UPDATED JULY 2019
There are two main types of competition you can run – a game of chance and a game of skill. But what’s the difference between them – and more importantly why should you care? A competition is a competition, right?
Wrong, there are some crucial differences between the two types of competition that affect not only your legal obligations, but the results you’ll achieve too…
Games of skill.
Games of skill are a more qualitative competition, requiring entrants to put more thought and – you guessed it – skill into their entry and produce an original and unique piece of content in exchange for an entry. The winner is chosen on the basis of their demonstrated skill as opposed to pure chance.
Game of skill examples
Examples of games of skill include pretty much anything beyond a like or follow or collecting simple demographics such as name and email.
Here are some popular types of games of skill:
- Answer in X words or less
- Submit a photo/video
- Caption a photo
- Complete a survey and answer a qualifying question
- Submit original work such as art or an essay
What it means for your competition
The big advantage of running a game of skill competition is that in Australia, you do not need a licence. Games of skill are exempt. This means you save yourself the time and money applying and waiting for licences to be granted.
However it’s not all sunshine and rainbows (unfortunately). Games of skill generally have a lower entry rate than games of chance simply because of the effort involved.
You may not think that 25 words or a slogan for a T-Shirt is really all that difficult, but never underestimate the laziness of the human race. On average you can expect about 25% of the entries as you would for a game of chance.
It’s not all bad though, the entries you will get will be of much higher quality because of the effort involved to enter; just make sure that the prize you’re offering outweighs the lengths your entrants have to go to for an entry.
Games of chance
Games of chance are a more quantitative competition, which don’t require entrants to show any skill in exchange for an entry. The winner is picked at random and skill plays no part in the deciding of the winner.
Games of chance don’t require any skill and are usually quick to enter. Competition examples include:
- Enter your email address
- Like or follow a page
- Complete an entry form
- Tag a photo/friend (just be careful of Facebook’s rules remember…)
- Vote for your favourite
What this means for your competition
Games of chance do require a licence in some states of Australia.
Currently, a game of chance will only require a licence in Australia once the prize value reaches $3,000 for ACT, $5,000 for SA and NT and $10,000 for NSW (New South Wales changed their laws regarding prize values in July 2020). Licence costs aside, games of chance have much higher entry numbers so are a great way to grow your audience or collect a large amount of leads.
The downside, because of course there’s always a downside, is that they’re not always as qualified as games of skill, so entrants may not be your target audience and therefore may never convert to paying customers. You can definitely help reduce the amount of poor quality entries by tailoring you prize, promotion, ads etc very carefully to appeal to your specific demographic.
Enjoying this skill vs chance guide?
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What if your competition is a game of skill but you pick a winner at random from the correct answers?
This is an excellent question that we get asked a lot.
If your entry method requires entrants to show skill (e.g. guessing a correct answer or finding the answer on your website) but you are planning to pick one winner from the pool of entrants who got the correct answer, your competition becomes a game of chance.
Why? Because you are picking a winner – at random – from the pool of correct answers, where everyone who got the correct answer has an equal chance of winning and the winner is not picked based on their skill from this pool of correct answers.
If, however, you award the prize to the first person who guesses correctly or the first person to find the answer on your website, your competition still constitutes a game of skill as there can only be one definitive winner (the first person to get the correct answer) who is not chosen at random.
How do you know which competition type is best for you?
Good question. Look at what you want to achieve from your competition. Do you want to grow your social media following to create a community around your business or are you after an original slogan for your new T-Shirt range?
Once you know what you want to achieve, you’ll have a good idea of which type of competition works best – for example a like to win competition isn’t going to generate any slogans but may work well to get people to vote for their favourite from a shortlist of slogans.
So there you have it, essentially, a game of skill is a competition where the winner is picked based on their skill and a game of chance is where a winner is picked based purely on chance.