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A Lottery for the future
Robert Foster – National Lottery Commission
Mark Harris – National Lottery Commission Ben Davey – NM Rothschild
22 June 2005 City briefing
22 June 2005 City briefing
Over £17 billion to good causes…
22 June 2005 City briefing
Over £24 billion in prizes …
22 June 2005 City briefing
Part of our everyday life…
22 June 2005 City briefing
Purpose
We are here to:
Make contact
Provide you with information
Encourage feedback on the competition process
The Lottery Environment
22 June 2005 City briefing
The Lottery Environment
What does the Commission do?Selects and licences the operator
Licences the games
Monitors and reports on operator performance
Enforces the licence
But does not:
Handle applications for Lottery funds
Distribute any Lottery money
22 June 2005 City briefing
The Lottery Environment
The Commission is committed to a fair and effective competition.
Our objectives are to design a process that: Generates competition for the licenceEstablishes a level playing field for all bidders Treats all players fairly Maximises returns to good causes
22 June 2005 City briefing
The Lottery Environment
We have a strong structure in place to deliver the competition.
Project BoardPermanent Chairman of the Project Board Independent assuranceExternal reviewCommissioners make the final decision
22 June 2005 City briefing
The Lottery Environment
Lead / Financial / Commercial - Rothschild
Technology / IT - HEDRA
Economics - NERA
Legal - Freshfields
Assurance - Cornwell
We have appointed advisers to support the process:
22 June 2005 City briefing
The Lottery Environment
We are looking for an operator that delivers a high level of funding for good causes by offering :
Games that are attractive to a wide cross-section of the public
Innovative games and servicesA reputation for being highly competent and with
high integrity
The Lottery Opportunity
22 June 2005 City briefing
The Lottery Opportunity
What does the Lottery operator do?
Develops games
Creates and executes marketing strategy
Manages the retail estate and other distribution channels
Organises draws
Pays large prizes to winners
Takes legal action to protect intellectual property
Provides customer service / care
22 June 2005 City briefing
The Lottery Opportunity
Retail is currently the key distribution channel, accounting for 97% of sales.
Emerging channels are:
Internet
Interactive television
Text messaging on mobile phones
22 June 2005 City briefing
The Lottery Opportunity
Sales – total £4,615m (FY 2003/2004, £m)
£3,225
£351
£78
£15
£641
£45£244 £15
Lotto ThunderballLotto Extra Christmas Millionaire MakerScratchcards HotpicksDaily Play EuroMillions
Source: NLC discussion document
22 June 2005 City briefing
Overall sales and proceeds for good causes
Total sales and NLDF primary contribution (£bn)
0
1
2
3
4
5
61
99
4-9
5
19
95
-96
19
96
-97
19
97
-98
19
98
-99
19
99
-20
00
20
00
-01
20
01
-02
20
02
-03
20
03
-04
20
04
-05
Sales NLDF Primary Contribution
£4.8bn
£1.2bn
22 June 2005 City briefing
Overall sales
Total sales 2002 – 2005 (£bn)
4.4
4.5
4.6
4.7
4.8
2002-03 2003-04 2004-05
Sales
22 June 2005 City briefing
The Lottery Opportunity
Camelot P&L 2003/2004 (£m)
Source: Camelot annual report 2004
Lotto 3,225Other draw-based games 749Scratchcards and interactive instant win games 641Gross ticket sales 4,615
Lottery duty (554)
Revenue 4,061
Cost of salesPrizes (2,294)National Lottery Distribution Fund (1,216)Retailers' commission (242)Terminal and data communication costs (101)
Gross profit 208
Administrative expenses (164)
Other operating income 1
Operating profit 45
22 June 2005 City briefing
The Lottery Opportunity
Profitability of Camelot (£m)
0
40
80
120
160
200
240
1996 1997 1998 1999 2000 2001 2002 2003 2004
Camelot gross profit Operating profit (before exceptionals)Source: Camelot annual reports
22 June 2005 City briefing
The Lottery Opportunity
Key attractions:
Stability of revenue stream
Scope for innovationTechnologyRoutes to marketGame portfolioFinancingOthers?
22 June 2005 City briefing
The Lottery Opportunity
Regulatory environment
There is room to innovate, but some activities are out of bounds:Sports bettingRapid drawsGames of skillBingoSales through street vendors and certain licensed
premises (such as bookmakers)
22 June 2005 City briefing
The Lottery Opportunity
Branding / marketing
Technology
Communications network
FinancingGaming / leisure
Distribution
THE OPPORTUNIT
Y
The Lottery Process
22 June 2005 City briefing
The Lottery Process
We published a discussion document in January.
Key issues for discussion:Levelling the playing fieldReducing costs for biddersAligning incentives
22 June 2005 City briefing
The Lottery Process
Provisional timetable:
Statement of Main Principles Autumn 2005
Draft Invitation to Apply Spring 2006
Final Invitation to Apply Late Summer 2006
Select preferred bidder Early Autumn 2007
Commencement of new licence 1 February 2009
22 June 2005 City briefing
The Lottery Process
How you can become part of the process:
Consider the issues outlined here
Consider the opportunities for your clients
Open a dialogue with them and us
We are happy to conduct face-to-face meetings to discuss the issues
And now it’s your turn… Questions
