Lottery bets, loses $284,000

Million Dollar Raffle paid off in 2011, but not this year

Lottery Director Bishop Woosley (shown) said there is a host of reasons why comparing the 2010-11 raffle with the 2013-14 raffle is like comparing “apples to oranges.”

Lottery Director Bishop Woosley (shown) said there is a host of reasons why comparing the 2010-11 raffle with the 2013-14 raffle is like comparing “apples to oranges.”

Sunday, January 26, 2014

One was a moneymaker. The other was a flop.

The Arkansas Scholarship Lottery has run two Million Dollar Raffle games since the lottery began selling tickets in the state in 2009. And although the two games were similar in a lot of ways, they produced wildly different results for the agency that was set up to help fund college scholarships for Arkansas students.

The first raffle, drawn April 7, 2011, made about $2 million in profit. And the second raffle, drawn Jan. 2, lost about $284,000.

Both games asked people to buy numbered tickets for a chance at winning $1 million. But Lottery Director Bishop Woosley said there is a host of reasons why comparing the 2010-11 raffle with the 2013-14 raffle is like comparing “apples to oranges.”

“The first raffle was the first time we had ever offered a million-dollar prize in the history of the lottery. That in and of itself is enough to drive the game,” Woosley wrote in an email Friday.

“To be honest, it would be difficult to compare [them] given that the two raffles are two very different games, launched in two very different time periods - startup versus later in the life of the lottery - with different prize structures, different incentives, different sales periods, different odds, different draw sequences and different price points,” he added.

Regardless of the difficulties in making comparisons, the results from the second raffle, announced earlier this month, left lottery officials and the public wondering what caused one raffle to succeed and the other to fail. The Arkansas Lottery Commission voted on Jan. 15 to have its vendor committee do an in-depth study of the second raffle, which was projected to take in $2.2 million in sales but sold a little more than $1.4 million worth of tickets.

During the first raffle, tickets went on sale on July 14, 2010. The date for the drawing was moved twice because the agency hadn’t sold all of the 500,000 tickets. After more than nine months of ticket sales, the agency awarded $2,540,000 worth of prizes, including $1 million each to two winners in April 2011.

Sales followed what lottery industry experts say is a predictable pattern. People typically buy fewer tickets when household expenses are higher - at back-to-school time, Christmas shopping or summer-vacation time, for example.

The lottery’s moneymaking months are typically February through May when people are catching up on credit-card bills from the holidays and tax returns come in, Woosley told the commission earlier this month.

For the first raffle, the extended drawing date put the last few months of ticket sales smack dab in the middle of the busy season for the lottery. In the six days before the first raffle drawing, the lottery took in more than $1.1 million in sales.

Lottery Commissioner Julie Baldridge was the spokesman for the lottery during the first drawing. She later became interim director of the agency.

“I sat at my desk the last night tickets were on sale, and I just hit the refresh button over and over and over. Finally at about 9:15 p.m., I hit the button and it showed 500,000 tickets sold, and my stomach just turned,” she said. “I was so happy. I had three press releases ready to be sent out, one that said the lottery broke even, one that said we made some profit and one that said we sold all our tickets for the raffle. I didn’t know until that last refresh which one I was going to send out.”

Baldridge and Woosley said sales for raffles or other numbers games with a set drawing date normally increase right before the drawings. That held true for both raffles, but there was not as large of an increase in sales during the second one.

On Dec. 30 and 31, the last two days of ticket sales for this month’s raffle, the department sold 20 percent of its tickets, jumping from about 199,700 sold to 250,840 when the sales period ended. The total sales for the last month, however, were just $614,050.

Woosley told the commission that holding the lottery at the beginning of January and having the last day to buy a ticket on New Year’s Eve, may have contributed to some of the shortfall. The hope had been that the game would bolster the agency’s sales in a traditionally slow month.

Woosley also said the lottery shortened the time period for the second raffle so that people wouldn’t have to hold onto tickets for as long.Officials promised not to postpone the drawing date and didn’t require that a specific number of tickets be sold ahead of time. All of those decisions were thought to be good incentives designed into the second raffle, and Woosley said the commission would likely look into which of those factors worked.

