Today in Tedium: There’s a character from the Encyclopedia Brown series that has been burrowed in my head for nearly 25 years now, though the specific book and case escape me. The author, Donald J. Sobol, went out of his way to explain that this character entered various contests/sweepstakes as a hobby. Even at age eight, it seemed like a strange character detail. The most likely candidate for the specific book in the series is Encyclopedia Brown and the Case of the Treasure Hunt, which encouraged readers to solve it themselves and enter their solutions in order to win prizes. Marketing ploys to children are nothing new but the methods and prizes used speak volumes of the audiences enticed by a chance to win. Today’s Tedium is looking at the Publishers Clearing House and why they’re suddenly offering prizes that only pay out, in part or in whole, after you die. — Andrew @ Tedium
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The odds of winning the top prize of the Publishers Clearing House sweepstakes, according to the Los Angeles Times. For comparison, the odds of winning one of the largest PowerBall payouts of all time was 1 in 292 million. The legalese attached to any given sweepstakes is crucial to an industry that at one time scammed more than $40 billion annually from Americans, according to the FTC. The history of sweepstakes is closely tied to laws regulating them. While lotteries and numbers schemes were the historical option for organized crime, sweepstakes became the domain of less than scrupulous companies.
Not sketchy at all. (Judith E. Bell/Flickr)
The sweepstakes industry can generate a lot more than junk mail
America has quite a long history of lotteries and sweepstakes. Even George Washington participated as an investor in a lottery that included land, livestock and people (i.e. slaves) as prizes. The primary modern distinction between a lottery and a sweepstakes is that the latter cannot require purchase for entry. Otherwise, they effectively operate the same. States have a monopoly on lotteries. But sweepstakes can be very lucrative for private enterprise.
Industry experts told the New York Times that the industry hit a stride in the 1960s as consumer products struggled to gain attention in an increasingly crowded space. One company, D.L. Blair, estimated it controlled some 80 percent of the corporate sweepstakes market (like the ones in children’s breakfast cereal) in 1979. However, it was the publishing industry that realized the full power of sweepstakes in driving sales, especially for magazine subscription. Reader’s Digest was one of the first to the party in 1962 having awarded nearly a million dollars a year until the end of the 1970s.
The sweepstakes explosion in the 1960s and 70s led to a unique situation where magazine publishers were often paying out more to non-subscribers or the “no purchase necessary to enter” crowd than to those who subscribed. By 1979, Publishers Clearing House (PCH) had distributed over $7 million to some 2.3 million winners, most of whom weren’t driving revenue to the company.
Publisher’s Clearing House and their ubiquitous direct mail advertisements had become so powerful in the magazine industry by the 1980s by driving circulation numbers, and thus advertising rates. This allowed PCH to pocket a significant percentage of subscription fees. To compete with the PCH monopoly, a group of publishers led by Time Magazine launched American Family Publishers and their own sweepstakes, offering $10 million at one point. However, this competition ended up working out quite well for the established sweepstakes operator.
Todd Sloane of Publishers Clearing House told Forbes in a 2012 retrospective of the two companies, “American Family Publishers was set up to directly compete with us. They were always a ‘me-too’ company. When we ran TV commercials, they would go on air with TV ads. They would do everything we did. So during the 1980s when there was a tremendous amount of TV advertising, people got these ads mixed up. They thought they were one-and-the-same.”
While PCH never used celebrity spokespeople (well, minus this more recent Wayne Brady ad), American Family Publishers relied on Johnny Carson sidekick and Star Search host Ed McMahon to let consumers know “You may already have won…” Today, the PCH website has a section clarifying that McMahon wasn’t their spokesman. But the confusion persists today. Both companies, however, were cautioned and fined by authorities for misleading language regarding their sweepstakes though American Family Publishers’ troubles would help lead to bankruptcy in 1998. The shenanigans between both companies helped Congress finally pass the Deceptive Mail Prevention and Enforcement Act to ensure strict guidelines that govern sweepstakes and their marketing.
Today, Publishers Clearing House is the largest sweepstakes operator in the United States, bringing in $1 billion in revenue in 2018. Though early revenue was driven by magazine subscriptions, the company makes the bulk of its modern money offering various merchandise online that come with entries into their famous sweepstakes. PCH reaches its increasingly elderly customer base through a clever mix of direct mail and online outreach, especially via Facebook. And the prizes enticing them to enter for a chance to win are getting more morbid.
