You May Already Be a Winner! The Story of Publishers Clearing House

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Once upon a time, magazine publishers hired teams of commissioned salesmen that went door-to-door to drum up new subscriptions. It was a pretty inefficient way to sell magazines. So in 1953 Harold Mertz, the manager of a magazine sales team, came up with the idea of mailing subscription information to potential customers instead.

For the price of a 3-cent stamp, Mertz could send an envelope containing a reply form and a small brochure describing the magazines available. Now he could canvass an entire city from the comfort of his basement. The real genius of Mertz's idea, though, was to offer magazines from multiple publishers - about 20 titles in all - making his company, Publishers Clearing House (PCH), a one-stop shop for an entire family's reading entertainment.

Much like the door-to-door salesman that PCH replaced, the company made money by earning a commission from every subscription sold. As its power in the industry grew, PCH could demand the publisher’s lowest subscription rate, all while taking a bigger and bigger commission. By the 1990s, PCH sold about eight million subscriptions annually, with commission rates between 74% and 90%. But PCH increased circulation so effectively that the deep commission was worth it, because it meant a publisher could charge more for advertising space in the magazine.

“You May Already Be a Winner!”

To increase sales and easily expand their mailing list for future solicitations, PCH began offering sweepstakes prizes in 1967, after they’d seen it work successfully for Reader’s Digest .

With the chance to win anywhere from $1.00 to $5,000 in cash, all a person had to do was fill out and return a contact card with a unique contest entry number printed on the front.

Unlike a lottery, there was no purchase necessary. And because PCH had determined what number would win the grand prize before the cards were even mailed, they could legally market the contest with the tagline, “You may already be a winner!” Best of all, if no one ever returned the pre-selected winning number, PCH didn’t have to pay out a dime. When people began to question if anybody ever really won, PCH started offering a second chance drawing, choosing a winner at random from the cards that had been returned.

High ‘Stakes Race

For nearly 25 years, PCH was the only big subscription house in town. But that changed in 1977, when American Family Publishers (AFP) came onto the scene, carrying magazines like Time and McCall's. Naturally, AFP ran its own sweepstakes, creating a sort of sweepstakes race with each company inching up its grand prize to outdo the other. But when customers complained of “sweepstake fatigue," the companies switched gears and began offering luxury items instead: cars, boats, private planes, and even a thoroughbred racehorse.  At least until 1985, when AFP bumped their grand prize up from $200,000 to $10,000,000. PCH had to do the same and, not surprisingly, players weren’t bored anymore.

To promote their sweepstakes, AFP hired celebrity spokesmen - the trusted faces of Ed McMahon and Dick Clark. In response, PCH went with a more personal touch, by introducing the Prize Patrol, a small crew of actual PCH employees that arrived at the home of the next sweepstakes winner with balloons, flowers, champagne, and a giant novelty check in-hand. The presentation was recorded and became a staple of the PCH television advertising campaigns for years, and the Prize Patrol is still out there surprising winners today.

What Are the Chances?

For the big $10,000,000 sweepstakes in 1985, New York state employee Lillian Countryman calculated the odds of winning, and, yeah. It wasn't pretty. Players of the AFP sweepstakes had a 1 in 200,000,000 chance. PCH players fared a little better, with a 1 in 181,795,000 chance. If you really wanted to win, your best bet was the Reader's Digest sweepstakes, with a 1 in 84,000,000 longshot for one of two grand prizes. However, there was a trade-off for the better odds – each winner only netted a modest $334,500.

Things have not improved over time. For the most recent $10,000,000 PCH jackpot, your chances are 1 in 1,215,500,000. Although that’s not bad compared to their “$5,000-a-Week for Life” contest, where you're looking at a 1 in 1,750,000,000 chance.

Buying to Win

There are many people who believe that their odds of winning the PCH sweepstakes would be better if they got a subscription or two. In the 1980s and 90s, this was especially common among the elderly, some of whom spent thousands of dollars—often buying multiple subscriptions to the same magazine—in an effort to get on some under-the-table VIP list of finalists. After one retiree died in 1999, his estate discovered that he had magazine subscriptions with PCH that were paid through until 2086. (He never won.)

