The headquarters of Scientific Games looks like any other office building on this green stretch of industrial-park suburbia, 20 minutes outside Atlanta. It's basically a parking lot, five flagpoles and room for 900 employees. But with a security pass and a chaperon, you can get a tour of the place, and eventually that will lead to a noisy, bustling factory that you can't see from the street.
"Pretty amazing, isn't it?" Steve Charles shouts one recent afternoon.
Charles oversees production here, and at the moment he's standing near a printing press that's about as long as a football field and 12 feet wide. Close by are what look like a dozen towers, all of which come close to grazing the ceiling. Get closer and you realize that each tower is a series of thick spools stacked one on top of the other -- roll after roll of instant, scratch-off lottery tickets, in perforated sheets. They're festooned with zany fonts and phrases like "Jumbo Cash!" and "Pay Day."
"This is just four days of work," Charles yells, looking up.
Over the course of a year, more than 17 billion -- that's right, billion -- scratch tickets will be stamped out in this plant, enough to girdle the globe at the equator 44 times. About 70 percent of all the cards sold in this country are designed and manufactured here, then sent to state lotteries, then to stores, where they are snapped up in droves that keep growing. Last year, we dropped $22 billion on scratch cards. That's more than we spent on movie tickets and video games combined.
Apparently, we're just getting warmed up. State lotteries say the sweet spot of this market is pricier cards with bigger jackpots -- $10 and $20 cards and million-dollar payoffs are now common. Fifty-dollar scratch tickets will likely debut by the end of the year. Some of these games are designed to take 15 minutes to play.
Many offer booty that makes cash seem dull. Play the "Wheel of Fortune" card and you could wind up with an audition on the show. Eight winners have scratched their way onto the air. And through licensing deals, celebrities, pop icons and other well-known images are turning up on tickets. Elvis has a card ("a hunka hunka instant love," it says in ads) as do stars of the NBA, TV Guide, Monopoly, an assortment of Ford trucks, the Pink Panther, Pac-Man and the "I Love Lucy" show.
"State lotteries love it because it's more interesting to promote the NBA than tick-tack-toe," says Steve Saferin, the Scientific Games marketer who pioneered the licensed card concept.
The dark side of all this is that for a small percent of scratchers, the cards are a life-wrecking problem. For many more, they're just a problem.
"One guy, he'd go into the store and literally buy tickets by the pound," says Ed Looney of the New Jersey Compulsive Gambling Council. "I mean, they'd put the tickets on a scale and weigh them. Then he'd get in his car and scratch for hours."
But big-time flameouts are pretty rare, says Looney. Scratch cards don't mint many gazillionaires, either, or turn up as plot devices on "Law & Order." They're one of those low-profile crazes that seem to take hold while nobody is looking. One day, you're at the store and you realize there are 25 scratch games for sale. Or you discover that your 13-year-old niece plays once a week. (Tsk, tsk. Must be over 18 to scratch.) Or you find yourself rubbing the latex coating off a card for a game called "Twice Lucky" and irrationally thinking, "Wow. I almost won." Which makes you buy another.
Some psychologists who've studied gambling say scratch cards, like all government lotteries, are basically a tax on the poor, since the poorer you are, the more likely you are to play. At minimum, they are a massive transfer of wealth, from the unlucky to the fortunate few and to everyone who doesn't play. But even among detractors, the tickets inspire a certain amount of awe. They're designed with an uncanny grasp of what makes people fritter away money on a losing cause. We're talking about a consumer product that generates about the same amount of money as Coca-Cola, and it hardly existed 25 years ago.
But if the tickets seem like a phenomenon that came out of nowhere, they're not. They came out of Massachusetts. Actually, we can get more specific than that. They came from a former Massachusetts lottery employee known affectionately in the business as "the mad scientist."
They came, if you really want the whole story, from Jimmy O'Brien.
Just the ticket
Around the halls of Scientific Games, people invariably smile when you mention Jimmy O'Brien. It's a smile that says, "Now, that guy's a character." And when they're done smiling, they'll say something like, "He's a genius," and they'll mean it. Here, the story of his career at the Massachusetts lottery has acquired the dimensions of myth.
