No cheer for Branson as Camelot snatches prize

After a four-month wait the announcement of who will run the National Lottery has finally been made. Camelot may have beaten Sir Richard Branson in the contest, but it still faces a formidable task.

In perhaps the most bitter moment of his life, Sir Richard Branson has seen the prize of running the Lottery cruelly snatched from him.

But the National Lottery Commission’s decision to award a second term to Camelot hasn’t just dashed the cup of victory from Branson’s lips. It has seriously called into question the way the licence is awarded.

The commission decided by four votes to one to reinstate Camelot ahead of Branson’s People’s Lottery; a U-turn from an original decision in August when Camelot appeared to have been defeated.

Commission member Hilary Blume immediately tendered her resignation to culture secretary Chris Smith, saying she could not support the decision.

Branson criticised commission chairman Lord Burns, claiming he somehow changed the minds of the other members who had originally voted for the People’s Lottery bid. Branson also hit out at the Government for reneging on its pre-election promise of introducing a not-for-profit lottery.

As Marketing Week went to press, Branson had yet to make up his mind whether to seek a judicial review. But he will not make a third bid for the lottery.

He says: “Camelot has been given a licence for life today. They might as well have given the licence to them from day one.

“There are always dangers in giving a contract to someone else, but that’s why we have a licence that can be changed. It will be interesting to see what happens in seven years.”

Blume’s resignation statement speaks volumes. Some could see it as a damning indictment of Camelot’s whole marketing strategy.

Blume believes the Lottery needs relaunching to halt declining sales. She adds that in her view the People’s Lottery was more generous to good causes than Camelot and preferred its game plan and marketing.

She says: “The choice of taking a higher risk in appointing a new operator, committed to giving more to the National Lottery Distribution Fund, with a proven flair for marketing…would be a risk worth taking.”

Prospects of promotion

Not everyone is of the same view. Professor Ian Walker of Warwick University’s economics unit says Branson saw the Lottery as another way of promoting his image and products.

But Walker is also critical of the People’s Lottery’s strategy of changing the matrix of the main draw from six numbers in 49 to six numbers in 53. He claims the new draw would have produced sales £3.5bn lower than Camelot’s forecast of £51.8bn in seven years.

Walker says: “Branson’s sums didn’t add up. Six in 53 is a very difficult game to win – there’s a one in 23 million chance instead of a one in 14 million with the current game.

“The People’s Lottery would get a rollover four-times more frequently and you’d think that would generate more interest, but it’s not true. People will leave their hands in their pockets until a rollover week.”

Now Branson’s dream has been shattered, Camelot will feel the burning heat of the spotlight. The public will want assurances that targets of £15bn to good causes will be met. Camelot’s executives will also be rigorously scrutinised following fat-cat pay scandals.

But it won’t be plain sailing for Camelot. The group could be left nursing a hangover when it realises it must continue to persuade people to part with their hard-earned cash. In Dianne Thompson it has a feisty chief executive who turned Camelot’s chances around in the courts. But keeping punters won’t be easy.

An observer warns: “People could get very blasé about the Lottery after Camelot’s retention of the licence. The whole thing may go stale.”

Camelot says sales across all Lottery games were up four per cent in the first half of the financial year (April to December), compared with the same period the previous year.

Although there is no breakdown for individual games, Camelot claims Instants’ sales are on the rise again, reversing a downward trend.

Figures for the latest Lottery weekend bear out Camelot’s claims, with sales at least holding up in all games. Camelot claims that ticket sales for the main draw on Saturday, December 16 this year were £52.9m, compared with £50.9m in the corresponding game last year. Thunderball claimed £4.4m last weekend, alongside £4m last year. Instants’ sales in the week ending December 16 were £11m, compared with £9.2m last year. Only sales for last Wednesday’s draw were down on last year, from £52.9m to £50.9m.

But other observers feel a general decline in sales is on the cards. The commission’s own figures show annual sales peaked at £5.6bn during the first licence, but now hover at about £5bn a year.

Walker says: “Camelot got lucky early on with an unusually high number of rollovers. Over a long period of time statistics revert to type and eventually people will get bored with fewer rollovers. It’s not enough fun.”

Conscious of this, Camelot launched Lottery Extra in September, but Walker claims Camelot will be disappointed with sales so far. Players must enter the main draw in order to take part in Lottery Extra.

Walker believes Camelot should adopt a similar system to the US and Australian lotteries, which have successfully invigorated sales by running a fixed prize game alongside the big draw. Here, players can enter one without the playing the other.

Another trick is to make the game easier to win. Israel’s population of 8 million was too small to sustain regular rollovers, so the operator reduced the odds and more people started playing.

Walker thinks Camelot should change the matrix: “Camelot will have to work a little harder to make the game more lively and generate some hysteria among players.

“It needs something else apart from Extra. It might make sense to introduce another game to compete with six numbers in 49, as in the US or Australia. If it had a higher level of rollovers, sales would be taken away from the original game but total revenue across all games would be more viable.”

New gameplan

The People’s Lottery wanted to introduce Millionaire, a weekend game with a guaranteed £1m jackpot. But the commission was concerned that the game was too risky to operate because there was no weekly limit to winners – so asked the consortium to stump up £50m as a fall-back fund.

There is plenty of caution about bringing in new games. One agency source says: “The issues surrounding bringing out a new game are riddled with difficulty. It’s a painful, strict process to get approval.

“But I’d be surprised if it isn’t in Camelot’s plans to roll out games on WAP phones and interactive TV.”

As a lottery observer, Walker believes the commission should be scrapped and future applicants, rather than civil servants, held to account so the commission is not blamed for the failings of the bidders.

“What bidders say is irrelevant because there is no penalty for making claims about revenue,” he adds.

“The present arrangements are completely crazy. Commissioners are ill-equipped to make risky decisions because they haven’t got a clue which game would be better for sales. The Lottery should be auctioned, forcing bidders to carry the risk of what they are saying.”

Other problems await people in the Lottery-money chain. Charities glumly keep their fingers crossed that the flow of cash will not be halted by delays in the new licence.

James Georgalakis, spokesman for charities body the National Council for Voluntary Organisations, says: “We hope that whatever happens after this debacle doesn’t delay money going to good causes. Every day the decision was put back there was a significant drop in income. It’s crucial that there are no more mess-ups.”

Retail outlets selling Lottery tickets, such as newsagents and supermarkets, will be hopeful any games Camelot introduces will not require replacement technology which could hit sales.

Branson may be drowning his sorrows. But with all the problems that Camelot faces in the coming years, the commission’s decision may have saved him from the poisoned chalice.

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