How healthy is the health lottery for good causes?

The establishment of the Health Lottery, a competitor for the National Lottery has caused a bit of a stir. At 20.4%, the health lottery distributes a smaller share of revenue to good causes than both the for-profit National Lottery (28%) and fundraising lotteries run by hospices themselves (50-60%).

If ticket sales from the Health Lottery simply replace sales from other "good-cause" lotteries, the net effect might be a reduction in the level of money raised. I've used some figures from press releases from the National Lottery, the Health Lottery and Help the Hospices to model what the effect might be on the total amount going to good causes.

Here are the estimated figures for the ticket sales, and amounts raised by each lottery for good causes per week:

% to the causes Estimated weekly ticket sales £ per week to causes
National Lottery 28% £100,000,000 £28,000,000 Source
Hospice Lotteries 55% £1,000,000 £528,000 Source
Health Lottery 20.4% £2,900,000 £600,000 Source

After 6 weeks, the Health Lottery is selling far fewer tickets than the National Lottery, but several times more than existing Hospice lotteries, although the payout to health charities is only slightly more ( but figures are quite rough estimates calculated from press releases stating the amount of money raised, and only take into account average sales before Health Lottery entered the market.)

What might the impact of the Health Lottery be?

Despite the lower payout rate, the new lottery could generate extra money for good causes if the money they spend on marketing and promoting the lottery creates a larger market for lottery tickets in addition to taking market share. The national lottery sells 100 times more tickets than the Hospice Lotteries, but given the local health focus, this model assumes that this sales are hit hard, with Hospice lottery sales falling by £1, and the National Lottery falling by £9, for every £10 of subsitution that occurs. The table below shows the net impact on revenue raised for good causes taking into account this subsititution effect - from 0% new sales - i.e. all tickets replace existing sales, to 100% new sales - i.e the market gets bigger. It also assumes that Health Lottery ticket sales will remain at the average level of the first 6 weeks - they probably hope to gain market share, but equally sales could decline after the initial launch publicity.

So taking these assumptions into account, (and I don't know how realistic they are) if 35% of the sales are additional sales, and 65% replace ticket sales to the other two lotteries, there will be a small net increase in money going to good causes to the tune of £700,000 per year.

If the percentage pay-out is increased this "breakeven" threshold falls - matching the lottery payout ratio of 28% would require only 10% of tickets to be additional sales before "good causes" as a whole start winning.

And regardless of the percentage that are "new sales" - the difference in the amount going to good causes if they payout were 28% rather than 20.4% could be £11.6million per year - although adjusting the odds or the amount going to causes may also have an impact on sales. (I'm sure the Health Lottery will have a more sophisticated model for internal use).

Change in annual sums going to good causes as a result of Health Lottery

(for different percentages of additional "new sales", based on average weekly sales of £2.9million)

% new sales 20.4% payout 25% payout 28% payout
0% -£15,752,946 -£8,717,653 -£4,129,419
5% -£13,405,299 -£6,370,006 -£1,781,772
10% -£11,057,652 -£4,022,359 £565,876
15% -£8,710,005 -£1,674,712 £2,913,523
20% -£6,362,358 £672,935 £5,261,170
25% -£4,014,711 £3,020,582 £7,608,817
30% -£1,667,064 £5,368,229 £9,956,464
35% £680,583 £7,715,876 £12,304,111
40% £3,028,230 £10,063,523 £14,651,758
45% £5,375,877 £12,411,170 £16,999,405
50% £7,723,524 £14,758,817 £19,347,052
55% £10,071,171 £17,106,464 £21,694,699
60% £12,418,819 £19,454,112 £24,042,346
65% £14,766,466 £21,801,759 £26,389,993
70% £17,114,113 £24,149,406 £28,737,640
75% £19,461,760 £26,497,053 £31,085,287
80% £21,809,407 £28,844,700 £33,432,934
85% £24,157,054 £31,192,347 £35,780,581
90% £26,504,701 £33,539,994 £38,128,228
95% £28,852,348 £35,887,641 £40,475,876
100% £31,199,995 £38,235,288 £42,823,523

That said, different causes will get the money - all of the Health Lottery money is planned to be distributed to local health charities, which are not necessarily the hospices who run competing lotteries. Buying their tickets will support them directly, and making a donation would be even better.

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