A record-breaking AU$150 million Australian Powerball jackpot run last week is likely to decrease the long-term ticket sales of operator Tabcorp by creating “jackpot fatigue” and raising the “Fear of Missing Out” (FOMO) threshold, according to JP Morgan analysts.
In a Wednesday note examining the revenue implications of the recent Powerball jackpot, which saw three winners share top prize, JP Morgan’s Donald Carducci and Abbinay Jeggannagari estimate the AU$150 million jackpot to have increased ticket sales through FY19 by 19.33%. However, for the 12-month period to 30 June 2020 they predict a decrease of 7.22% in sales as a direct result of subsequent “jackpot fatigue”.
“Jackpot fatigue occurs when players ‘wait’ for a larger prize before purchasing a ticket; resulting in fewer ticket sales and stymied prize growth,” the analysts said.
“This contrasts with the ‘FOMO point’, or a threshold where players are in ‘fear of missing out’ on large jackpots. FOMO creates an increase in ticket sales and new lottery players, boosted by word-of-mouth.”
JP Morgan’s concerns are borne out of a similar case study in the United States where in October 2015, US Powerball decided to craft bigger jackpots by reducing the odds of winning from 1 in 175 million to 1 in 292 million. Three months later, in January 2016, US Powerball subsequently reached a record jackpot of US$1.6 billion – up 108% on the previous year’s records and enough to boost ticket sales by 69.7%.
However, it also pushed up the FOMO point by 63.7% (from US$171.2 million in 2016 to US$280.1 million in 2017), resulting in decreased overall ticket sales from 2017 onwards.
“While there was an increase in ticket sales for the larger jackpots, this was not enough to compensate for the decrease in sales for lower-mid size jackpots due to jackpot fatigue. This puts a downward pressure on ticket sales post a rule change to jackpot chance.”
Tabcorp recently implemented its own changes to Australia’s Powerball odds, which now sit at 1 in 134 million, prompting JP Morgan to predict a 75.1% increase in the country’s FOMO point in the wake of the recent AU$150 million jackpot, rising from AU$42.26 million pre-jackpot to AU$70.49 million post-jackpot.
“We increase FY20 earnings by 5% to account for recent performance while reducing FY21 earnings by -2% due to jackpot fatigue,” the analysts said.
