Lottery Testing Price Sensitivity
Mega Millions is considering increasing the cost of a ticket from $2 to $5; Maine online casino efforts are flailing; and new information in the Jontay Porter betting case.
The Bulletin Board
NEWS: Mega Millions is considering a significant ticket price increase, but will it achieve the desired goals?
NEWS: Maine online casino efforts run into a familiar problem.
NEWS: More details emerge on Jontay Porter’s betting habits.
QUICK HITTER: PENN stock is down 88% since March 2021, but remains undervalued, per Deutsche Bank.
AROUND the WATERCOOLER: A service that you’re never going to use.
STRAY THOUGHTS: Bubble theory.
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The Reasons Behind Mega Millions Ticket Price Increase
Mega Millions is considering raising the cost of tickets from $2 to $5. Lottery Geeks reports that Mega Millions administrators have considered a price increase (and other possible gameplay changes) for two years.
According to Lottery Geek’s sources, the price change would accomplish two objectives:
Differentiate Mega Millions from Powerball. This is apparently a common problem. “Mega Millions enjoys less brand equity and suffers more from brand confusion than Powerball,” Lloyd Danzig, managing partner at venture capital firm Sharp Alpha Advisors, told Lottery Geeks.
Increase jackpot sizes and potentially non-jackpot prizes.
There is also a possible third reason we have recently seen broached in Massachusetts: masking declining sales with price increases.
On that front, instant win scratch tickets have been creeping up in price, including a $50 ticket in Massachusetts, which Massachusetts Lottery Director Mark William Bracken said “papered over” negative sales trends. The initial $50 ticket was the best-selling ticket in the country, but the second round of $50 tickets hasn’t performed as well.
But, as Danzig told Lottery Geeks, “Large-format draw lotteries have historically benefited from their positioning at the $1 to $2 price point and risk alienating core users at a $5 price point. Even if the odds for customers improve, that improvement is difficult to communicate and appreciate.”
One of the interesting aspects of this is ticket pooling and mass sales during jackpot periods, where people collect $20 from everyone in the office and buy tickets in bulk. The price change will likely produce fewer ticket sales as people are unlikely to jump their pool contribution from $20 to $50; they’ll just buy fewer overall tickets.
There are nine Mega Millions states: California, Georgia, Illinois, Massachusetts, Michigan, New Jersey, Ohio, Virginia, and Washington State.
Tribal vs. Commercial a Sticking Point in Maine
Barring a special session later this year, Maine’s 2024 online casino efforts (LD 1777) will come to a close today.
To be fair, the legislation that would have allowed the state’s four tribes to partner with online operators made it further than I expected, setting up what could be a fascinating 2025 legislative session.
That said, the legislation as written will continue to face strong opposition as it cuts out the state’s two commercial casinos, operated by Penn Entertainment and Churchill Downs.
Most states try to chip away at tribal exclusivity, but the opposite is occurring in Maine. It’s complicated, but because of history and a federal law signed in 1980 (the Maine Indian Land Claims Settlement Act), tribal lands are treated as municipalities in Maine, which prevents the tribes from placing their land in trust and operating casinos. Lawmakers have been trying to rectify this through online gambling.
In 2022, the tribes were granted exclusive control of online sports betting—retail betting was authorized at commercial casinos. The online casino bill went a step further without so much as a bone thrown at the state’s two commercial casinos.
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Jontay Porter’s Betting Activity = Circumstantial Evidence
There are some new details in the Jontay Porter case. According to the Action Network, “Toronto Raptors center Jontay Porter owned and operated a VIP account at FanDuel in Colorado that wagered millions of dollars in total from 2021 to 2023.”
The volume of betting activity is alarming and follows the revelations in the Shohei Ohtani case, in which the interpreter allegedly lost tens of millions betting with an illegal California bookie.
Importantly, Porter didn’t wager on NBA or college basketball per one source, but the wagers themselves are not the issue. Porter is being investigated due to irregular betting activity around his prop bets.