“If the first raffle drawing had been held on its originally scheduled date, the lottery would have likely lost over a million dollars,” Woosley wrote. “We designed this game to avoid liability in that range.”

The lottery also built in “early bird” prizes for the second raffle. An October drawing for a smaller prize worked to temporarily bolster ticket sales, but a November early prize drawing did not create much if any uptick in sales, Woosley said.

Woosley and his staff tried other methods to boost sales in the second raffle. The lottery offered volume discounts: one ticket for $10, three tickets for $20 and five tickets for $30. Although the second raffle sold half as many tickets as the first, they didn’t generate half as much revenue because some of the second raffle’s tickets were cheaper.

When those deals didn’t seem to spur sales as much as the lottery wanted, the agency increased advertising and began offering incentives to the clerks who worked in the stores selling lottery tickets.

The stores and clerks make commissions when they sell the winning tickets for most of the number games. Those commissions were lower in the raffle game, which lottery officials speculated was a factor in clerks selling fewer tickets.

According to emails between lottery officials obtained by the Arkansas Democrat-Gazette through a Freedom of Information Act request, the lottery began an incentive for clerks in October offering them free scratch tickets if they sold a certain number of raffle tickets. That bolstered sales some, so the lottery offered them scratch tickets with higher prize values to try to increase sales, but that resulted in only minimal success.

According to the emails, the lottery was tracking the number of stores that had not sold any raffle tickets throughout the second raffle’s four months of sales. Three days into ticket sales, 1,310 of the state’s more than 1,900 retailers hadn’t sold any tickets. Three days later, that number had dropped to 756.

It continued to drop, but as of Oct. 28, almost halfway through the raffle, 136 retailers still hadn’t sold a single ticket.

“How is it possible that 20 some retailers on the border of us and Tennessee have not sold a raffle ticket?” Woosley wrote in response to the Sept. 25 query that showed that 285 retailers, including many in West Memphis, hadn’t sold any tickets.

Mike Smith, the lottery’s director of gaming, wrote in an email after the Oct. 28 report: “The biggest issue I see is that we have 943 retailers that have sold nine or fewer Raffle tickets in the 57 days the game has been on sale.”

That meant that more than half of the state’s retailers had sold fewer than 10 tickets.

Sales did not pick up in November, the early bird draw didn’t seem to stir up interest, and advertising on television, newspaper and radio failed to rescue the raffle. Sales dropped from $178,340in October to $167,860 in November.

According to the emails, the first mention to the Lottery Commission of the possibility that the raffle would lose money came after the drawing was over. And even then, the news was prompted by questions from commissioners who knew what the predicted sales were and how much money had been awarded in prizes.

“Let me see if I’m understanding this right,” Commissioner Bruce Engstrom wrote in a Jan. 2 email. “Below shows Final Sales @ $1,426,490. A later email stated the “Winning Raffle ticket numbers drawn Thursday” totaled $1,550,000. How much did we lose on this?”

Woosley responded quickly that the raffle likely lost about $200,000. The commissioners were given the $284,000 figure two days before their Jan. 15 meeting.

Woosley wrote in an emailed response to questions Friday that he had mentioned how raffle sales were tracking during every commission meeting while tickets were on sale.

“It’s difficult to make a prediction when you have to wait until the last few days to determine what sales will ultimately be,” Woosley said. “The sales from raffles typically occur in the last few days. It would be impossible for me to accurately predict whether we would be successful or not until sales had ended.”

Meanwhile, some commissioners want to know what could have been done to increase ticket sales and what might be done to prevent a flop in future games.

The commission will discuss the subcommittee study once it is complete, but for now, there’s no plan for a third raffle. Woosley wouldn’t entirely rule it out, however.

“I will never close the door on any idea which could potentially make money for our agency to put towards scholarships for students,” he wrote.

Front Section, Pages 1 on 01/26/2014