this matters to gamblers who've shown they will play for only the biggest jackpots.

Jerry Angst, a Seven Mile, Ohio, resident who won $5,000 playing Mega Millions in November, said he bought $10 worth of tickets because the jackpot had reached $79 million.

"It had been almost a year since I'd done something like that," said Mr. Angst, a 22-year-old truck driver. "If I'd only got one more number, I'd have gotten the $79 million."

Carol Dempsey and 11 fellow employees at Cincinnati's Keebler Co. bakery missed Mega Millions' $163 million jackpot by one numbered ball. They split a hefty $175,000 consolation prize - getting $14,580 per person before taxes.

That win doesn't create blind loyalty in Ohio Lottery games. Ms. Dempsey said the Keebler group plays for the biggest jackpot that's available, and that means buying Powerball tickets when it's up.

"We spend $10 each per drawing, two drawings a week," said Ms. Dempsey, 48, who packs crackers for shipping. "We play the game that's got the biggest numbers."

The leader of one anti-gambling group said he wasn't surprised that Mega Millions did not spur a huge increase in lottery sales.

"We always expected Mega Millions to kill Super Lotto," said the Rev. John Edgar, leader of a coalition of Ohio United Methodist churches opposed to legal gambling.

Mr. Edgar said the lottery's changes to its instant games and to Buckeye 5 are more troubling because those games rely on repeat players who may be addicted gamblers.

"These are the actions lotteries take when they are intentionally trying to expand the number of repeat players," he said. "They're focusing in on the games that are the most addictive and really working that section."

E-mail shunt@enquirer.com

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