Commission system fairest for most Lottery retailers

by Commissioner Gary Peters

On April 22, one lucky Michigan player won the $208 million Mega Millions jackpot. Obviously, it was a big day for Ralph and Mary Stebbins of Port Huron, who claimed their prize just a week later.

But what might not be as obvious is that the Stebbins family was not the only winner in that Mega Millions drawing. The residuals are many, and at the top of the list of beneficiaries is the retailer who sold the winning ticket, River District Market in Port Huron.

Michigan Lottery retailers receive a 6-percent commission on ticket sales. Our commission is the highest in the region (Indiana and Ohio, 5.5 percent; Illinois, 5 percent) and among the highest of any state lottery.

Retailers also receive a 2-percent cashing commission on tickets claimed at their store for prizes up to $600, and a 2-percent bonus commission, up to $2,000, on prizes over $600 for tickets sold at their store.

This means that the River District Market received $2,000 for selling the winning Mega ticket. This is important to note, because since the drawing we have heard from some retailers asking what River District got, and why stores that sell winning tickets don’t receive an uncapped percentage of the jackpot amount, as is the case in some states.

Michigan has reviewed various states’ commission structures, and we believe that our system is the fairest for retailers. If we provided an uncapped percentage of the jackpot amount to the winning ticket seller, one retailer would hit it big. And that’s great—for the one retailer.

But those “hits” do not happen that often, which means that only a very few retailers from the 10,000-plus retailers selling Michigan Lottery products would reap the benefits. Michigan’s system of providing a commission to everyone for both sales and redemption means that all retailers get a share all the time, which we believe is the most equitable arrangement possible.

In total commissions, including sales and redemptions, the Lottery paid $145.4 million to 10,651 retailers, for an average of $13,651 in commissions per retailer in FY 2004. Over 40 of those retailers hit the $1 million sales mark last year, meaning they received $60,000 in sales commissions alone!

I’d venture to guess that River District, and many other retailers, will benefit from this winning ticket in other ways. Lottery players love to buy tickets from retailers who’ve sold winners, so we expect River District will see a bump in sales. And Lottery players—and some former non-players—are inspired by a big win like this one and tend to purchase more tickets or become first-time players.

There is no getting around it: when people see and learn the story of actual winners like the Stebbins family, they are more apt to buy a ticket. These additional Lottery sales translate into sales of other goods at the store as well—when players come in to buy their Lottery tickets, they’ll pick up a loaf of bread or a gallon of milk at the same time.

Not only do retailers reap the benefits, the State of Michigan does as well, which in turn means the state School Aid Fund, our beneficiary, comes out ahead too. And taxes? Michigan’s portion from the winnings was a whopping $4.9 million!

Lottery commissioners and directors agree that the value of a large jackpot winner in their state can’t be measured; it generates great publicity that can’t be bought. The phrase “it’s a win for everybody” might be a bit overused, but I think it is really appropriate in this case. The Stebbins family, Lottery retailers, the Mega Millions game, the State of Michigan—we are all winners!