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Director of Finance Online - Blogs - The Edge » Blog Archive » Is £2 too much for a lottery ticket?

The Edge

Richard Northedge takes on corporate finance

Is £2 too much for a lottery ticket?

It is a bold company that doubles its prices overnight. Yet for Camelot it should not matter: if customers pay twice as much for lottery tickets they will win twice as much. Nevertheless, will £2 put off punters?

The lottery is all about percentages. Half of each ticket sale comes back as prizes, 28 per cent goes to good causes, 12 per cent to the government in tax with the promoter and retailers splitting the rest. Even at £2 a ticket, 98 per cent of purchasers will win nothing and 98 per cent of winners will receive the minimum, token, prize. In theory, the ticket price is irrelevant.

In 1995, a year after the UK lottery was launched, Camelot boldly announced that ticket prices were being held at £1 as though this was a contribution to beating inflation. Well it could hardly increase them to £1.03, then £1.06 the following year so that they gradually reached £2 (which would not be for a few years yet if the price was linked to the inflation rate).

If people wanted to spend £2 they could buy two tickets – different numbers if they didn’t expect to win, the same numbers if they did. Indeed, introducing a Wednesday draw gave the chance to spend a second pound.

But while the value of lottery tickets does not change by doubling the price, there could still be a resistance to purchasing. Adding a zero and making the tickets £10 – and the prices ten-times greater – would be the same value but the outlay would deter many. Look at the proliferation of pound-shops on Britain’s high streets to see that some retailers see £1 as a key pricing point.

Camelot is taking a risk therefore. Sales of draw-based games are running at £10bn a year with another £2bn of instant-play games. Sales have risen by more than a third since 2002 - partly by adding games and partly by remarketing – but before then they were dipping as the public tired of playing and realised how impossible 14m-to-1 odds of a jackpot really are.

The rise in the price of Lotto tickets in the autumn of 2013 will thus be accompanied by a tweaking of the prizes to “re-energise” the game. By definition, the jackpots will be bigger – which provides a marketing opportunity - but the odds do not change.

Will the public be fooled by bigger prizes for a ticket that costs only a pound extra? Or will £2 suddenly seem expensive for a flutter that is usually pointless? Having never raised its prices in 19 years, Camelot is entering new and dangerous ground.



5 comments on “Is £2 too much for a lottery ticket?”

  1. john hicks says:

    in spain euros lottery tickets cost 2 euros each and have done for some while

  2. Eddie Gallagher says:

    As a reasonably affluent player of the lottery I have no real issues re the price hike … however it is the poorest members of society that this will impact on most.

    In my job I deal with several shopowners and hear their stories of customers spending their last £ on a lottery ticket as they chase the dream of winning the lotto.

    We are talking about low earners, the unemployed, single mothers, disabled etc that just cannot afford an extra pound without cutting back somewhere else eg food, heating, kids clothes etc.

    Camelot have shown a distinct lack of awareness as to what is happening in the economy. Their focus is on grabbing headlines and being some sort of charitable superhero to projects up and down the country.
    But my question is at what cost to the man in the street who will never benefit from lottery funding?

    In an attempt to make up for dropping lottery sales, it seems to me the Camelot fat cats have lost touch with all common sense. Their attitude seems to be one lacking in social awareness and the decision to raise the price of a ticket just seems to be a desperate cash grab so they can justify the continuance of their travel and celebrity laden junkets that their world revolves around.

    Camelot are out of touch and this could backfire dramatically. Have they even considered failure?

  3. Sam says:

    @John Hicks: In the UK the Euromillions lottery already costs 2 GBP a play - its is the National Lottery being referred to here

  4. Mark says:

    I’m very upset to hear about the changes to the lotto. I have been doing the lotto since the start in 1994, I do 6 lines of my own and organise a family lotto which is 5 lines a week. It saddens me to say I will no longer be doing the lotto one the price of a ticket goes up to £2. What concerns me more is that I know a lot of people have said the same, they will not be paying £2 a ticket, so you will probably find a dramatic decrease in sales which unfortunately will reduce the amount of money going to good causes. The people responsible for this change should reconsider their actions!

    If there was a change to be made to the format it would have been best putting a cap on the Jackpot, say £2 million and then bumping up the prize money in the lower tiers. I just hope that once you witness the slump in sales and therefore profit you revert back to the original price of a ticket (£1).

    From a very disappointed long-time member of the lottery R.I.P yes this could be the end of an era and you’ll probably have to make job cuts in a couple of years due to this.

  5. Paul says:

    I think it is a huge leap in the price. True the prize money will go up but it is disproportionate to what Camelot will be earning. Especially giving that in many cases players don’t win and others don’t claim their prize money. The only consolation is that some of the lottery earnings go to good causes. The result of the increase in my opinion will be people looking for cheaper options such as euromillions.com/ and other online lottery agencies, and I don’t blame them. Shame on Camelot!

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