Lottery bidders gamble on 50 per cent profit rise

Lottery bidders Camelot and the People’s Lottery have pledged £15bn to Good Causes. To do this they must first boost profits by 50 per cent, says Torin Douglas

When Richard Branson said the excitement had gone out of the National Lottery, he was closer to the truth than he realised. The media coverage of last week’s bids for the next Lottery licence was surprisingly scanty. Most newspaper headlines focused on the red herring of the “mystery bidder”, who turned up with a thin brown envelope, unnoticed and unannounced, on behalf of an unidentified charity consortium.

Even though it was obvious that this bid would not survive half an hour’s detailed scrutiny – given that Camelot and the People’s Lottery had each submitted dozens of boxloads of bid documents – the media were desperate to find a new line. Camelot had given its best story – the decision to halve its profits – to the Sunday papers, leaving itself with little to talk about on Monday, when it formally unveiled its bid. Branson had already revealed the main PR planks of his bid – profits to Good Causes, a millionaire a day and Bill Gates – and, even though the media never normally tire of the bearded balloonist’s exploits, on this occasion they did.

By Tuesday February 29, the day of the noon deadline, newsdesks thought there was little left to say. They were wrong, but by then they couldn’t see the news for the balls. And the biggest balls, naturally, came courtesy of Richard Branson. If razzmatazz were any guarantee of success, Branson would have been home and dry. Unfortunately, it’s not, as he discovered six years ago when he delivered his Lottery bid accompanied by the race horse Desert Orchid and grabbed all the media exposure – but not the licence. Fortunately, that unhappy lesson didn’t stop him pulling out the publicity stops again this time, to the great relief of the hacks and news crews who had braved biting wind and torrential rain to watch the bids arrive.

Branson and his chief executive-designate – J Walter Thompson’s Simon Burridge – made heroic efforts to fill the publicity vacuum. Despite the weather, they went ahead with a People’s Lottery parade around the streets of Victoria, including a band, huge inflatable lottery balls, two Ad-vans and, as representatives of the “People”, lots of actors dressed up as doctors, nurses, teachers, City gents, barristers, building workers and soldiers.

The less flamboyant Camelot had turned up earlier with a bright red van – though not Postman Pat – to emphasise its public/private partnership with the Post Office. Inevitably, Branson won the battle of the TV bulletins though, strikingly, neither bidder made much of a splash in the following day’s papers. Yet behind the vans and the balls lurked the dramatic news the media had been searching for. Both bidders are pledging to raise no less than &£15bn for Good Causes – 50 per cent more than in the current seven-year licence period. Which leaves only one question. How? How can the already huge takings of the Lottery be boosted by 50 per cent?

Not from the halving of Camelot’s profits, that’s for sure. Even Branson was forced to concede they were already going down, joking that it too was becoming a not-for-profit operator. Few recall that Camelot always said its profitability would go down over the seven years of the licence. Yet transferring half its current annual profit to Good Causes would raise less than five per cent of the extra &£5bn Camelot and the People’s Lottery have both pledged to raise over the seven years. So where will the rest come from?

Branson says from excitement, generated by better marketing. He believes Camelot has let the Lottery become boring – and though Thompson naturally denies it, pointing to the record-breaking takings over January – to some extent he’s right. Branson also points out that sales of Instants scratchcards have plummeted from their peak, and that overall lottery sales are in decline.

Camelot retorts that this is the nature of lotteries the world over, and the skill is in managing the brand and the games so they gradually pull in more money over time, without killing the golden goose. Branson says Camelot’s new games haven’t come up to expectation – and here again he is, to some extent, right. The attempt to bring together scratchcards and the TV online show, The Big Ticket, was an embarrassing flop and even the Millennium Big Draw 2000 – which I thought would be a sure-fire winner – created fewer millionaires than Camelot’s relatively modest predictions. Finally, Branson believes the main Lottery online game – choosing six numbers from 49 – should be scrapped in favour of a new one, which will create more rollovers and millionaires. Camelot claims that that way madness lies, pointing to the California lottery which made a similar switch and after seven years was selling half as many tickets as before.

Here we get to the nub of the problem with any proposal for such a big sales increase, whichever bidder puts it forward. It’s a risk. Camelot plans to invest &£1bn during the next licence period – on extra marketing, four new online games, new types of prizes (such as a trip to the moon) and games on the Net and mobile phones. Yet it has also stressed its social responsibility, in terms of protecting low-income players, preventing the under-16s from playing and stopping excessive play. When Branson accuses Camelot of having one of the world’s worst records on “spend per head” – the UK is ranked 30th behind Finland, Cyprus and 16 US states – Camelot says it is proud that it has managed to get millions of people playing a little each week, rather than a few people playing a lot.

Public concern about excessive gambling and lottery fever has fallen away sharply, even among the churches. Surely any bidder that suggests it can achieve a 50 per cent increase in an already hugely successful Lottery is simply asking for trouble.

Torin Douglas is media correspondent for BBC News

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