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UK National Lottery needs to be more digital, licence bidder says

Sazka’s Sir Keith Mills vows to boost social media presence to halt decline in people playing

FEBRUARY 18 2021

The UK’s National Lottery needs to be hauled into the digital age with scratch cards on mobile phones and greater presence on social media to halt the decline in people playing, the head of one of the main bidders to take over the licence has claimed.

Sir Keith Mills, chair of the bid by the Czech company Sazka, told the Financial Times that Camelot, the National Lottery’s current operator, had “not kept pace with change” after an explosion in online gambling lured away younger customers, causing it to lose 8.5m players in the past decade.

Currently, about 40m people play National Lottery games. Mills, who created Air Miles and led the London 2012 Olympic bid, added: “The money to good causes has plateaued and I do worry that unless the National Lottery is reinvigorated it will go into a decline.”

Camelot, which has run the National Lottery since its inception in 1994, has disputed this, noting that it runs Europe’s largest online lottery by revenue.

Since a restructuring in 2014 it has increased contributions to good causes by 14 per cent.

Competition is heating up for the fourth National Lottery licence — one of the most valuable government franchises on offer to the private sector — as Camelot’s current 14-year term ends in 2023.

Bidders must submit initial proposals to the Gambling Commission in April.

The preferred bidder is expected to be announced in September.

Bids are also expected from the media mogul Richard Desmond, who runs the UK’s Health Lottery, and the Indian operator Sugal & Damani — both of whom have previously made offers for the franchise.

Neither have announced their intentions. Camelot, which is owned by Canada’s Ontario Teachers’ Pension Plan, has seen off competition through three previous licence contests. But executives in the industry said that after missteps during the current licence period, including a period of falling sales and incurring more than £4m in fines from the regulator for mobile app glitches and paying a prize to an allegedly fraudulent ticket, its reselection was not guaranteed.

Between the awarding of the current licence in 2009 and 2020, Camelot’s profits grew 51 per cent, while returns to good causes increased by a third.

Its charitable contributions have in part been cannibalised by its pursuit of new products, such as instant win games and EuroMillions. While 40 per cent of sales from the traditional “Lotto” draw goes to good causes, only 28 per cent does from EuroMillions.

Camelot did, however, report that it had raised £863m for good causes in the six months to the end of September last year — only a 1.5 per cent decline on the same period in 2019 despite the pandemic. Mills warned that if the licence was not offered to another operator it would cast doubt on the credibility of the competition process: “If you are going to run the National Lottery with a private sector operator and that operator never changes then why don’t you nationalise it?”

If it is successful, Sazka would introduce new interactive lottery games, put the lottery draw back on national television and digitise its current product, which is largely sold through local newsagents, Mills said. It also intends to create a database of lottery players — similar to that collected through the Nectar loyalty scheme that is used by shops and train operators, which Mills also created. Recommended Gambling industry Gambling group says 4% of revenue comes from players at high risk of addiction

The Czech group has a chequered history. At the end of 2010, a predecessor state-owned entity defaulted on payments to creditors over bonds used to finance the then Sazka arena in Prague and was declared bankrupt in 2011 owing more than CZK135m (then about £4.75m) in prize money.

Its business was then bought out of insolvency by a vehicle owned by the Czech billionaire Karel Komarek whose Sazka Group has since taken over or invested in lotteries in Italy, Greece and Austria.

In November, the private equity giant Apollo Global Management said that it would invest €500m to boost Sazka’s European growth.

For its UK National Lottery bid it has also recruited Lastminute.com founder Brent Hoberman and former Sainsbury’s chief executive Justin King.

Warwick Bartlett, chief executive at Global Betting and Gaming Consultants, said that, while Sazka was a “credible company”, it faced a tough battle to show how it would improve lottery sales just as a review of the UK’s gambling laws was under way.

“A pitch that will demonstrate increased sales against a backdrop of politicians trying to rein in the appetite of consumers to gamble could be tricky. It may come down to economy of scale, and how one operator is prepared to trim costs against another,” he said. This article has been revised since first publication as regards the predecessor, state-owned, entity.

https://www.ft.com/content/3c54e4a3-bf09-451c-8102-326889b7db4c