Camelot keeps hold of Lottery licence

Camelot is to launch a fresh onslaught to revive flagging lottery sales over the next ten years after winning the right to run the next National Lottery licence.

The company was chosen by the National Lottery Commission (NLC) this week as the preferred bidder to run the third Lottery licence for ten years from February 2009.

It beat competition from its sole rival, Indian lottery operator Sugal & Damani, and will spend the next month agreeing terms with the NLC. Camelot chief executive Dianne Thompson will head the company until at least 2012.

Camelot’s plans to boost sales during the period include launching a range of innovative games, introducing digital screens in shops, and launching a Player Card which stores players’ numbers and preferences.

Radical moves are needed to boost turnover. Lottery sales for the year to March slipped to £4.9bn from £5bn the previous year. Meanwhile, Camelot is under pressure to increase sales and contributions to good causes – it must raise £2.2bn to fund the London 2012 Olympics. It will halve its overall profits to 0.25% of sales in the next licence period from 0.5%.

The NLC says Camelot’s strategies are likely to raise more money for good causes than Sugal & Damani’s plans.

However, the NLC is sceptical about Camelot’s forecast of achieving £79bn in sales and £22bn for good causes over the ten-year period.

NLC chief executive Mark Harris says: “The Commission came to the conclusion that the figure was over-optimistic.” It would mean sales of almost £8bn a year, a 60% increase on existing levels.

Harris says Camelot has failed to take into account the extent to which launching new games would cannibalise sales of existing games.

For instance, Camelot plans to launch a World Lottery Draw, linking scores of countries around the world. The game would run every month and create up to 100 millionaires per draw, with plans for an annual superdraw with a jackpot of up to £250m.

But some believe this could take sales away from EuroMillions, a weekly draw which links lotteries in nine European countries. One observer says: “EuroMillions struggles unless it has a large jackpot. The draw was originally televised on Sky One, demoted to Challenge TV before going to UKTV Gold.”

A Camelot spokesman says the £79bn figure can be reached if the NLC permits all the proposals Camelot has made in the bid.

“There isn’t a single proposal we have included which doesn’t require approval from the NLC,” he adds. “Until we have had a discussion with them and know what they like, it is difficult to respond. We are a highly regulated business, there is nothing we can do without the permission of the NLC.”

Meanwhile, some see Camelot’s main task as boosting interest in the main Lotto draw which accounts for 60% of sales.

One former employee says the strategy pursued by commercial director Phil Smith, who resigned in February, was to launch new games and encourage people to play across the portfolio. While this has helped lift sales over recent years, some believe it has confused players.

The source says: “One challenge is getting airtime for those games. How do you create brand exposure? Lottery behaviour is about regularity. Broadcast shows create an environment for games to be successful. The more products you have, the more difficult it is to create multiple environments, and that’s where the strategy pinches a bit.”

Another key strategy for the next licence is rolling out Fast Pay, which allows shoppers to buy tickets at retail checkouts rather than queuing at ticket booths. Camelot plans to expand the scheme from Tesco to a further 11 retail chains.

Observers believe Fast Pay has great potential because it allows people to load regular numbers onto the card and hand it over at the checkout, thus repeating the same numbers each week.

This further entrenches the “pschycological lock-in” of buying a Lottery ticket with regular weekly numbers and keeps players coming back for fear of missing out.

Meanwhile, the Camelot spokesman says the proposed National Lottery Player Card is a step up from the Fast Pay card, and has the ability to build in player preferences. “It is probably the single most significant marketing innovation in the bid. It will build on the success of Fast Pay, hugely improve customer convenience and will put an end to the days of lost tickets.”

Another challenge for Camelot will be to revive interest in the Lottery among young adults. One plan is to launch online “lifestyle games” offering non-cash prizes such as meeting celebrities and adventure holidays.

A source says: “The National Lottery is definitely off the agenda for the young. They weren’t around for the launch razzmatazz and have other interests.”

Much will depend on whether the NLC permits some of these radical innovations, or rules that they pose a threat to vulnerable players.

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