Friday, September 13, 2013

A Review of the Lotto 649 September 2013 Game Changes

Canada's national Lotto 649 game will change beginning September 15, 2013.  Most notably, players of this lottery game will find four changes:
  • Ticket prices will be $3 each (increased from $2),
  • Minimum jackpots will begin at $5 million,
  • A new match 2 prize (2 of 6 white balls) earns a free play,
  • A separate second draw game with a guaranteed $1 million prize is included.
The rational behind raising the ticket price is that the increased minimum jackpot and the $1 million guaranteed prize draw will lure more players. Plus, to help make the players believe they are not wasting their money, the addition of the match 2 prize will increase the number of winners by approximately 12%.

  • This post was revised on Monday September 16, 2013.
  • This is Part I of a 2 part series which reviews the changes to the September 2013 Canadian Lotto 649 game.
  • Our second post, Part II (next week),  will provide a "2013 Lotto 649 vs Lotto Max - When to Play Guide " 
Wow, more winners and higher prizes, all for a single buck more!

Is this a good deal for the Canadian Lottery player?

No, not really.
Why? Because the increased jackpot, $1 million prize, and match 2 prize payouts are all funded by the ticket price increase, and little goes back to the players.

Prize Payout Structure
Under the new Lotto 649 game rules, all Pool's Fund payouts (5/6+, 5/6, and 4/6) are approximately 10% lower under the $3 play:
  • Match 6/6 = $5 million (vs $2 million)
  • 5/6+ = $77,145.29 (vs 87,357.71) - down 11.7%
  • 5/6 = $1,530.66 (vs 1,718.22) - down 10.9%
  • 4/6 = $54.11 (vs $60.57) - down 10.7%
  • 3/6 = $10 (same)
  • 2/6+ = 5 (same)
  • 2/6 = Free Ticket (new)
  • (1) Guaranteed  Prize of $1 million to be paid on a raffle basis

Why are these down?
There are 6 reasons why these will be lower:
  • Regardless of whether the Lotto 649 ticket cost $2 or $3, 47% of the ticket sales are dedicated to the Main Prize fund. This is the amount that will be paid out to players. The remaining 53% will be kept by the lottery organizers.
  • Next, the payouts for the fixed 3/6, 2/6+, and 2/6 prizes are deducted from the Main Prize fund.
  • The remainder is then called the Pool's Fund.
  • According to a predefined percentage, the Pool's fund is allocated to the jackpot 6/6 prize, as well as the 5/6+, 5/6, and 4/6 prizes.
  • Although the absolute amount of the Main Prize and Pool's Fund has increased, the individual allocation of prize percentages were revised: 6/6 jackpot = 79.50% (was 80.5%); 5/6+ = 6.0% (was 5.75%), 5/6 = 5.0% (was 4.75%), and 4/6 = 9.5% (was 9.0).
  • This all means that: if we assume that all 13.98 million tickets are sold, then the amount in the Pool's Fund (amount to be used for paying the 6/6, 5/6+, 5/6, and 4/6 prizes) decreases by $1.401 million, which is a 15.37% decrease.
  • However, allocation for the funding of the Guaranteed  $1 Million Prize, which is 7%, is deducted from the 47% proportioned for the Main Prize Fund (and not the organizers 53%).
If we consider that the Lotto 649 ticket price increased by 50%, then we realize that the Pool's Fund value decrease is quite substantial.

What about the $5 Million Minimum Jackpot Prize?
This is a good offering. The old $2 game listed a minimum prize of $2 million. However, this was rarely used. Instead, most starting jackpots were valued at either $3.0 or $3.5 million. Since the cost of a 649 ticket increases by 50%, the new $5 million minimum is in line with the ticket price increase.

And the new Free Ticket 2/6 match prize?
The $3 Lotto 649 game adds a new "free ticket" prize for those matching only 2 of the 6 white balls. This change means two things.
  • First, the number of possible winners increases by 12.01%; bringing the overall percent of winners to 15.1% (as opposed to 3.1%),
  • Second, the overall odds if winning is decreased from 32.31 to 6.62.
While this sounds good, we believe this is only a marketing ploy which guarantees future sales.

Remember, this is a "Free Ticket" prize, not a $3 cash prize. This means that the prize can only be used in the next (or subsequent) drawings. Thus, 12% of the winning players must redeem their prize for new tickets, which means that they will only have a 15% chance of winning once again. Even though some players may later win, most will have lost this value without having a choice of keeping the money.

But I can also win the Guaranteed $1 Million prize.

Yes, But will there be a Guaranteed $1 Million Winner?
Yes there will be a winner. At the original time of this writing, the documentation did not specifically indicate if there would be a winner. However, newly published game rules by the ALC and WCLC indicate that there will always be a single winner. For this to happen, then the additional ticket selection numbers must be sequential and known at the time of the drawing.

The BCLC documentation lists:
  • Guaranteed Prize Draw prizes are not shared.
  • Guaranteed Prize Draw prizes are not carried over to the next draw.
  • Guaranteed Prize Draw winning selection is exact match only, in the order that they appear.
Thus, if the prize is not carried over, then it sounds like there remains a possibility that a winner will not be drawn.

Why Sequential Numbering is Important: because Winning may be Rare.
Based on the Guaranteed Prize Draw Selection number format, your chances of winning this prize are about 1 in 1 billion (yes, 1 billion). As stated in their documents, in order for a player to win this prize, they must match a 10 digit number (in the format of xxxxxxxx-xx). Since there are 10 digits that can range from 0 to 9, there is a total of 1 billion combinations. Using our Poisson Distribution Probability of Winning page, we can learn that ticket sales must be 10.04 million in order for there to be a 1% chance of someone winning the Guaranteed $1 Million prize. If all ticket combination are sold, there is only a 1.39% chance that there will be a winner (for 28 million sold, a 2.76% chance; and for 42 million tickets, only a 4.12% chance).

Perhaps No Guaranteed $1 Million Winners.
So you see that the chance that anyone winning this prize is extremely small if it is not limited to the total ticket sales. Therefore, we are discounting the value of this prize to zero. Note, however, that this prize will not be shared. Should there be more than 1 winner in a drawing, then all winners will receive $1 million.

Because the methodology of generating this extra prize number on your ticket is not defined, we are unsure if there could be multiple winners. If the number is assigned sequentially (or a sorted variation thereof), then there will not be multiple winners. If the number is randomly generated, then there is a possibility that there will be multiple winners.

However, the ALC Game Rules state that there will always be 1 winner and that there will be no duplicates.

Players were alerted to the Lotto 649 changes almost 6 months ago, but the details of the prize allocation and distribution was not made public until last week. After analyzing the impact of these changes, it becomes apparent that the lottery organizers did not want the public to understand that the changes do not benefit the players because:
  • total allocation of lottery sales revenue to  winners prize payouts remains the same (47%)
  • the Guaranteed $1 Million Prize consumes 7% of this revenue,
  • the Lotto 649 portion of distribution is lowered to 40% of sales,
  • the the 2/6 free ticket only assures future lottery sales and not cash to players,
  • the values of the remaining prizes (except for the jackpot) do not increase in proportion to the 50% ticket price increase; instead, they decrease in value.
Therefore, we do NOT look favorably
on the 2013 
$3 - Lotto 649 game.

Fortunately, Canadian lottery players can play Lotto Max and the regional games at a relatively much cheaper cost.

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