Recession no drag on Georgia Lottery

She’s been out of work for six months and has a car note and mortgage nipping at her heels. So Melva Outlaw went to the Northside Drive Convenience Store in northwest Atlanta to buy some cardboard hope.

The clerk ripped the $10 Extreme Green ticket from one of the more than 50 dispensers offering instant tickets and handed it to the woman, who immediately started scratching away, shaking her head with each losing number.

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JOHNNY CRAWFORD/ jcrawford@ajc.com

Samuel Lipkins leaves the Northside Drive convenience store where he often buys lottery tickets.

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LOTTERY BY THE NUMBERS
• Amount of revenue paid out in prizes, 2008: Instant, 68.4 percent. Online, 51.3 percent.
• Percentage of revenue derived from instant games: Fiscal year, 2008, 68 percent. Fiscal 2004, 57 percent. Fiscal 1996, 31 percent.
• Number current scratch-off games: 78.
• Advertising budget, 2008: $20.3 million
• Revenue 2008: $3.5 billion.
• Money to education 2008: $868 million
• Number of instant tickets printed for Georgia games, 2008: 1.5 billion
Sources Georgia Lottery and Scientific Games Corp.

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“Not good, not good,” said Outlaw, who said she spends maybe $100 a week — more now than ever.

The Georgia Lottery took in $3.52 billion in the last fiscal year ending July 1 and is slightly ahead of that pace this year, despite —  or perhaps because of — the cratering economy. Last year, it paid out more than $2 billion to players and $868 million to education, both records.

But despite its success, lottery officials are feeling financial pressure. They worry the costs — the HOPE college scholarship and pre-K program, winnings and other expenses — may outpace lottery revenue next year because of increasing student enrollment. The shortfall may cause cuts in what students get for book fees and has spurred talk of new lottery-run gambling machines in Underground Atlanta.

Officials worry the game, which started in 1993, may be topping out. Georgia Lottery CEO Margaret DeFrancisco last month told legislators the lottery is at the “apex” and “we don’t have any more

$100 million arrows in our quiver.”

DeFrancisco’s concern has been one lottery officials have held almost from the start. In 1997, a lottery expert warned Georgia’s game “has reached maturity and can expect flat or declining sales.”

In 1999, then-Georgia Lottery chief Rebecca Paul said the game was closing in on $2 billion in annual sales but worried it was peaking. At the time, Georgia’s lottery avoided the early “player fatigue” seen in other states by continually introducing and marketing new games.

The lottery has repeatedly broken its own records since then and is still trying to squeeze more growth from the game. But achieving new growth, much of which comes from scratch-off games, is increasingly difficult because the lottery must pay out more prize money to keep players coming back.

In fiscal 2004, the Georgia Lottery brought in $2.71 billion to give $782 million to education. Last year, it generated an additional $800 million in ticket sales to deliver just

$86 million more to education.

Nearly 70 percent of Georgia Lottery’s revenue comes from scratch-off games, which offer more payouts and instant results. Ten years ago, it was half that.

Georgia Lottery has 78 scratch-off games in current circulation and has run through nearly 300 more since 2003. Walk up to nearly any convenience store counter and you’ll be greeted by a cacophony of colorful cardboard promising riches and excitement. Millionaire Jumbo Bucks. Lucky Gold. Fire ‘N’ Dice. Winfall. Blackjack Attack. And the granddaddy, the $20 per ticket 15th Anniversary Millionaire Extravaganza.

“We have worked hard to meet and exceed the expectations,” DeFrancisco said in an interview last week. “We’re changing it to keep it fresh. You can’t be the same old, same old.”

Critics, like Gail Howard, a New York Lottery News columnist, said “scratch-off and daily numbers appeal to the poor and the gambling addicts. Scratch-offs have been increasing in popularity because people need instant gratification.”

Harry Pam, who works at the MLK Citgo Food Mart, one of the top lottery grossing stores in metro Atlanta, said hope springs eternal, even if not logical.

“If scratch-off people win, we put the ticket in the window so everybody knows and others come,” he said. “They see the winners in the window but don’t see the Dumpster full of losers.”

Some experts say lotteries have been busy continually targeting the core players who may be running out of disposable money, losing interest or even dying off.

“The biggest trend in the past 10 years has been to increase the play of the Joes, the core players, while ignoring the Jacks, the infrequent players,” said Michael Jones, the former head of the Illinois Lottery and director of the Independent Lottery Research consulting company.

He said polls show 75 percent or more of Americans approve of lotteries, but only 10 percent are consistent — or weekly — players. He said 54 percent of Illinois lottery tickets are sold to ethnic and racial minorities.

“That’s a disturbing statistic,” he said, “not because of sociological issues but because of what the lottery can be [if more people played].”

More states have employed a strategy of increasing the payout percentage for prizes and raising the price of tickets, Jones said. Those who want “instant gratification” also want to see some action. They want some winnings, even if just $2 from a $5 ticket. It keeps them playing.

In 1997, Georgia Lottery paid out 50 percent of its revenue in prizes. Now it pays out 58 percent. Scratch-off games pay out 68 percent.

Percentages paid for the HOPE and pre-K programs during that time have correspondingly dropped from 35 percent of revenue to 25 percent. DeFrancisco argues the total amount of money going to education has grown, even as the percentages have dropped.

While some players, like Melva Outlaw, see the lottery as a possible answer to their financial problems, DeFrancisco believes the bad economy is tempering sales.

“It’s really trying, especially now,” DeFrancisco said. “We’re trying to be relevant and exciting and entertaining, to keep people interested.”

Jim Kennedy, vice president of Scientific Games, the supplier of scratch-offs to Georgia, said the company printed more than 1.5 billion tickets for the state last year from its Alpharetta printing facility. It also printed more than 30 billion tickets for lotteries in 37 states and eight countries.

Instant game sales in the United States have more than doubled in the past decade to $30 billion per year, he said.

“Georgia’s performance is world-class. It has the second highest per capita sales in the world and the fourth largest total instant sales in the U.S.,” he said.

At the Northside Drive Convenience, Samuel Lipkins, an Atlanta contracting compliance worker and $3-a-day player, shook his head when hearing of the unemployed woman who had lost $10 just minutes before.

“When you’re in a desperate situation, you look for opportunities,” Lipkins said. “The tickets become an option when you realize nothing else is coming.”

Albert Rayle, a retired doctor, came in to buy soda and “that big green thing,” the $10 scratch-off. The game is more upbeat for him. He likes that the money goes to a good cause.

“And I’m waiting on my million,” he said, his face cracking into a smile.