O'Brien, 58, was hired by Scientific Games three years ago and splits his time between Alpharetta and his home in Burlington, Mass. Right now, he's here in an office without windows, which adds to the sense that he doesn't get a lot of sun. He looks like a math professor who could use a vacation, and he speaks softly, bashfully, with a thick Boston accent. There are a dozen cans of Diet Coke on the table and a tin of peanuts, plus a spool of paper spilling out the back of an adding machine. He often works here 20 hours a day, without breaks.
"We bring him food sometimes because he'll forget to eat," says Jennifer Welshons, Scientific Games' director of research, who works down the hall. "He gets that focused."
O'Brien will detail his life in the lottery with a wistful grin, but he seems genuinely uncomfortable with even a bit of limelight and he takes pains to credit his colleagues as well as the elected officials above him. Those officials, however, think of O'Brien as one of the state's great unsung heroes.
"The day we hired Jimmy O'Brien was a great day for Massachusetts," says Bob Crane, the state treasurer for 27 years, now retired, and the guy who oversaw the birth of the state's lottery in the 1970s. "He was quiet, he never boasted, but it wasn't long before we realized he was always right and always ahead of the rest of the world."
The scratch card was actually invented by the people who founded Scientific Games, and had its public debut in 1974. But after a decent start, the product kind of spluttered. For years, it was like a side dish for players who much preferred the gargantuan sums that were at least mathematically possible in Lotto-type games.
That changed in 1979 when the Massachusetts lottery put a help-wanted ad in the newspaper, searching for a marketing guy with a statistics background. O'Brien, then a Marks-A-Lot pen salesman with an MBA, got the job. His boss told him that scratch ticket sales were so poor there was talk of just phasing them out.
"They were considered dead in the water," O'Brien says, leaning back in his chair. "But I looked at them and I thought, they just weren't marketing them right. They were focused on other things."
O'Brien began to give the system what can only be described as a total body overhaul. First he studied the prize structure. On a typical scratch game, the state handed back about 30 cents of every dollar in prize money, most of it $1 and $2 at a time. There were a handful of $10,000 winners, but they were so rare that few players were enticed by them.
"People thought it was a sucker's bet," says O'Brien, who would conduct dozens and dozens of focus groups over the years. "They wanted the excitement of gambling, and they weren't getting that."
So O'Brien dramatically increased the number of payoffs in the $40 to $100 range. The bulk of all prizes were still $1 and $2, but there were enough mid-size winners to generate what's called "chatter money" -- buzz that tempts others to play. The change meant jacking up the total amount of prize money. So O'Brien recommended an idea that for the lottery world was radical: He raised payoffs to 45 cents on the dollar. Then higher and higher. Yes, the state would take in less from each ticket, but if many more tickets were sold they'd cover the shortfall, and then some.
This might sound like Retail 101, but lotteries were risk-averse in the early 1980s, worried mostly about security and the sort of accounting glitches that lead to unpleasant headlines. There were a lot of former FBI agents in the business then. The emphasis was on squeaky cleanness, not innovation.
To ensure that people knew about the higher payoffs, O'Brien slapped phrases like "1000 $1000 winners!" on the tickets in big bold letters. He had the cards reconfigured so that if there were 12 chances to win, you could win 12 times. Every card had to be "good to the last scratch." Eventually he started selling more than one game at a time, introducing cards with gambling themes, entertainment themes, holiday themes.
O'Brien also retooled the lottery's relationship with its other customer: retailers. Store owners hated scratch games. Yes, they'd earn a 5 percent commission for every ticket sold, but they had to pay for all those tickets upfront. By 1985, at O'Brien's direction, the state was giving the tickets to retailers and collecting only after the tickets had been sold.
"The response was instantaneous," he says. "We went from 2,600 retailers to 5,000 in one year."
That was it. Massachusetts has scratched like it had the hives ever since. In 1980, the year that O'Brien started, the cards brought in $54 million. By 1985, it was $158 million. Then it doubled again, and again, and again. In 1995, $1.6 billion in scratch cards were sold in the state. Nobody had seen anything like it. Across the nation, lottery officials watched the tallies and drooled. What is going on there? Reps were dispatched to find out.