As Dillon Borgida noted on X, “This by itself isn’t abnormal or wrong; it’s just more circumstantial evidence against him in the prop fixing case.”
NBA Commissioner Adam Silver called the allegations a “cardinal sin” and said that a permanent ban from the league is among the disciplinary options available.
“That’s the level of authority I have here,” Silver said. “Because there’s nothing more serious, I think, around this league when it comes to gambling: betting on our games. And that is a direct player involvement. And so, the investigation is ongoing, but the consequences could be very severe.”
Quick Hitter: PENN Stock Undervalued?
Deutsche Bank analyst Carlo Santarelli has lowered his price target on PENN Entertainment from $22 to $19, citing larger than anticipated losses for ESPN Bet.
PENN’s stock has dropped dramatically from its high of $130 per share in March 2021. It currently sits at around $16 a share, which is still below Santorelli’s target price.
ESPN Bet’s market share has leveled off at around 4% in active states, down from 8% just after its launch in November 2023.
Analysts have pointed out that the ESPN Bet platform isn’t on the same level as FanDuel and DraftKings, and there is a lack of integration with ESPN programming and apps - something PENN CEO Jay Snowden has mentioned.
“They have to get work done within their media app, within their fantasy app, and the Bracketology,” Snowden said during the JP Morgan Gaming, Lodging, Restaurant & Leisure Access Forum. “That’s on ESPN to get these integrations going faster.”
On an episode of the Eilers & Krejcik Gaming Zero Latency Podcast (a newsletter sponsor), Matthew Trenhaile, the former head of growth sports at Pinnacle, offered ESPN Bet some advice: “I’m leveraging the fact that I have an asset of journalists writing content for my sports. Every game should have a storyline, and that storyline should be manifested in a pre-built SGP that customers can click through to.”
PENN has pointed to the upcoming NFL season as its true launch point (my words, not PENN’s), with better integration and product enhancements expected.
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Around the Watercooler
Social media conversations, rumors, and gossip.
Huddle CEO Francesco Borgosano used an interesting phrase on a recent episode of the Eilers & Krejcik Gaming Zero Latency Podcast: Vanity metrics.
Borgosano was talking about the numerous markets sportsbooks offer that generate trivial amounts of wagering handle but allow the operator to say they offer over 500 markets, even if they only receive bets on 20 markets. The ability to say we have 500 markets looks good to investors and customers.
This is something I’ve encountered inside and outside of gaming.
One example is babysitting services at gyms. They look good in an advertisement and when you show someone around the facility, but in my experience, the number of people who use the service is a small fraction of the number who ask about it and are swayed to sign up because of it. It sounds good, and people start thinking of all the scenarios where they might use it, like during school vacations, but the chances they do are slim.
That becomes apparent if you shift to a monthly charge instead of free or pay-as-you-go. Suddenly, very few people are interested in it. Similarly, I’ve seen it eliminated, and the gym lost four customers.
Stray Thoughts
I spend the first half of my day immersed in the gambling universe and the second half in the martial arts universe. What I’ve learned is residents in both universes live in extreme bubbles.
Most people don’t know the difference between Judo and Muay Thai or Tae Kwon Do and “Karate,” let alone the differences between Folkstyle and Freestyle wrestling or Goju Ryu, Shorin Ryu, and Shotokan Karate.
A traditional martial artist might roll their eyes when someone calls their uniform a “gi” instead of a dogi or says a “Bo” staff (which means staff staff), while a person on the street would say, “What the hell is a gi or a bo?”
Similarly, the average person (even the ones who gamble occasionally) doesn’t know what an SGP is, how gambling affiliates work, or the distinction between FanDuel and Bovada. Many people also don’t know basic blackjack rules, that there was an online poker crackdown in 2011, or what baccarat is.
Basically, what we, the residents inside these bubbles, consider common knowledge is anything but common knowledge.