California’s Lottery--Striking It Rich : Per-Capita Ticket Sales Outstrip Those of Other States’ Games
By any measure, the California Lottery has been a phenomenal success, selling more than $800 million in tickets in the first three months--or about $30.30 worth for every man, woman and child in the state.
A sociologist attributes it to traditions Californians inherited from the ‘49ers and from the movie industry--trying to get rich quick, and trying whatever is trendy.
The people running the operation here credit careful planning, good management and the state’s diverse cultural heritage.
Lottery officials in other states say that it was pretty much a case of being in the right place at the right time.
Outstrips Predictions
But whatever the reasons, the California Lottery has outstripped even the most optimistic predictions, doing better, according to its director, Mark Michalko, “than any other lottery in the world.”
As far as anyone knows, he is right--even when you allow for the fact that California is the largest state in the nation.
By way of comparison, New York--the nation’s second-most-populous state--had sales of only $196.5 million during its first three months, in 1976. That came to about $11.55 for each resident of that state, about one-third the per-capita rate in California.
Each state that followed New York into the lottery business did better on a per-capita basis, with Arizona coming in at $15.92, the state of Washington at about $24.40 and Colorado at about $25.28.
And when California--the latest to join the parade--went on-line in October, it capitalized on what one industry observer calls a “lottery fever” that had been sweeping the nation.
Gov. George Deukmejian--never a fan of the lottery--predicted at the time that sales here during the first full year of operation would total about $900 million, a figure that should be reached by the end of this month, less than a third of the way through that year. Michalko countered with his own estimate at the time of “about $1 billion, maybe $1.2 billion.”
But looking at the figures piling up on his desk last week, Michalko changed his prediction.
“Historically, after the first few months, there’s more of a drop-off,” Michalko said. “I’m sure there will be one--it’s just a question of when. But even so, we should hit $1.5 billion by June 30, and top $2 billion by the end of the first year.”
Michalko’s $2-billion estimate is a staggering figure--more than the sales of 81 of the top 100 publicly held companies headquartered in California in 1984, as much or more than the budgeted general fund expenditures of 21 states in fiscal 1985-86.
No other state has ever sold more than $1.3-billion worth of lottery tickets in a year. Ralph Batch, a director of the Maryland-based Public Gaming Research Institute, a private organization that does consulting and advisory work for state lotteries and other gambling interests, said he does not know of “any place on the North American continent--any place anywhere”--that has sold $2-billion worth in a year.
But Batch, a veteran of the business who has managed lotteries in New Jersey, Illinois and Delaware during his career, said that based on California’s special advantages and current sales, “it’s reasonable to believe that they can achieve it.”
A lot of people agree.
“California has always been a place where the risk takers are at home,” said William Roy, an associate professor of sociology at UCLA. “It goes back to the Gold Rush. People came here to get rich quick. They still do. . . .
“Take the movie industry. It’s full of people who are gambling, taking a chance, even though they risk getting nothing. . . . It’s the thrill of the risk, like climbing a dangerous mountain.”
Keeping Pace With Trends
Like the movie industry, Roy said, other ventures that succeed in California have to keep pace with the latest trends.
“Right now, the lottery is ‘in,’ ” Roy said. “It’s something people are talking about with each other. . . . People like to be ‘in.’
“Take the lottery ads. . . . They’re like Pepsi ads--slick, quick and telling you to ‘be with it.’ They make the lottery very attractive.”
Michalko is proud of the advertising, which tends toward the “soft-sell” approach, emphasizing the “fun” of gambling. Brad Fornaciari, an account executive for Needham Harper Worldwide, the lottery’s ad agency, said the approach, which also emphasizes “the fact that 34% of the money is going to a good cause--schools,” was chosen “because experience from lotteries in other states indicated that showing it was more than just a grand way to make money was more appropriate for long-term success.”
It is still too early to gauge the effectiveness of the ads, but Michalko thinks that they were a major factor--along with extensive news media coverage--in “conditioning” the public to react favorably to the California Lottery when it began.
Lottery officials then managed to sustain sales by introducing new variations of the game every time interest began dropping. For example, in the first six weeks of the lottery, sales declined from $80 million to $45 million per week. Then a “new” game was introduced, and weekly sales rebounded to $70 million, only to ebb again until a third game was introduced, when they rebounded once more.
Again, this was drawing on the experience of other states. In all of them, sales tended to drop off, week by week, only to soar again as a “new” game was introduced.
Director Credits Staff
Michalko also is quick to credit his staff for much of the success.
“We wanted to avoid the mistakes made in other states--and one of the biggest had been unqualified personnel,” he said. “We got good people, dedicated, talented people, people who hit the ground running--hard.”
A lot of those people--like Michalko himself, who came from the Ohio Lottery--were raided from lotteries in other states, attracted by higher salaries and what Michalko calls “the challenge of being part of the world’s largest lottery. . . .
“There were people working seven days a week while we were getting ready, and there were some 14-hour days,” Michalko said. “It was fun, but after six months of not eating or sleeping right, I’m not sure how much fun. I know one thing, it was one hell of a lot of work.”
Michalko--who believes that most Californians spend only “discretionary funds” on lottery tickets--thinks that the “above-average disposable income” of the state’s residents is a big factor in the success of the games.
Like others who talk of California’s success, he also stresses a “pent-up demand” for a lottery in California.
Partly ‘Preconditioning’
He says this public enthusiasm for the games is based, in part, on gambling experience gained from casinos in nearby Nevada, and on “preconditioning” based on “the foreign backgrounds of certain people,” including many Latinos and Asians who come from countries where lotteries have long been a part of the culture.
Joan Zielinski, executive director of the New Jersey Lottery, and Martin M. Puncke, director of the Maryland State Lottery and president of the National Assn. of State Lotteries, agreed that--in Puncke’s words--”California was the right place at the right time.”
With the news about Eastern lotteries reaching the relatively affluent West, “Californians were really primed for this,” Zielinski said.
“California not only has a large population base, most of them are city people,” Puncke said. “Metropolitan-thinking people have more of an inclination to play than rural-community people.
“If you live in a city, you normally handle more cash money--you’re more familiar with it, it’s more of a commodity, there’s more of a tendency to move it around.”
State officials here say that it is still to early for any demographic studies on who is playing the games--whether city dwellers, farmers, rich or poor--and whether the bulk of sales are by a pool of heavy repeat buyers, but lottery industry sources say early samplings indicate broad enthusiasm in California.
Roy, the UCLA sociologist, nonetheless sounds a note of caution.
“Nothing stays ‘in’ here very long,” he said. “People here are not committed to anything, they’re just ‘into things. . . .’
“When the lottery’s no longer ‘in,’ it will be interesting to see how well they sustain it. . . . It could be the highest high now, and the lowest low later.”