The much-hyped and addictive games will rake in $358M this year; some worry they hurt the poor.
Inside the Clark gas station on Rice Street in St. Paul, just above the bags of potato chips, signs taped to the wall celebrate each time a customer won at least $500 playing the Minnesota State Lottery. The owner has posted 19 winners in the last year and a half alone.
Diane Andresen is not one of them. Still, she comes to the station day after day to buy scratch tickets, $50 to $60 worth every week. She once won $1,000 playing scratch, 15 years ago. Most of the time, she scrapes away the thin latex coating on the cards and finds only losers.
Andresen, 48, who sells pulltabs for a living, knows she has spent thousands more than she’s won. Why does she keep buying? “It’s in hopes of winning.”
Andresen’s constant losses are part of a giant jackpot for the Minnesota lottery. The state-run gambling operation is raking in record profits year after year. Its success has been immune to economic downturns and stoked by the soaring popularity of habit-forming and ever-multiplying scratch games.
A Star Tribune analysis of 10 years of lottery sales and income shows that scratch games are now driving the lottery’s growth, not lotto games and their much-hyped, huge Powerball jackpots. The state lottery is expecting a record $358 million in scratch sales in fiscal year 2013 — about $150 million more the other lottery’s products combined.
Scratch sales grew an average of 3.4 percent annually over the past decade, according to the newspaper’s analysis of sales at more than 4,000 retailers. By contrast, lotto sales have slid, falling an average of 1.4 percent annually over the last 10 years. Last year, however, a price hike and several big Powerball jackpots boosted lotto revenues 30 percent.
The instant gratification can make scratch games addictive, and some blame the lottery for taking advantage of the poor. Lottery officials say they try to mitigate the damage of problem gambling and point out that the lottery has contributed more than $2 billion to the state budget and environmental programs since it began in the early 1990s. To keep it growing, they have spent more than $75 million advertising and marketing their products in the last decade, records show.
They make no apologies for doing exactly what’s expected of them: making money.
“We have to recognize that we are in a very competitive marketplace,” said Don Feeney, the lottery’s research and planning director. “We are competing with everything on display in a store.”
Low odds, high sales
The lottery’s popularity comes despite the odds. The chance of winning any money is about 1 in 3 to 1 in 4, but goes from about 12 percent odds of getting your money back on the cheapest ticket to a 1 in 405,773 chance of winning the $1 million prize on the $30 ticket, the most expensive the lottery sells.
That hasn’t stopped customers from buying $2 billion in scratch tickets all over the state in the last decade. East Grand Forks has the highest per capita sales (North Dakota doesn’t have scratch tickets). Detroit Lakes, International Falls and Waite Park rank closely behind.
John Mellein, the agency’s former director of marketing and sales, attributes the record sales to a more strategic and aggressive promotional campaign with a focused message: the lottery offers fun and entertainment.
The lottery conducted dozens of surveys and focus groups dissecting its customers’ age groups, income brackets, computer and social media usage, and shopping habits. Many of those studies suggest that a broad swath of Minnesotans play scratch, regardless of income.
But for years a key demographic has largely shunned the lottery: young people. The lottery’s own studies show that no other age group buys tickets less than those 18 to 24.
In an effort to understand why, one survey in 2011 asked 18- to 34-year-olds to draw a “typical” lottery player and compare it to a drawing of themselves. The results: Those taking the surveys were often depicted as young, active and energetic; the lottery players were typically shown as older and sedentary. A 24-year-old drew a picture of a 52-year-old lottery player saying, “I have seen a lot of places in my day.”
The lottery’s marketing often has skewed younger. Its presence on social media has grown; recent commercials feature cute puppets clowning with former Minnesota Twins Bert Blyleven and Kent Hrbek. Some of its bestselling new scratch products feature Twins and Vikings logos.
There’s also been an increase in cartoonish, multicolored tickets that pop out from vending machines and gas station cases. The $5 “Stinkin’ Rich” scratch game features a cartoon skunk. In 2009 the lottery offered 49 different kinds of scratch tickets; it will offer 75 this year.
The lottery’s goal: offer more products in hopes of finding something for everyone in just about every age group and income bracket in every area of the state. The number of lottery retailers, who get a 5.5 percent cut of every ticket sold, grew to 3,126 by the end of the year. Lotto tickets can be bought at dozens of gas pumps and ATMs across the state, a first in the country.