The best business model??

By: ispeculatornew
Date posted: 08.21.2009 (4:00 am) | Write a Comment  (3 Comments)

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lottery-of-birthWhat would you do if you could have a business model with almost no risk, a 70% profit margin at worst and no innovation or research to work on? That is pretty much what the lotter business enjoys. Even though they make the headlines when they offer prizes that can often reach hundreds of millions of dollars, the fact is that they have the best odds of all. For each ticket of one dollar, they might give you a 1/50,000,000 shot at winning $5M.. that is a 90% profit margin. Sure, you might be unlucky and have a few lucky players. But since it is possible to get insurance on all gains, you really have nothing to lose now do you?

The problem of course is that in most places, especially in North America, lotteries are public games run by the government. No surprise of couse as it is an important source of revenue for the state and provincial governments and they thus have very little incentive to let it go.

It will be interesting to see how this evolves as the government does of course have a difficult role as it also must try to prevent its citizens from being addicted or having gaming addiction problems. Not an easy thing to balance when you consider that the government wants as many people as possible to participate in these lotters and games. As well, lotteries can be seen as a tax for the poor. Studies have shown time and time again that those most eager to enter lottery or other luck games are often the least fortunate, and it becomes very difficult morally for governments to continue to take money from the poor when it usually is designed to do the exact opposite. The sense is usually that private companies would only have 1 goal in mind; profits. But do you think the government is really trying to do anything different?

What do you think? Do you agree with governments running such lotteries? Or do you think they should let the private sectors take care of it but impose taxes on those companies? Another point to consider is that usually governments to not feel like they have to disclose what they do with the huge lottery profits. It is often completely unknown where the money was spent and what was done with it because the reality is that most citizens care about one thing only; if they won or loss….Estimates are that a state like California could earn between $16 and $37 billions per year by leasing lottery rights. Such amounts of money could certainly do a lot of good…

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3 Comments

  1. Comment by OneDay — August 21, 2009 @ 7:45 am

    Actually, I do not agree with you. The government uses taxes to mainly meet the needs of the community, thus ensuring a fairer distribution of wealth. From this point of view, the operation of a lottery by the government appears for me as immoral. As everyone knows, in fact, is among the poorest were recruited followers of “chance”. This makes the lottery a regressive form of taxation…

  2. Comment by François — August 21, 2009 @ 7:53 am

    hum it could be a good business model, however put it the other side, for private lottery companies, it’s an important source of revenue and thus they have very little incentive to let it go….

  3. Comment by IS — August 23, 2009 @ 7:02 pm

    @OneDay, Yes I see your point, and agree, it is regressive

    @Francois, yeah, don’t think the government will be able to get it back once it does let it go:)

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