The costs involved with running a lottery
You might think that most of the lottery money taken in by operators goes towards prizes and pockets. But in reality, there are many facets of a lottery that cost money to run and operate.
First and foremost, of all the lottery income that comes in, the first expense to be paid is the regulatory percentage dedicated to charities. Yes, charities get paid first. That’s the reason the lottery exists and these benefactors receive their funds in a very timely manner.
Of course, prize money needs to be set aside to pay each and every winner who claims a winning ticket. So if the jackpot is $10 million, there has to be $10 million on the operator’s account to cover that win. And every single cent that is available to be won must also reside in the account to pay off winners.
Retailers themselves also get paid their percentage of ticket sales and their percentage of sales of winning tickets. Also, retailer terminals and equipment, including the paper used to print the tickets, are paid for from lottery income. New retail locations need to be equipped with lottery terminal gear. Retail gear must be maintained, replaced, or updated. The paper always needs to be available, training for all staff on how to issue and validate tickets must be done, and printed material such as game information, other brochures, and number selection paper needs to be kept stocked.
Many other operating expenses also have to be paid out of ticket sales income. All suppliers have to be paid for all of the products and services that the lottery operator needs to offer the lottery. Office supplies such as paper, copiers, forms, staplers, pens, pencils, computers, and other normal office gear all have to be purchased and supplied to the operator’s locations. Operators also have to pay for the initial and renewal licensing fees of the gaming entity itself and all of it’s pertinent staff.
Day-to-day operating costs also come out of lottery income. Administrative costs such as the Human Resources department, various types of training programs and activities, and staff salary and wages are more costs that lottery income is parcelled out to.
One of the more major expenses that take a good chunk out of lottery income is in the advertising and marketing of lottery games. Operators have to pay for the production and broadcast of television and radio commercials, print ads in newspapers and magazines, various types of retailer signage, website creation, maintenance, and content promoting the lottery games, and other ways of drumming up business to get more players or to get players to play more games.
Of course, staff and other costs associated with winning ticket and winner investigations and verifications, investigations into potential fraudulent tickets, claims, or winners, and other legal matters also come out of the lottery income.
And it might be obvious now that the costs associated above with running a lottery can be very, very expensive. So it shows just how much money the lottery actually makes to be able to pay winners and run a lottery gaming business,
So once you see all the expenses that lottery operators have to contend with, all of it falls under three major categories; paying out winning tickets, paying out to charities, and the operation of the lottery. And this lets you imagine the huge amount of funds that are brought into the state or province each year; Billions and billions of dollars. With only a third of it going to actual lottery players.