In our last post we ended up joking around that USPS could start it’s own lottery. For some reason this preposterous idea stuck in our heads and we started juggling some numbers in a spreadsheet. A couple hundred million dollars in revenue may be quite possible. Not too bad. We seriously doubt that USPS can rake in that kind of money with selling greeting cards. In 2007 the U.S. based gambling industry had a gross revenue of $92.27 billion. U.S. Citizens spend hundreds of dollars a year per head on gambling.

USPS has been desperately looking for new revenue avenues. There was some talk about selling non-postal goods such as cell phones, and offering of banking services. These are highly competitive lines of business and their widespread implementation within USPS  requires expensive training of ten-thousands of USPS retail employees. The Postal Sanity approach to a USPS run lottery only requires training for a few hundred persons and is highly scalable in deployment. Another advantage of this approach is that it neatly fits into the existing USPS technology infrastructure. USPS does not need to perform any point of sales modifications or widespread employee training. The lottery tickets, which are standardized postcards, can be sorted and processed by existing letter sorting equipment.

The needed legislation to enable a USPS run lottery should not be impossible to achieve, and it could be done on a state level rather than a federal one. The prospect of a USPS lottery will induce a huge controversy. We cannot think of any better way to get free advertisement worth millions of bucks. Free public controversy may also serve as a tool to test consumer acceptance of such an endeavor.

For the following outline we selected a fixed set of numbers. If you like a copy of our spreadsheet to play with your own set of numbers you can request it here.

A rough outline for a USPS run lottery

Where could I buy a ticket for the USPS lottery?

You just send a  “ticket card” (post card) to one of the “USPS-State-Lottery-Centers”. Include your contact info (address/phone/e-mail) on the pre-defined fields and apply $1.00 in postage. You can send as many “ticket-cards” as you want for the weekly drawings. Pre printed ticket cards may be available at USPS retail stations.

What is a “USPS State Lottery Center”

It is established within a P&DC (mail processing center). Each state could have it’s own USPS-Lottery-Center.

How will ticket cards be processed within a “USPS State Lottery Center”?

As the ticket cards arrive at the USPS-Lottery-Center they will be sorted in incoming mail sort schemes and set aside. The collected batches will then be processed in “ticket-card” processing runs. The existing USPS sorting machines are already capable to perform the tasks we describe next.

Each ticket-card will be processed during “ticket-card” processing runs,  executed on a DBCS type machine, capable of reading and printing IDTAGs. If a “ticket card” has no IDTAG yet then an IDTAG will be printed.  In both cases the card image will be lifted and stored along with the IDTAG. The processed ticket cards should be immediately discarded (recycled).

All lifted images and IDTAGs will be collected by a server up until the weekly drawing occurs. The total amount of ticket cards processed determines the total price payouts. A lottery-drawing-application will select the winners by selecting random IDTAGs. The image associated with the winning IDTAGs contains the contact information of the lottery player. Images showing insufficient postage will be disqualified.

How will the winners be notified and paid?

A low cost approach is to print a notification letter using an exact copy of the return address of the lifted image. The notification also includes a check, for deposit only.  This may work well for smaller amounts (less than $ 500). Bigger amounts will have to be handled in a process similar to how existing state lotteries handle bigger prices.

There should be no prizes less than $100. This will greatly reduce the processing cost for payouts.

What numbers did Postal Sanity come up with?

We make the following assumptions:
10% of U.S citizens will play weekly for $1 (30 million $1 tickets).

Postage per ticket $0.28 (Post card rate)
Wager per ticket $0.72
Total $1.00

The yearly sales are:

Yearly Sales Postage $436,800,000.00
Wager $1,123,200,000.00
Total $1,560,000,000.00

Most lotteries have a payout rate of less than 60%.  We suggest a wager payout rate of 85%.

Cost Payouts 85%
Cost Process Postcard 20%

The cost to process a ticket card is estimated at 20% of the 28 cent postage. Coast to coast transports are not required, no last mile delivery cost and no expensive UAA handling.  The net payout rate comes to an attractive 61.2%.

With above numbers we arrive at the following gross revenue which could be pretty close to the net revenue.

Yearly Gross Revenue Wager $168,480,000.00
Postage $349,440,000.00
Total $517,920,000.00

If you increase the wager to $2.72 ($3 ticket card) with a net payout of 61.65% the yearly revenue still comes to $57 million dollars with only 0.33% participation required (1 million $3 tickets).