$527M
The amount of money that Publishers Clearing House claims it has paid sweepstakes winners since its founding. The company has also settled lawsuits from all 50 states over its history of misleading marketing techniques, many of which implied that contestants were “finalists” or otherwise implied greater odds than in reality. They have also been accused of taking advantage of elderly consumers, despite taking proactive steps to avoid such abuse.
This Prize Patrol ad doesn’t look dated at all.
Prizes for the soon-to-be dearly departed
Interspersed between syndicated hits of daytime television, like Judge Judy and The Price is Right, are numerous ads for Publishers Clearing House sweepstakes. How the PCH sweepstakes operate is pretty straightforward. Contests are “pre-selected” with the winner decided before entry numbers are assigned to participants. If the winning prize number is unclaimed, they move onto a second round until the prizes are awarded.
Nowadays, many of these prizes are framed in weekly sums, like $5,000 a week for life. In practice, the sweepstakes industry has always worked on payments made over a long term rather than paying an initial lump sum. For example, the PCH $10 million Super Prize pays $225,000 a year for 29 years with another $3.475 million in the 30th year. States like New York and California require sweepstakes to provide surety bonds for the value of the prize. This allows contest prizes to effectively be accounted for as a business expense, like any other type of marketing.
Prizes that pay a set amount per week for life follow a different set of rules. In 2013, Michael Miller, a 26-year unemployed man from Illinois, became the youngest person ever to win PCH’s $5,000 a week for life prize. While Mr. Miller will hopefully get to enjoy his bounty for years to come, most PCH contestants tend to be older, though the company doesn’t publish demographic data. They have also gone out of their way to insist that young people also win.
But according to the Better Business Bureau, more than 70 percent of victims of sweepstakes and lottery scams are over 55 years old. (Scammers will often pretend to be the PCH, informing marks they have won a prize but need to pay a small fee to claim it. No legitimate sweepstakes requires a fee to claim a prize.) When journalists look at who falls deep into the PCH rabbithole, chasing real but statistically improbable rewards, the victims are almost invariably elderly. For example, the children of Karl Dowd estimate their father spent some $5,000 to $30,000 in merchandise from PCH before his passing in 2015. The company does have safeguards in place monitoring for individuals who spend excessively in a short period of time, which it put in place sometime around 2000. PCH executives did admit Mr. Dowd triggered their safeguards and eventually reimbursed his family $2,000.
The older ages of sweepstakes contestants is perhaps best signaled by Publishers Clearing House latest update to their prize structure. Along with their “For Life” prize, PCH announced a “Forever” prize in 2020. The lucky winner receives $5,000 a week for life, “then after that” (the company’s euphemistic phrase) a designated recipient receives $5,000 for the rest of their lives.
A posthumous sweepstakes prize is fairly unprecedented. Lottery annuities can be transferred to an heir in the event of death. Free funerals or cremation are occasionally offered as marketing stunts by minor league baseball teams and funeral homes. But prizes that pay out in part or whole after death is a new phase for the sweepstakes industry. Money every week might have appealed to those nearing retirement. The “forever” prizes appeal to a demographic approaching the last stretches of their lives and worried about the loved ones they’ll leave behind.
For many, sweepstakes are harmless fun that don’t require anything but time and information in order to win. (The data firms like PCH collects has also become a significant revenue driver, though such information has been monetized for decades now.) There is even a dedicated subset of players known as “sweepers” that enter sweepstakes as a hobby.
Carolyn Wilman, author of How to Win Cash, Cars, Trips, and More, estimates she has won around $250,000 total in prizes by entering sweepstakes. (She estimates she submits around 35,000 plus entries to sweepstakes a year.) Her tips include organizing your entries while limiting the amount of time dedicated to sweepstakes to a couple hours a day at most. Perhaps the biggest tip is to just focus on corporate giveaways and ignore the massive payday offered by outfits like PCH. She told the Washington Post in a 2017 interview, “I wish I could earn my living winning sweepstakes. But I couldn’t pay my rent if I had to rely on prizes. Winning just enhances my life.”
The benefits of winning a sweepstakes are obvious. The costs of playing are less so. After all, there’s no purchase necessary to win. And it could be me. It might finally be me, right?
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