- Average jackpots of $115 to $145 million;
- A high jackpot of $700 to $800 million;
- Average jackpot growth of $15 to $20 million.
To help players understand the implications of these changes and whether they should continue to play the new Powerball game, we are writing a 3 part series of posts:
- Part 1: Evaluate the prize structure in comparison to Mega Millions (published October 2011),
- Part 2: Examine the average Powerball jackpots and anticipated increases (this post), and
- Part 3: Compare the new Powerball return to Mega Millions and other lottery games (to be published).
To begin, we summarize the two most significant changes that affect the annuity jackpot offerings. These are:
- Minimum jackpot is set at $40 million
- Cost of each ticket is $2 each.
Since jackpot levels will be higher, they believe that the players "buy" level will be reached more rapidly and that players will eagerly purchase tickets at the inflated costs. So, the questions arise:
- The complete range from minimum to maximum.
- The 84% range (shown by the thick white portion)
- The average (horizontal black line)
- The median (both the orange horizontal line and the purple square
- The 97% marker (orange square)
This data is a graphic visualization of the table immediately below.
Since the format of both games changed, we wanted to see the impact of the most recent. Thus, we break apart the Powerball jackpots after January 2009 and the Mega Millions after its June 2005 changes.
Since the minimum jackpot offerings grew for both these games, we see that the average jackpot won increased as well. For Powerball, it increased from $66.6M to $74.2M; and Mega Millions increased from $56.3M to $65M. Interestingly, the median value (the 50% level) increased by the amount equal to the increase in jackpots. So, as the Powerball minimum moved from $10M to $20M, its median moved by $10M as well, from $49M to $59M. And, the Mega Millions median increased $7M (from $37.0M to $44.0M) after the minimum jackpot increased from $5M to $12M.
Additionally, the mode (the most frequent jackpot level) for both games is calculated to be the same as the minimum jackpot after the changes (i.e. $20M for Powerball, and $12M for Mega Millions).
|Avg JP||Avg Chg||GT 100M||40-100M||LT 40M|
|PB After 2009||74.2||15.0||25.7||15.0||8.7|
|MM After Jun 05||65.0||13.4||29.5||12.5||7.9|
Since the minimum Mega Millions jackpot is $12M and Powerball is $20M, we find that Powerball jackpots increase at a faster rate than Mega Millions when the jackpot is $100 million or less. However, the differences are not as great as we would expect.
Once the jackpot (in either game) reaches $100M, we find that Mega Millions jackpots increase faster. We attribute this to the fact that the chances of winning Mega Millions (1 in 175 million) is less than Powerball (1 in 195 million).
However since the overall odds of the new 2012 Powerball game will be the same as the current Mega Millions game, we expect Powerball accretion to equal that of Mega Millions once the jackpot reaches and exceeds $100 million.
Each game begins a sequence set to the the minimum Jackpot. Since the Powerball begins at $40 million, we expect each jackpot from $40M to $100M to increase by $15M. Once the $100 million level is reached, new Powerball will increase by $30M until the 10th drawing. At that point, it will double to $60M. When the jackpot reaches $400 million, subsequent jackpots will increase by $100 million each.
|Chg||PB 2012+ Projected Jackpots||Dwg
Regarding the potentially largest jackpots, it is reasonable to expect to see a jackpot of $700 to $800 million. This would be reached after the 16th or 17 consecutive drawing without a winner. This amount would be in line with those previously reached by Mega Millions and Powerball (approximately $370 million).
- Expect average jackpots to grow by $15 to $20 million.
- Expect average jackpots of $115 to $145 million;
- Look for jackpots to reach $700 to $800 million.
Although the new game offers jackpots twice the size of the existing game, players are expected to purchase tickets that cost twice as much. We believe the lure of the new jackpot level of $40 million will attract players to purchase the same dollar amount as they would currently spend. This means that jackpots will increase at the same rate of $15 million when levels are at or above $40M. This level of increase will be sustainable because Powerball will be paying out the same amount of money in the new game as they would in the old game.
But, the difference is only half the amount of tickets will be sold. Thus, on the average, it will still take 6 to 7 drawings before a jackpot is won. By then, the jackpot will be $115M to $145M.
Powerball 2012 will have the same winning frequency as the Mega Millions game which will continue to have jackpots of half the size (because tickets cost half as well).
Two factors pose risks for Powerball. If the expected jackpot levels are not reached and maintained, then players will become frustrated and reluctant to spend twice the money for a ticket. Further, if mega jackpot levels of $250 or more are not reached quickly, players will become more convinced that Mega Millions and other State lotteries offer better opportunities. If this happens, then the new 2012 Powerball will fail to succeed.
On the other hand, if these levels are reached quickly, players will eagerly flock to the new game regardless of cost. Thus, we have to wait and see.