Heavy Players Support Lottery Cash Cow
First of two articles
By Ira Chinoy and Charles Babington
Sixteen miles to the southeast, around the junction of Martin Luther King Jr. Avenue and Good Hope Road in Anacostia, cash drawers open and close thousands of times a day in the lottery trade. Within a few blocks of one another in one of the region's poorest neighborhoods, a dozen D.C. Lottery outlets including convenience stores, check cashing shops and other agents sell $2 million a year in government-sponsored betting slips.
Those contrasting images reveal a fundamental truth about what the lotteries in Maryland, Virginia and the District have become: a $2.2 billion- a-year cash cow that relies on a hard core of heavy players, who, on average, have less education and lower incomes than the population as a whole, according to lottery documents and data. The heavy players also include a much higher percentage of minorities.
For example, 61 percent of Virginia Lottery sales to the state's residents are made to just 8 percent of all Virginia adults, according to 1995-96 lottery survey data obtained by The Washington Post. Of that small pool of heavy gamblers, one in five never finished high school, and more than one in three were African Americans, roughly double the rates among all Virginia adults surveyed.
Those heavy Virginia players on average spent $47 for lottery tickets in two weeks, the equivalent of more than $1,200 annually. Yet one in six had household incomes of less than $15,000, according to the lottery data.
Similarly, Maryland lottery players "are more likely to be male, less educated and more downscale" than residents who never play, according to a 1997 state study, which adds: "They are also more likely to be black." Among heavy spenders, the distinctions by income, education and race "are especially pronounced," the study asserts.
And in Washington, sales figures show that the city's most anemic lottery market lies west of Rock Creek Park in an area with the highest education and income levels and the thinnest concentration of minorities.
Lottery officials characterize their games as egalitarian, played by "the average person out there," as David Gale, executive director of the North American Association of State and Provincial Lotteries, put it.
But officials rarely publicize the fact that most tickets are bought by a small core of heavy players or the extent to which that core is skewed by race, income and education. The 32-page report that Maryland lottery officials submitted to state legislators last year does not mention demographics. But the phenomenon gnaws at some government officials.
"It's troubling to me," said Anthony A. Williams, the District's chief financial officer, "when you have people who make less than $15,000 a year and a huge percent of their income is going for playing."
Others choose to focus on how lottery sales have become budget mainstays in Annapolis, Richmond and the District, which collectively made more than $800 million in lottery profits last year. That fiscal reality has prompted lottery officials to scramble for more aggressive, eye-catching marketing campaigns as sales have flattened.
Maryland Gov. Parris N. Glendening (D), who adamantly opposes slot machines and other casino gambling, called it "sad" that the lottery often holds special appeal for those with the least money to spare. But, Glendening said, "I'm a realist. The lotteries are there. The revenue flows are there."
And so are players like Jesse Williams. Strolling into an Annapolis liquor store, Williams, 43, empties his pockets of several dollars to play Pick 3, Maryland's top-selling game.
On this day, Williams has no car, no telephone, no regular work beyond odd jobs. He does have a wife, three children and, he says, an irresistible urge to play the state-run, twice-daily numbers game. He conjures numbers from dreams, from news stories, from formulas based on his children's birthdays.
"I wake up hoping I can play a number that will hit," Williams says. "Of course, I say that every day."
A steady lottery player for 25 years, Williams says he has had some winning numbers, with his biggest win bringing $1,500. Still, he says he would be better off "if I had saved what I've invested" in lottery tickets. "But it's a habit. You can't help it."
As he heads out the door with a fistful of lottery tickets, the clerk rings up a liquor purchase and calls out the total: "$3.84." Williams stiffens, looks forlorn. "See," he says, "if I had some money, I would play that number!"
A Big Business
Clerks ensconced behind bulletproof windows sell tickets to a mostly African American clientele, which ranges from commuters in business suits to more casual regulars such as Ti Lipscomb, 37. A school bus driver from Alexandria, he stops at the store between his morning and afternoon runs.
Lipscomb likes the Mini Mart, he says, because "as soon as I get over [the District boundary], it's the first place I get to."
"It's just something to do," says Lipscomb, who plays all three area lotteries. "I come out just a little ahead," he says. "If I can spend money on food and entertainment, I figure I can spend a little on this."
To divine winning numbers, Lipscomb says, "I have an old fellow who helps me. Or sometimes I use my instincts. If I see a number over and over, I play it, and it usually comes up."
