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Business Model of Lottery Companies

Have you ever wished to become a multi-millionaire overnight? Or have you have thought of getting thousands of dollars just by spending $50 on a lottery ticket? In this article, we will understand the business model of lottery companies.

Well. We all wish to have a lot of money so that we do not need to take the stress from our regular jobs.

Lottery companies maybe not be popular in India that much because of the government regulations but in the countries like the United States of America and Canada, lottery companies make billions of dollars.

Before beginning this article, let me tell you a real short incident.

I am here in Canada as an international student. I arrived on 10th December 2021.

I was looking for a part-time job so for an interview I went to a convenience store. What I saw there really surprised me.

People above the age of 50 were continuously coming to the stores.

Want to know the reason?

To buy lottery tickets!!!

Some bought 5 tickets for $30. Some bought 10 tickets for $100.

After coming home, I did some research on the lottery business in Canada and US both and saw some astonishing numbers.

  • According to the report of Bankrate, an adult individual in the USA spends $1,038 each year to buy lottery tickets.
  • The report from Gallup shows that half of adult Americans consider buying lottery tickets.
  • An interesting data from Ontario Lottery and Gaming Corportation shows that 54% of Ontario adults bought a lottery ticket in the past 12 months.

Also read: How Crypto Exchanges Make Money?

Business Model of Lottery Companies

Let’s say, there is a lottery of winning $10,000. And the time duration for the lottery we take here is 4 months.

To participate, the participants have to pay only $10.

Now, the company which organizes this lottery would have to promote and sell more and more tickets.

There are thousands of convenience stores in the United States and Canada. The lottery company plans to sell tickets from such stores.

Within a period of four months, just 4,000 people take a part in a lottery.

Therefore, the total revenue for a lottery company would be $40,000.

Cutting expenses like living commissions to the store owner and other marketing costs, we cut down 30%. The number can be bigger or smaller.

Here, the net profit of the $28,000.

That’s not the end…

You would need to give $10,000 to the lottery winner and therefore, the final profit would be $18,000.

Within a period of 4 months, the company made $18,000 by launching just one lottery. Also, don’t forget, we considered only 4,000 participants. It can be tens of thousands and even millions too.

This is how lottery companies in North America make huge money.

But, what are fascinating things about lotteries such that millions of people consider buying them? Let’s find out.

5 Reasons Why People Buy Lottery Tickets

1. Enterntainment

Many people find it entertaining as it is completely based on luck. So, they try the lottery just because they want to see how lucky they are.

These types of people are not desperate to make money from the lottery.

2. Greed

One study shows that people above the age of 40 consider buying lottery tickets excessively.

The majority of the time, poor and middle-class people get involved in the lottery because they think it is the only way for them to become rich. They believe that one day, they will win millions of dollars as a winning price that they won’t need to work anymore.

With such a type of ideology, thousands of dollars by an individual are spent on buying lottery tickets.

A poor or middle-class person with financial literacy would invest $1000 each year in an index fund and make himself wealthy over the period of time.

Also read: How Spotify Makes Money?

3. Get Rich Quick Scheme

Another reason why people are so attracted to the lottery is to become rich overnight.

It’s like ‘get rich quick scheme’.

4. Small Investment, Big Gain

How much money do you need to buy a lottery ticket?

The answer is… You can buy lottery tickets worth $1 too.

With a so-called ‘investment’ of $1, you expect to win thousands and millions of dollars. The chances of winning a lottery are very less as there are millions of people who buy this $1 lottery and think just like you.

However, over the period of time, buying a lottery becomes a habit and eventually, you end up spending a lot more.

5. Financial Freedom

Expecting financial freedom from winning a lottery is the worst mistake one could ever make.

In fact, multiple studies have found that 70% of lottery winners end up going broke and filing for bankruptcy.

Conclusion

There are so many ways to become rich. You don’t need to buy lotteries and spend your hard-earned money. Instead, what you can do is improve your financial knowledge, learn new skills and monetize them.

This way, you won’t need to rely on your luck!

Anuj Vohra

Hi , I am Anuj Vohra. Founder of Itsfacile.com & Saral Investment.

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Anuj Vohra

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All the articles are written by Anuj Vohra