Back of the envelope calculations that don’t add up.
Cabinet ministers who get to make stuff up during interviews and their comments go unchallenged by simple facts and figures in the newspaper story.
All just par for the “news” course in Newfoundland and Labrador these days, apparently, and for the second time in a week, nottawa has laid out some pretty sharp observations on local reporting and the bogus political claims they contain.
In the latest post, nottawa takes apart comments made by finance minister Tom Marshall in a Telegram story on provincial government profits from video lottery terminals:
First, while disposable incomes in Newfoundland & Labrador [sic] rose sharply in 2006, they've declined every year since.* The first year that VLT numbers rose, disposable incomes in this province were actually declining, not increasing. That tends to happen in a recession. Thus if higher disposable incomes were to account for the rise in VLT revenue, surely that rise would have occurred in the very years that Marshall himself reported that VLT revenues were declining. It's completely contradictory.
As for an increase in population, while the province did report a minor population increase in 2009, Newfoundland & Labrador's population has 6,000 fewer souls than it did in 2004-05, the baseline comparator year given by the great numerologist himself in the Telegram story.
The asterisk just directs you to the Statistics Canada data series that show the declines he mentions.
There are a couple of details that nottawa left out.
For starters, the Telegram story refers to a cut in the number of terminals and other changes to game play:
In 2006, the government launched a strategy to reduce the number of VLTs in the province by 15 per cent over five years.
That target has been exceeded. The number is closer to 25 per cent.
In 2007, the province brought in other measures to reduce VLT play.
VLT operating hours were cut to a 12-hour window between noon and midnight. Previously, the hours were 9 a.m. to 2:30 a.m.
The machines were reprogrammed to slow play by 30 per cent. And the stop-button feature was removed from VLTs, further slowing play.
Now on the surface that looks like some kind of anti-gambling move. Yay, government! That rosy interpretation would be easy if you also heard the news stories about the Premier’s remarks on online gambling and didn’t get anything else but the superficial version of things.
But that conclusion would also be a wee bit off base once you consider the second element.
Take a look at an aspect of the Telegram story that isn’t right there in your face. Look at the number of machines and the profit and figure out how much each machine that is in service generates for the province’s finance department in profit. Don’t forget along the way that, as nottawa pointed out, that the lottery corporation knows in intimate detail what action each machine gets.
When you compare the profit and the number of machines, you discover that each machine made an average of $32, 266 in 2004-05. The profit dipped to $27.761 per machine the next year but then four years later - 2008-09 - the per-machine take is back up to $34,216. That’s roughly where it was four years earlier.
Fewer machines.
Same profitability.
And from nottawa’s observation about population, you could logically conclude the actual cash take on the machines might well have been the same in 2008 as it was in 2004. Heck, the haul might have even gone down somewhat.
Fewer machines, same profitability and all in the absence of a huge jump in revenue.
Could it be that the lottery corporation very sensibility reduced its costs in order to improve its profit margins? On the face of it, the cut in machines could do just that. By getting rid of unprofitable machines or ones with low profitability the lottery corporation would do two things.
First, it would reduce the cost from payments to bar owners, cash payouts on low revenue generators and maintenance.
Second, it would redirect the cash from the less profitable machines to other machines, often in what was essentially the same business establishment.
Poof! Lower costs would mean increased profitability even if you had exactly the same gross revenue.
When more people start playing the smaller number of machines or start spending more cash, the profitability climbs even higher. This might seem like magic to some people, including, apparently, the province’s finance minister. Remember: Marshall was taking about factors that would increase revenue, but the figures he gave the telegram were profits. The two are connected but they aren’t the same thing.
But really, the lottery corporation apparently just took a sensible business decision when it started to cut back on the number of machines. The fact that it looked to some like an anti-gambling initiative was a bonus. Two birds. One stone. Ya gotta like them apples, or in this case cherries and lemons or whatever it is that VLTs show on their screens.
Now the lottery corporation isn’t likely to give you its gross revenue numbers for the province because that’s a competitive issue. You can find out what the total profit was for this province in 2008, but when the corporation reports profits in the thousands of millions of dollars – instead of billions – you know that obscuring details are important to the corporation.
Even the 35% of the province’s adult population with adequate numeracy skills would have to think twice about the figure of $1,637 million to figure out how much it is. They could just as easily have said $1,637 thousand thousand. Still the same number but not exactly the conventional way of saying $1.637 billion, is it?
All that said, though, if you follow the logic, it is compelling.
But it sure isn’t what Tom Marshall was blathering on about or what the Telegram reported.
- srbp -