Customers such as Lipscomb have made the South Capitol Mini Mart the metropolitan area's biggest-selling lottery agent, with nearly $4 million in sales last year, according to lottery officials.
Government lotteries in the United States date to the Colonial period. But they have taken on the trappings of a big business only in recent times. Thirty-seven states and Washington sell lottery tickets through 225,000 outlets, according to the lottery trade association. Typically sold dollar by dollar, lottery offerings produced about $36 billion in sales and $12 billion in profits during the last fiscal year, outselling such business giants as Walt Disney Co., McDonald's Corp. and Microsoft Corp.
The lottery industry casts itself as a purveyor of inexpensive fun the chance to hit the jackpot for only a buck. Lottery tickets are fat-free. They don't trade on graphic images of sex and violence. They don't lead to cancer or car wrecks. The profits go to the common good.
"Big jackpot games are equalizers," Edward J. Stanek, Iowa's lottery commissioner and an industry leader, said in a speech in Boston in the fall. "Those who were not fortunate in the drawing of genes and inheritance can venture a chance equal to everyone else to benefit financially."
Some critics decry the lottery as regressive, because it draws disproportionately from those with the least to spare. Critics also complain that government should not benefit from compulsive gamblers.
But enthusiasts for state-run gambling point out that buying a lottery ticket unlike paying sales or income taxes is voluntary. They argue that problems afflicting a small fraction of the population should not restrict everyone.
Lottery officials also note that players across the socioeconomic and demographic spectrum buy lottery tickets. In greater Washington, recent consumer surveys by Scarborough Research Corp. show that a majority of players are white, have household incomes above $50,000, own their homes and attended college. A majority of the area's adults share those characteristics, according to Scarborough.
However, the Scarborough questionnaire does not ask players how much they wager, giving equal weight to heavy gamblers and casual players. Statistics culled from the Virginia Lottery offer a more complete picture of lottery patrons and the extent to which state-sponsored gambling relies on hard-core players who often don't fit the "typical" portrait.
In a 1995-96 study, state officials found that 41 percent of Virginia adults surveyed had bought a lottery ticket within the last two weeks. About 18 percent of the players were African American, close to the percentage of blacks among Virginia adults. But survey data The Post obtained from the Virginia Lottery shows that the percentage of blacks rises sharply as the level of lottery spending rises. Blacks make up a majority of the biggest spenders those who spent an average of more than $90 over two weeks, or the equivalent of $2,362 a year.
Again, a small core of players accounted for a big chunk of lottery business, with 2 percent of adults contributing 29 percent of the sales. Those avid players, on average, were lower on the educational and economic scale, with four in 10 having household incomes of less than $25,000.
On average, the lower a player's income in Virginia, the larger the share of income spent on the lottery, according to state records.
Annual surveys conducted for the Maryland lottery have found similar patterns. Last year, heavy players defined by the state as those spending at least $10 a week included almost half of all lottery patrons without a high school diploma, almost half of those making less than $20,000 a year and more than 60 percent of all African American players.
Those patterns in the regional lotteries conform with national trends identified by two Duke University professors almost a decade ago. Their book, "Selling Hope," showed that although games and customers varied among the states, in general, blacks and Hispanics played more than whites; the less education people had, the more likely they were to play the lottery, and to play heavily; and low-income people spent a much bigger share of their income on lottery tickets than more affluent citizens.
The high concentration of African Americans who play the lotteries heavily has provoked debate about whether states intentionally prey on black neighborhoods with major advertising campaigns and high concentrations of lottery sales agents.
In Maryland, lottery director Buddy Roogow said, "We do not try to appeal to a specific group of people."
Anthony Cooper, director of the D.C. Lottery, said the vast majority of agents are not recruited by the lottery agency but rather apply to be vendors. In addition to receiving commissions for selling and cashing tickets, store owners often believe lottery sales are good for business by attracting foot traffic, Cooper said.
Officials in Maryland and Virginia said franchises in those states are granted through a similar process.
Portia James, curator of the Anacostia Museum and Center for African American History and Culture, believes it is wrong to view hard-core lottery play just in racial terms.
"I think on some levels it's class-linked, it's income-linked," James said. "If you don't have a great many options and you don't have a great many escape routes, then perhaps this seems more viable to you."
Also critical, she said, are "the walking examples within our community. We all know them: people who have hit."
