National Lottery: Has Camelot’s luck run out?

The luvvies are having a field day with Nadine Dorries, the new head of the Department for Digital, Culture, Media and Sport, or as some have nicknamed her, the minister for “culture wars”.

Her snootier critics have mocked how someone who writes “clogs and shawls” fiction about Irish Catholic families in 1950s Liverpool could possibly oversee the nation’s higher aesthetics, let alone the BBC’s output. 

One writer said: “Calling Nadine Dorries an author is like saying cannibal Jeffrey Dahmer was a chef.” (Never mind that Dorries has sold 2.5 million of her books.)

Nor can they forget – or is it forgive – her appearance on ITV’s “I’m a Celebrity …Get Me out of Here”, where she ate camel toes and ostrich arse for fun, and laid in a cabinet with bugs and cockroaches.

Yet the new culture secretary’s feel for popular taste may come in handy as she will soon have to rule on one of the country’s most commercial and public of deals: who should be chosen to run the next 10-year licence for the National Lottery.

There are four bidders for this highly profitable contract which has been in the hands of the Canadian-owned Camelot for nearly three decades. 

They are the Czech-controlled Sazka group, whose bid is being orchestrated by the former London Olympics organiser, Sir Keith Mills; Sisal, the Italian gambling company, which is working on the bid with BT and the children’s charity Barnardo’s; and media tycoon, Richard Desmond, of Northern & Shell, which already runs the Health Lottery. The fourth is the incumbent, Camelot, which is having another shot. 

The bidding process has been delayed several times because of Covid but the final tender documents – over 1500 pages long – are due to be handed into the Gambling Commission next month.

It’s the most thorough, some would say tortuous, process which has cost the rival competitors millions of pounds to put together. 

As well as setting out why the bidders believe they could do a better job than Camelot – and what they would do to improve the National Lottery – they must show they have the fire-power and proof of funding to run such a huge country-wide network. 

The tender process is also tightly run for fear of being seen to be open to persuasion or inducement. The bidders are forbidden from publicly saying why they think Camelot is not good at its job nor what they would do about it. 

Indeed, one of the bidders whom I spoke to about the tender said he had to have the time and date of our telephone call logged. 

The Gambling Commission, headed by Marcus Boyle who recently joined from Deloitte and who is also chair of the British American Drama Academy, is due to make its recommendation to Dorries in February next year. While no one will admit this publicly, it’s inconceivable that Dorries will make a decision without the final nod from No 10. 

The nation’s gambling is big business – and highly profitable. Since Camelot won the first National Lottery in 1994, some £43bn has been given to good causes around the country.

What will persuade the Commission – and Dorries – that they should give a new bidder a crack at the lottery? Why, after nearly 30 years, should Camelot be asked to step down?

After all, at first glance Camelot has not done a bad job: after some problems and a few management reshuffles, the money going to community charities has increased again. In June it reported that £1.8bn was raised for charities last year.

Yet lottery analysts claim that Camelot has become stale, that its technology needs updating and that money is wasted on marketing. They point out that the National Lottery has lost eight and a half million players and become far too reliant on scratch cards for revenue.  

While revenue from gross ticket sales has increased between 2010 and 2020, from £5.5bn to £8bn, the ratio contribution to good causes has decreased over the same period of time, from 28 per cent in 2010 to 23 per cent in 2020.

Over that same decade, the total sales of scratch-cards and interactive instant win games rose from £1.4bn to £3.4bn while the total draw-based sales appear to have been overall stagnant, fluctuating between £4bn and £4.5bn. 

But a rise in revenue from scratch cards is not particularly profitable because they return only 10p out of every pound spent to good causes, compared with the twice-weekly draws such as Lotto, which give three times that amount.

Another area of criticism is that although Camelot’s profits rose 14.32 per cent to £95 million in 2019-2020, the actual contribution to good causes increased by just 0.31 per cent. Last year was a record sales year for Camelot, with higher scratch cards and online instant win games, so analysts reckon there will be a massive profit growth. But will the amount to good causes increase by a similar amount?  

Marketing costs have also soared to £145m, compared to £77m in the previous year. While Camelot paid out £1.8bn to good causes, some £56.6m went to cover marketing costs compared to £39m in 2018 to 2019.

In another twist, the government has launched an inquiry into the Gambling Commission’s running of the licence and handling of the competition process. Julian Knight, the Conservative MP handling the review, is concerned that there are tough measures in place to ensure that when profits rise, it’s not only the operator that benefits, but charitable causes too.

Worries that Camelot was not distributing enough money to charity were raised a few years ago when an MPs’ report showed that while revenue had climbed by 2 per cent between 2009-10 and 2016-17, Camelot’s profits had risen by 122 per cent to £71m.

If you were of the gambling sort, the odds are with Sazka Group, based on the quality of the British team the Czech collective has put together to make the bid. Sazka is run by Czech billionaire tycoon, Karel Komárek, who made his fortune from oil and gas dealings. He operates lotteries in Greece, Italy and Austria as well as its home country.

Komarek has created a new UK vehicle, Allwyn, and brought in as chairman, marketing maestro Sir Keith Allen who helped with winning the Olympics bid for London, created Airmiles and Sainsbury’s Nectar card, and more recently advised No 10 on its obesity strategy. 

Sir Keith in turn has recruited some good business brains to the enterprise with former Sainsbury’s chief executive Justin King and lastminute.com’s founder, Brent Hoberman. They are working with Vodafone on how best to update the technology behind the lottery and how to improve the customer experience. 

Italy’s Sisal, headed by chief executive Francesco Durante, has a lower public profile here in the UK but is deadly serious about its ambition for the National Lottery. In Italy, Sisal runs the SuperEnalotto and recently beat Sazka to win Turkey’s big lottery contract.

Owned by the private equity group CVC, which bought it for €1bn in 2016, Sisal has teamed up with the children’s charity Bernardo’s to help with its good-cause credentials, and is working with BT on technology. One of Sisal’s criticisms of the current Camelot reign is that the lottery has lost its shine, first doubling the ticket price in 2013, then adding 10 balls to the mix in 2015, losing millions of customers in the process. 

Richard Desmond’s Northern & Shell group, which already runs the Health Lottery, has been criticised for not giving enough of revenue from ticket sales to charities and other good causes.

It’s impossible to predict who the Gambling Commission and Nadine Dorries will go for but one thing is sure. If Camelot were to retain the licence, you can bet your socks that the three rivals – whose bids have taken years of work and millions of pounds – will go for judicial review. Dorries might want to tap up her fellow Lancastrian, Mystic Meg, who became as much of a draw as the National Lottery itself, to see if the astrologer has a feel for which of the bidders have the winning balls to outshine Camelot.