Lottery Business Models

A lottery is a scheme for raising money by selling chances to share in a distribution of prizes, usually based on a drawing. A prize may be a fixed amount or a percentage of the receipts, and the format of the lottery can range from a simple draw with a fixed number of winners to the complex lottery with multiple prize pools.

Historically, lotteries have been an important part of the financing of public works projects and have also been used to raise funds for private ventures. They were a common source of funding for roads, libraries, churches, colleges, canals, and bridges during colonial America. They were also a popular source of income for government entities and private businesses in the American Revolution.

In the United States, there are more than 35 state-run lotteries that generate billions of dollars in revenues annually. Most of the revenues are earmarked for education.

Lotteries are regulated by federal law and some states regulate them as well. The revenue from a lottery is taxable if the sums won exceed a certain amount in a year.

Several studies have shown that the general population supports state-run lotteries, although there are differences by socio-economic group and other factors. For instance, men tend to play more than women; blacks and Hispanics are more likely to be regular players; and people in the middle age ranges and above play less often than those in younger age groups.

State-run lotteries are typically administered by a state agency or public corporation that is in turn financed by taxes on winning tickets and sales of other lottery products. These revenues have to be distributed among a variety of programs, including schools and other educational institutions, health care organizations, and charitable foundations.

The lottery industry has developed a wide array of business models and strategies for generating and distributing winning ticket inventory, promoting the lottery to consumers, and tracking prize payments. Some of these strategies include:

Retailership / Distribution

The majority of lottery tickets are sold by retailers, usually convenience stores and other retail outlets. Many retailers are owned or operated by individual businesses, and some operate as independent contractors. Some of these companies are national chains, while others are local or regional businesses.

Various other outlets are licensed to sell lottery tickets, including nonprofit organizations (churches and fraternal groups), service stations, restaurants and bars, bowling alleys, and newsstands.

In the United States, there were approximately 186,000 retailers selling lottery tickets in 2003. The largest market was California with approximately 19,000 retailers, followed by Texas with 16,395 and New York with 15,300.

Some of these retailers offer online services as well. The largest market for internet lottery games was the state of Texas with almost half a million tickets sold on the Internet in 2003.

Despite the growing popularity of lottery games, many concerns have been raised about the impact of state-run lotteries on public policy. These concerns focus on whether the promotion of gambling by state lotteries is appropriate for a government that is concerned about providing affordable health care, improving public education, and protecting the interests of the poor.