The region's lottery officials readily say they would like to have more agents in wealthier neighborhoods. In the heart of Potomac, where the shopping centers at Falls and River roads have been without a lottery agent for years, the Giant Food store has expressed interest in selling tickets, Roogow said. But generally, the Washington region's most upscale areas have a low concentration of lottery outlets.
Some critics say government simply should not be in the gambling business.
"The whole thing is unseemly, for the state to encourage gambling," consumer activist Ralph Nader said in an interview. "The government should be espousing the finest values in this society, not the destructive values that are class-stratified to boot."
Addicted to Playing
In seeking customers with bigger wallets, Maryland, Virginia and Washington each have offered a wider variety of games. The lottery industry discovered years ago that high jackpot games tend to attract higher-income players. The D.C. Lottery joined a multi-state consortium offering Powerball in 1992, with purses sometimes exceeding $100 million; Maryland and Virginia joined a different multi-state consortium to peddle the Big Game, a variant that also has big jackpots and very long odds.
But the Big Game failed to boost overall profits for either Maryland or Virginia during the last fiscal year. Powerball is the most popular game in Washington's wealthier neighborhoods, but the bulk of its sales come from elsewhere in the city. Moreover, Powerball sales in Washington fell sharply in the last two years.
The biggest moneymakers for the region's lotteries remain those patterned on the illegal "numbers" games that flourished before state-run wagering captured much of the market. Pick 3 is the Maryland lottery's biggest earner, with top prizes of $500 on a $1 bet, at odds of 1,000 to one. In Virginia, Pick 3 and its close cousin, Pick 4, together outsell all other games, and the District's three-digit Lucky Numbers is the city's top seller.
More than jackpot games and scratch tickets, those numbers games particularly depend on a small coterie of hard-core gamblers. Of all games offered, the three- and four-digit versions also have the highest concentration of African American players, according to Maryland and Virginia lottery studies.
As state officials try to drum up more business with new games, new advertising campaigns and extensive market research, some customers voice grievances about where the lotteries are headed. An assessment of player attitudes in Maryland last year by the Trahan, Burden & Charles advertising firm reported that customers "see more and more games taking more and more money from Marylanders" and also "worry about those players who are 'addicted' to playing."
In a 1996 Virginia Lottery opinion survey, 13 percent of those who had purchased tickets said playing the lottery reduced the money they spent on household expenses, and 7 percent said lottery play had caused family disagreements.
Whether state lotteries pander to gambling addicts is the subject of dispute, as is the extent to which problem gamblers make up the core of heavy players critical to state lotteries. Henry Lesieur, a sociologist and former editor of the Journal of Gambling Studies, contends that more than one in five dollars wagered on daily numbers games and instant scratch tickets come from problem gamblers.
Although gambling addictions clearly affect individuals in all social strata, "the hook for pathological gambling can be set much easier for people of lesser means because the excitement of how it will change their lives if they win is considerably greater," Howard J. Shaffer, director of the Harvard Medical School's division on addictions, said in an interview.
A recent study that Shaffer co-authored concluded that 1.6 percent of adults will have a serious gambling disorder during their lifetimes and that almost 4 percent will have moderate gambling problems.
How many have a problem with lotteries specifically and the extent to which lotteries rely on them has yet to be determined, Shaffer said, but "people are showing up in our clinics who have lottery-related problems."
Maryland, Virginia and the District, which now spend more than $30 million a year on lottery advertising, do not earmark any profits for the study or treatment of gambling disorders. The Virginia Lottery is the only one of the three to offer a hot line for problem gamblers, at a cost of $30,000 a year, with the telephone number printed on its lottery tickets. Launched last summer, the hot line logged 220 calls in its first nine months, about one-third of them identifying the lottery as the main gambling problem, according to the agency.
Penelope Kyle, director of the Virginia Lottery, spoke for many in the industry by insisting: "The last person I want looking at a lottery game is someone who's addicted to gaming. I don't need that person."
As to whether the state should be concerned about the substantial sums culled from people of limited means, Kyle said: "I wouldn't want to comment on how my neighbors spend their income because I think it's none of my business. If someone's goal is to prevent Mr. X from spending $1,200 on the Virginia Lottery, the only way that can be done is to abolish the Virginia Lottery."
Market researcher David J. Barie contributed to this report.
© Copyright 1998 The Washington Post Company