For Lottery, Raising Prize Purses Was No Gamble

Neither the recession nor the decline in consumption has had any deleterious effect on the fortunes of Mifal Hapayis, the national lottery. A study of the company's 2009 financial reports, obtained by TheMarker, indicates that Mifal Hapayis just completed its best year ever, with record income of NIS 4.5 billion - a 14 percent increase as compared with 2008.

Mifal Hapayis' revenues in 2008 and in 2007 were NIS 3.9 billion and NIS 3.8 billion, respectively.

Revenues in the final quarter of 2009 totaled NIS 1.15 billion - a 12 percent increase over the same quarter in 2008.

One of the triggers of this growth in income was the new format of Lotto, launched in February 2009, which has faced criticism from the Finance Ministry.

"Increasing the first prize at the same time as lowering the chance to win it only raises greater concerns regarding addictions to gambling, and generates gambling hysteria in lotteries in which the grand prize is particularly large," the ministry said.

What prompted this statement was the fact that under the new format, the chances of winning dropped from one in 13.5 million to one in 18.5 million, while the potential winnings increased.

Mifal Hapayis data reveal that Lotto has once again become the national lottery's best selling game. Revenues of Lotto - in its new format - jumped by 46 percent in 2009 over the previous year, totaling NIS 1.36 billion.

Fourth-quarter revenues from the game totaled NIS 355 million, as opposed to NIS 262 million in the parallel quarter of 2008.

According to Payis data, 26.5 million entry forms for Lotto - in its new format - were submitted between February and December 2009, as opposed to 18.7 million entries during the same period of the previous year, and the average winning prize of the new Lotto was over NIS 56, as opposed to NIS 39 in 2008.

In addition, there were some 14 million entries that won a prize in 2009, as opposed to 12.3 million in the previous system in 2008.

In 2009, Payis distributed NIS 2.6 billion in prize money, as opposed to NIS 2.3 billion in 2008. NIS 100 million of that amount was transferred to the treasury as taxes on lottery winnings. All told, 89 millionaires were created in 2009, having been awarded amounts of greater than NIS 1 million.

Mifal Hapayis reports that in 2009 there was a sharp rise in funds invested in the community - NIS 1.2 billion, signifying a 44 percent increase as compared to 2008.

As for explaining the increase in revenues during a recessionary year, Mifal Hapayis managing director Shaul Sotnik said, "This has to do with the arduous and professional labors of the Mifal Hapayis team, which has for years been aimed at the entire community and not only on strong financial groups. The new Lotto system has prompted people to purchase more entry forms. The public likes it, because more prizes are returned to the community, and we have enlarged the mid-level prizes."

Referring to reports that Finance Ministry director-general Haim Shani gave instructions to restore Lotto to its previous format, Sotnik said, "In the meantime, we are not changing the format, and are continuing to do what we have been doing."

In the new Lotto format, the value of prizes has increased, as opposed to the chances of winning the lottery, which decreased. The minimum first prize increased from NIS 4 million to NIS 5 million, and the minimum second prize increased from NIS 500,000 to NIS 1 million.

"If bread is not good, people don't buy bread, and the fact is that Lotto was more successful in 2009 and that more people purchased tickets," said Sotnik, countering charges voiced about the new Lotto. "The increase in revenues indicates that there are more customers willing to participate in Lotto, and we are seeing that there is an increase in the female demographic, in the above-average income demographic, and among people who purchase only one entry, no matter how long the duration of the large lottery drawing. About 90 percent of customers purchase in amounts of up to NIS 64. We caused the game to be more suited to Israeli tastes - more lighthearted and aimed at broader, more moderate public. It isn't that people have become bigger gamblers, but that more people are filling out Lotto entries, and apparently the Israeli public wants larger prizes."

"Over one-half of the adult population in Israel takes part in Lotto," Sotnik added. "Essentially, with the new Lotto it is easier for a customer to become a millionaire, even from the second prize. Only this week, in the NIS 74 million winnings, the second-prize winner received NIS 4 million, and two weeks ago there was a NIS 6 million winner in the second prize. That could not have happened in the old Lotto. The fact that we increased the rate of return of the prizes itself demonstrates that the consumer is receiving more."

Odds are you don't need a lotto ticket, but you'll buy one anyway

Who among us felt no regret this week about not filling out a Lotto entry form? Neither the heart nor mind is capable of disregarding the headlines filling the newspapers about the 'NIS 74 million winner who has not yet been found.' For a moment there, we nearly found ourselves checking our wallets to see if maybe, just maybe, the headline was about us.

At a time when a three-room apartment in Tel Aviv sells for over NIS 2 million, raising children costs tens of thousands of shekels a year, and the cost of living is higher than our wages, is a lottery win of a few measly millions even enough? It would not be sufficient even to furnish all of our needs and wants. So there can be no doubt about it - a few tens of millions of shekels are now the minimum to make us rich.

Most of us consider ourselves level-headed individuals. Yet if we already spend money without end on unessential things, then what are another few dozen shekels? In the most recent Lottomania drawing, 7 million forms were sold, at an average outlay of NIS 46 per form.

It goes without saying that some of those who filled out Lotto entry forms would have been prepared to spend much higher amounts of money, even if, or perhaps because, their financial status is less than rosy.

Some would say that the timing of Lotto's change of format last February, to a drawing in which the chance to win is slimmer but the prize is eye-poppingly large, happened to Mifal Hapayis at exactly the right time - the unemployed were sitting around the house, the wage earners had just been informed of salary cuts, and the self-employed weren't sleeping at night, out of fear of what tomorrow might bring. Winning tens of millions of shekels is exactly what the doctor ordered.

But why is Mifal Hapayis to blame? Maybe it is the media, the clothing stores, the retail chains, the car companies, the businessmen, the PR people, the marketing wonks? All of them have created the consumer culture that calls out us to possess brand-name clothes, iPhones, iPods, luxury cars and a million other things. And if you are going to consume them, you simply cannot make ends meet on a few thousand shekels a month.

Meanwhile, expenses on water, public transit, housing and much more have increased. Given the real and legal opportunities that people have to reach fanciful levels of wealth, the option of filling out a Lotto form seems downright logical.

Even the stories about lifestyles of millionaires and billionaires - their yachts, private planes and luxury pads - don't really help.

Mifal Hapayis is no different from other businesses in Israel. All of them have joined together for the sake of a single goal - to get us to buy products we don't really need. That being the case, what difference does it make whose pit happens to swallow us?

The only difference lies in that Mifal Hapayis is selling us the possibility of gaining something that we will almost certainly not receive. A dream with almost zero chances of winning. At least when you pay for jeans you get to take them home.

The next Lotto drawing is being held this Saturday. The maximum possible prize: NIS 14 million. The odds of winning - one in 18.5 million. Good luck.