"Massachusetts was the mecca," says Steve Casebeer, a marketer with the Kentucky lottery. "Everyone was there, asking, 'How can I take this back to my own state?' "
"It was like a wagon train," O'Brien remembers. "They all came. From England, from Spain, from France, from South America. I remember the state of Ohio. Those guys stayed for a couple weeks."
The year O'Brien retired, in 2001, the Massachusetts lottery sold $2.7 billion worth of tickets. Instead of doing $54 million in 12 months, the state was doing about $54 million every week.
"I've always said that he's one of the most valuable public servants that Massachusetts ever hired," says Fred Newton, a former product manager at the lottery, who worked with O'Brien.
That might understate it. The O'Brien approach has now been imitated all over the world and it's heaved fortunes into state and local coffers. Until he joined Scientific Games, O'Brien earned the less-than-tycoonish salary of a state employee, less than $100,000 a year. If you compare what he was paid in total with the billions he brought in, dollar for dollar, Jimmy O'Brien is one of the most valuable public servants in U.S. history.
Hooked on scratching
There's a bodega in Manhattan's TriBeCa neighborhood called Good Luck Candy and Tobacco, where dozens of different scratch games cascade down from a shelf behind the candy counter. Good luck, it turns out, is rare here. All the players who trickle in one recent evening say they've hit a $40 winner, or better, but no one claims to be in the black.
Not Jesus Velasquez, a young guy with thick glasses who left with a card called "Word Game." "I'll buy $2 games now and then," he says. "I'm definitely down. But I've got a friend at work who spends a lot on these tickets. He's way down. And he can't stop."
Asking Jimmy O'Brien, or executives at Scientific Games, how they feel about problem scratchers is like asking a Ford Motor Co. executive how he feels about drunk drivers. Like a lot of products, this one is harmful when misused, they say. And they prefer to focus on the unimpeachable causes, such as education, that are funded by billions in scratch revenue.
Without question, scratch cards are insidiously good at delivering exactly the sort of thrills that keep gamblers, pathological or not, coming back for more. Losing tickets are all designed to produce what's known in the business as "heartstoppers," a moment when it seems as though you are on the verge of winning. It's an illusion, of course. If you scratch just enough to reveal the serial number on any card, you can hand it back to the retailer, who will scan it and tell you if you won.
The cards pay off frequently -- about one in four yields something -- and at random, which turns out to be a devastating combination, as the pioneering behavioral psychologist B.F. Skinner learned years ago. In experiments, Skinner taught rats to feed themselves by putting them in a box with a lever that, when pressed, dropped in food pellets. He discovered that if you rewarded the rats at random intervals and in varying quantities they would hop on that lever long after you shut off the flow of food.
"It was hard to get them to stop, actually," says Nancy Petry, a professor of psychiatry at the University of Connecticut and author of a book on pathological gambling. "Scratch cards are built on the exact same principles of behavior. Make the prizes frequent and unscheduled and vary the sizes, and people will keep gambling."
It's the formula honed by the makers of slot machines, the biggest profit center of nearly every casino. In a way, what O'Brien and the rest of the lottery business did was figure out a way to offer the thrills and perils of a one-armed bandit in a 7-Eleven. And like the slots, the fine-tuning on scratch tickets extends right down to the gaudy art on the front.
" 'Fat Cat' is one of our best sellers," says Dennis Miller, Scientific Games' director of marketing, pointing to a ticket that features a cartoon of an overweight feline. "You take a fat cat and put him in a tux, or give him a cowboy hat, people love it. We don't know why."
Scientific Games is, among other things, a lab where scratch marketing is constantly honed. It's a little bit art, a little bit science, and every state with a lottery is forever looking for new ways to separate players from their money. What's sold is hope, in the guise of an impulse buy.
The day that Steve Charles gave that tour of the plant at Scientific Games, the press was cranking out cards at a speed so fast you couldn't tell what was being printed. Until you got a look at those mammoth spools at the end of the line. The work in progress was tickets for the Illinois lottery, featuring a strikingly irreverent cartoon of Abraham Lincoln, grinning like a drunk. The game was called "Change Your Life."