This “buy to win” theory was reinforced in 1992, when sanitation workers found hundreds of unopened PCH sweepstakes entries in a dumpster, all of which were from people who had not made a purchase. During the class action suit that followed, PCH explained that they could determine who had ordered a subscription without even opening the mail, thanks to a see-through window on the envelope. Using this method, envelopes with subscriptions were separated for processing, and the “did nots” were electronically scanned and entered into the sweepstakes. In this case, PCH claimed that a mail handling contractor had acted against company policy by simply throwing away the “did not buy” entries. To show they upheld the “No Purchase Necessary” sweepstakes regulations, PCH entered the discarded forms into their upcoming $10 million and $1 million drawings. Although the bad press hurt their reputation, the lure of millions in cash kept people playing just the same.

According to PCH, a majority of sweepstakes winners haven’t purchased anything from the company.

You Won!*

In the mid-1990s, state and federal government became concerned that sweepstakes mailings had become increasingly confusing, if not outright deceitful. In giant block letters, the entrance forms all proclaimed that the recipient was the grand prize winner, followed by much smaller print saying, “if you return your entrance form and it displays the winning number."  While it was easy for anyone to misunderstand the mailings, the elderly community seemed especially confused. Soon, newspapers carried stories about retirees that had blown their life savings on cars, houses, and other luxuries because they erroneously believed they had won millions. In one widely-publicized story, octogenarian Richard Lusk flew from California to Tampa, FL—the mailing center of American Family Publishers—in October 1997 and again in February 1998 to collect $11,000,000 he thought he had won in two separate sweepstakes.

In addition, scam artists were using this confusion to their advantage. After a round of official sweepstakes mailings were sent out, scammers would contact people and claim that the mailing the person had just received was a genuine winning notification. All the “winner” had to do was pay a few thousand dollars in “administrative fees” in order to facilitate the first payment of their grand prize millions. Of course the winner paid the fees, but they never received a visit from the Prize Patrol. Although the legitimate companies were in no way involved, nor did they require any such administrative fees, they bore the brunt of the backlash nonetheless.

Laying Down the Law

Between the “buy to win” overspending and confusing sweepstakes mailings, both AFP and PCH became the targets of multiple personal lawsuits in the 1990s, as well as a handful of class action suits from quite a few states. The companies usually covered their bases well enough to have the case dismissed, or they settled out of court, but the legal fees and decreased business from bad press took their toll. AFP filed for bankruptcy in 1999 and would close its doors soon after.

Meanwhile, Congress received enough pressure from citizens to pass the Deceptive Mail Prevention and Enforcement Act in 1999, also known as “The Sweepstakes Law." Among other things, the law states that sweepstakes must include the odds of winning, a schedule of when prize payments will be made, reiterate that no purchase is necessary to play, nor will purchasing increase your odds of winning, and that there are no fees to be paid by the winner (other than taxes, of course). Since the law went into effect, PCH has paid out millions in settlements for class action suits over their marketing tactics, some of which include $48 million between two separate multi-state suits in 2000, $34 million to 26 states in 2001, and most recently, $3.5 million to 34 states in 2010.

PCH Today

Although PCH still offers magazine subscriptions, it’s far from their only source of revenue. In the mid-80s, they began selling books, VHS tapes, and audio cassettes, and have since expanded to collectible knives, jewelry, vitamins, and even flower bulbs. The launch of pch.com in 1999 allowed people to register for the sweepstakes without even sending in a card, but it also gave PCH the opportunity to branch into a variety of online ventures. They now have a handful of websites that feature online video games, a daily lottery, online coupons, and a search engine that offers a chance to win prizes every time you use it. You can even download PCH iPhone apps to play on the go.

We all remember getting subscription cards, but no one at the _floss has met a Publishers Clearing House sweepstakes winner. Did the Prize Patrol ever show up in your neighborhood?

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June 21, 2012 - 7:36am
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