Emergence of pension lottery jumpstarts the boom
Korea is in the grip of lottery fever. The nation is on course to sell 3 trillion won ($2.69 billion) worth of tickets this year, up 25 percent from 2010.
The Finance Ministry, in charge of lotteries, has stopped its TV promotions with celebrities in an effort to slow the industry’s growth.
The explosive popularity of lotteries this year isn’t just about the thrill of winning. Years of branding the state-run project has attracted more prudent, level-headed office workers who would otherwise have dismissed lottery tickets as wasteful gambling.
“When lotteries were first introduced in 2002, buying a lottery ticket was considered a cheap fleeting thrill, or more often than not just gambling. But we have been promoting that nearly half of the lottery sales revenues go to welfare programs for the poor,” said Hong Nam-ki, the former chief of Lottery Commission Department at the Finance Ministry.
“More people feel better about buying a one-in-a-million chance,” he said.
The introduction of the pension lottery on July 1 was a turning point. The issuing authority says the pension lottery has helped address the negative image of the lottery as gambling in one big hit.
The winner receives 5 million won of annuities every month for 20 years instead of collecting a lump sum. To launch the product, the government pushed to legalize lottery annuity payments earlier this year. The pension-type lottery has enjoyed success since its launch. The weekly issuance of 6.3 billion won has been sold out every week since July, far exceeding government expectations that only about 7 percent of the total issued would be sold.
“The explosive popularity of the pension lottery is thanks to its name. Most people know that betting for a lump-sum is a bigger win than receiving the money in installments, but the merits of securing decades-long pension probably exceeds for those facing job insecurity,” Hong said.
Priced 1,000 won each, the 6.3 million pension lottery tickets issued every week ― amounting to annual sales of 327.6 billion won ― only make up about 3 percent of the total issued by the Finance Ministry’s Korea Lottery Commission.
Sales of tickets for the “online lottery” ― a conventional lottery in which tickets are also available in shops ― make up 95 percent of total ticket sales where buyers put in random numbers for each draw.
The rush to buy pension lottery tickets is not enough to cause all of the estimated 25 percent annual expansion of the lottery market, but there was a substitute effect.
“Because pension lottery tickets are sold (only) in print tickets, I often visit stores in my area but they were sold out in nine out of 10 visits. A lot of people including myself end up buying online lottery tickets as a substitute,” Lee Jae-yong, a 32 year-old bank employee said.
“I know the monthly installment of 5 million won would almost be halved after tax and inflation in years to come, but I’m still attracted to the annuity-type because there’s no danger of losing it all at once,” he said.
Of course, the public is turned on by enormous prizes. One sign of for this is that sales of lottery tickets soar on the weekends when an especially large jackpot is at stake. The third week of October sold a total of 120 billion won worth of tickets, more than double the average weekly sale, after the prize from previous week was rolled over.
The country’s annual lottery sales are estimated to hit a seven-year peak at 3 trillion won by the end of the year. The sales in the first half amounted to 1.38 trillion won, which is a 10.2 percent jump from last year’s 1.25 trillion won.
The launch of Lotto was a nationwide hit, generating 4.23 trillion won of revenue for 2003. But sales had been on a steady decline since, falling to 3.46 trillion won in 2004, 2.84 trillion won in 2005, 2.59 trillion won in 2006 and 2.38 trillion won in 2007.
Things turned around in 2008 when the government started promoting the lottery tickets as a type of charity raffle. The Finance Ministry hired TV personalities including Kim Mi-hwa, Park Bo-young and Lee Seung-ki to draw attention to the lottery fund’s welfare spending.
“If you buy a 1,000 won lottery ticket, about half of it goes to a child birth promotion campaign, to subsidies for low-income families or other welfare programs. Only about 400 won goes to the prize and the rest is used to run the issuing authority,” Hong said.
Out of concern that the government could be seen as embracing gambling, the National Gaming Control Commission is reportedly putting a cap on the issuance of tickets.
“The NGCC will hold a meeting later in the month to discuss setting a limit on the total number of lottery tickets to cool the lottery fever,” a Finance Ministry official said.
By Cynthia J. Kim (email@example.com)