Wednesday, December 31, 2008

How 2009 Powerball Changes Effect You

In August 2008, the MUSL announced that the State of Florida would be joining the Powerball lottery. With the increased population of new players, Powerball expanded the set of white ball numbers and decreased the number of red Powerballs, in order to make the game more attractive. The minimum jackpot will be increased, and for those who purchase the Power Play Option, the second prize of matching all 5 white balls will be fixed at $1 million.

Tickets for the new Powerball format will go on sale on Sunday January 4, 2009, and the first drawing will be held on Wednesday January 7, 2009.

While players should be excited about these new changes, they should understand that this new format:

Benefits the Powerball States

Not the Players!

Summary of Publicized Changes
First, lets review the Powerball changes that will become effective in January.
  • White Balls increased from 55 to 59
  • Red Powerballs decreased from 42 to 39
  • Minimum annuity jackpot increased from $15 to $20 Million
  • Powerplay Match 5 multiplier (5+0) fixed at 5X, payable in $1 million cash
  • Chances of winning the jackpot increased to 195.2 million
  • Overall odds of winning any prize decreased to 35.1
  • Jackpot pool percentage increased from 30.3% to 32.5%.
Additionally, certain things will not change. The price per ticket will remain at $1 each. The prize payouts and combination structure will remain as is. The Power Play Option will continue to cost $1, and the bottom seven prize levels will still be drawn with values 2X to 5X. Lastgly, the annuity payment structure remains fixed.

Combination Changes
Table PB09-1 summarizes combinatorial changes implied by the changes in the quantity of white and red balls. As shown, the Powerballs decrease from 42 to 39 balls, a 7.1 decrease. At the same time, the white balls increase from 55 to 59, a 7.3% increase. This appears to be a net wash.

However, the number of white ball combinations has increased from 3.5 million to 5.0 million, which is a 43.9% increase. But because the Powerballs decreased, the total number of all 6 number combinations increased only by 49 million, or 33.6%.

Table PB09-1: Combination Changes
Item New
Change Pct
Tot Combos 195,249,054 146,107,962 49,141,092 33.6%
Powerballs 39 42 -3 -7.1%
White Balls 59 55 4 7.3%
5-Number Combos 5,006,386 3,478,761 1,527,625 43.9%

Winners Changes
Since the winning prize structure remains the same, the new format will produce more individual winners. While the number of combinations increased by 33.6%, the total number of winners increases by 39.3%. This is a 6.0% advantage for the players.

At the same time, the number of losers increases by 33.5%, about the same as the increase in combinations.

Further, the overall chances of winning any prize decrease from 36.6 to 35.1, which is 4.1% advantage for the players. This is reinforced by the fact that the percent of winners also increases by 4.4%.

Table PB09-2: Winners Chances
Item New
Change Pct
Tot Winners 5,560,464 3,991,302 1,569,162 39.3%
Tot Losers 189,688,590 142,116,660 47,571,930 33.5%
Overall Chances 35.11 36.61 -1.50 -4.1%
Pct Winners 2.85% 2.73% 0.12% 4.4%

Thus far, it appears that players will benefit from the game format changes.

Payout Information
But reviewing the payout information presented in Table PB09-3 below, one can begin to understand why the players do not really benefit. In the new format, $54.1 million will be returned to the players. This is only a 23.5% increase. Remembering that the total number of combinations increased by 33.6%, it becomes apparent that a full 10.1% of the new money raised remains within the Powerball organization. Since the number of combinations increased by 49.1 million and each combination represents a dollar, we quickly see that $4.9 million extra goes to Powerball, not the players.

This is reinforced by reviewing the Average Ticket Win, which at $9.73 (verses $10.97) is a 11.3% drop. Both of which re-iterate that players receive less money in the new game.

Table PB09-3: Payout Info
Item New
Change Pct
Tot Payout $54,112,290 $43,800,030 $10,312,260 23.5%
Avg Tkt Win $9.73 $10.97 -$1.24 -11.3%
Return per $ $0.28 $0.30 -$0.02 -6.7%
Jackpot/Odds $569,577 $409,763 $159,814 39.0%
Jackpot Parity $161,136,764 $117,307,932 $43,828,832 37.4%

Additionally, the Jackpot/Odds and Jackpot Parity percent changes of 39.0% and 37.4% indicate growth that exceeds the 33.6% increase in new combinations. Should the Minimum Jackpot be greater, these would be more in line, and help to benefit the player. But, since the Jackpot is fixed at $20 million, overall payouts to the players is minimized.

Power Play Jackpot Breakeven
Lastly, for completeness, the increase in combinations and payouts implies that the Power Play Jackpot Breakeven level is increased as well. From Table PB09-4, we learn that players should purchase the Power Play Option whenever the Jackpot is below $62.6 million. Above that level, players should always skip this option and go for the Jackpot itself by spending the additional dollar on an individual ticket.

Table PB09-4: Power Play Breakeven
Item New
Change Pct
Tot Payout $62,568,435 $43,200,045 $19,368,390 44.8%

While the new Powerball matrix format increases a players chance of winning a prize by increasing the number of winners, the amount of money returned back to the players is proportionately lower than the existing game. As we have seen, the average winning ticket will now be $9.73, which is 11.3% lower than present. Further, the actual percent of amount of money is 10% less than what has been increased.

Since nearly $5.0 million extra will be retained by Powerball, we believe the new format benefits the Lottery Organization rather than the players. To remain fair, either the minimum jackpot should have been set at $25 million, or lower tier prize payouts should have been increased.

In a year when lottery sales have declined, it is not surprising that the Powerball organizers revised the format in order to increase their retained profits.

While the lure of winning a minimum of $20 million is nothing to sneeze about, players should understand who profits and who loses.

We hope you have found this study to be informative.

Learn More
To learn more about this subject, visit our in-depth pages that provide the detailed numbers behind each of these options.

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Saturday, December 13, 2008

November Entrecard Droppers

Merry Christmas
Happy New Year
To all of our Readers.

With special thanks to our dedicated daily visitors, and especially our Top 10 Entrecard droppers in the month of November 2008:

November EC Dropper Awards

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We hope your Holidays are Joyous.

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