When a company loses a licence, it can make for an interesting story. But when a company has held a licence for 28 years – since the inception of the programme in question – and proceeds to lose it, that makes for quite the headline. Indeed, within the UK gaming sector, that’s exactly the kind of tectonic shift the last few months have provided. Camelot, which has run the UK’s National Lottery since 1994, this year lost the right to operate the billion-pound scheme beyond 2024 – when its current licence expires. Taking over the National Lottery will be Allwyn, formerly Sazka Group, signalling an almighty change at the top. The king is dead, long live the king.
All change, Allwyn
If one entity is to preside over something for 28 years and counting, there are inherent benefits and economies of scale it can boast. The same concept would apply to a person, like a political leader or CEO, and a wider group, like a football team, trade body or company. At the same time, though, 28 years and counting can, theoretically, invite tiredness and stagnation. There is no fresh, new impetus from elsewhere and innovation can be hindered.
The latter point was clearly given greater weight by the regulating body for the UK National Lottery – the Gambling Commission – in its decision. Speculation had suggested Camelot, which had seen off so much competition in the past, would be awarded the Fourth National Lottery Licence just like it had been awarded the Third, Second and inaugural licences before it. Lee Richardson MBA, CEO of Gaming Economics and regular Gambling Insider contributor, joined us live at ICE London for a GI Huddle interview to discuss why exactly the Commission ruled as it did.
“To give a bit of context, I was involved in the bidding process (representing an unsuccessful rival bidder) that’s been going on for almost two years, which started in the summer of 2020,” he told Gambling Insider. “With the UK National Lottery, we are talking about a 10-year licence from 2024 to 2034. Camelot has been the incumbent lottery supplier for almost 30 years. Putting this into context, the UK would’ve been one of the last major countries to have a national lottery. It’s become, over the last 30 years, one of the most efficient lotteries in the world.
“Around 95% of the money is returned to the Government, charities or the players. It’s the single most popular form of gambling, as a channel in the UK; it has been for a generation. It has raised around £40bn ($50.29bn) for good causes throughout its time and a further £20bn in lottery duty. So, both in terms of taxes and good causes, it has been phenomenal. I think we’ve seen several things throughout this bid competition. When it started it was entirely a retail operation, now it is online. Online services have become an incredibly important part of how you deliver a national lottery. I think online services are the basis on which Camelot, currently, has lost that bid; Allwyn has been declared the winner.”
“Badly wrong” – A predictable pushback
Naturally, however, this decision is far from the end of the matter. Camelot instantly declared its intention to appeal the verdict, ensuring that when we reached out to Allwyn for comment for this feature, the company was unable to provide any statement as the case is still an ongoing legal matter. Camelot, similarly, referred Gambling Insider to its statement as of 1 April, which “still stands.”
Following the decision to issue proceedings in the High Court against the Gambling Commission, Camelot CEO Nigel Railton said: “We are launching a legal challenge today in our capacity as an applicant for the Fourth Licence because we firmly believe that the Gambling Commission has got this decision badly wrong. When we received the result, we were shocked by aspects of the decision. Despite lengthy correspondence, the Commission has failed to provide a satisfactory response.
“We are therefore left with no choice but to ask the court to establish what happened. Irrespective of Camelot’s dual roles as current operator and applicant for the next National Lottery licence, the competition is one of the largest UK government-sponsored procurements and the process deserves independent scrutiny. Separately, more than 1,000 Camelot employees work tirelessly to successfully operate The National Lottery under the current licence and, at the very least, they are owed a proper explanation.”
And there have even been rumblings from lottery supplier IGT, as reported by the Sunday Times in late April, which has launched a claim for damages against the Gambling Commission. In its court filings, IGT has accused the regulator of being in “breach” of its obligations and, unsurprisingly, wants the decision overturned. As Allwyn would work with a different provider, IGT – a provider of many lotteries around the globe – would no longer play a part within the UK National Lottery ecosystem. Accordingly, it is demanding to be paid damages for loss of profit and wasted costs for taking part in Camelot’s licence bid. The winning bidder could well refer to this as ‘sour grapes.’ Camelot and IGT, on the other hand, would vehemently disagree.
The importance of retail success
In the modern gaming climate, an overwhelming emphasis is placed on digital offerings – and rightly so. Most of today’s world is online, so too are the majority of the world’s new gaming markings: especially in the US. And yet both in the US and the UK, retail refuses to go away. Online casinos are far from replacing the experience of being in a Las Vegas or Atlantic City casino, while the majority of National Lottery players in the UK will buy a ticket in their local newsagents or petrol station.
It is perhaps the topic of retail success that was central to Allwyn’s winning bid, as Richardson explained at ICE London: “There are around 46,000 retail outlets that sell lottery products. That is a huge network, and it takes a lot of time and effort to put that in place. One of the challenges for anyone coming in, in this case Allwyn, is that there is a two-year transition period in which to build a network. However, the retail offer from Camelot has been looking tired; it’s been seven years since it has last been refreshed. It was very clear, particularly after the pandemic, that Camelot was not going to spend any more money on its retail offering. Camelot was hoping to reinvest after its contract was renewed.
“So while the incumbent does have an advantage, and there is a strength to being in place as the current operator, at the same time they knew the real economics. They took a tangible decision not to reinvest in the all-important retail segment. Even in the online age, more than 50% of every pound that is spent in the National Lottery is spent in a retail environment; supermarkets, corner shops, etc. This sector is still incredibly important. One of the things that Allwyn, the winner thus far, has said is that it will invest in both the online and retail offers.”
Understandably, Camelot has gone on a charm offensive in the wake of the Gambling Commission’s decision. In late April, it announced “decade-high” retailer satisfaction scores – convenient timing given its appeal process had already begun. It was noteworthy that its satisfaction scores were directly related to retailers, which it claimed scored the highest since 2012: overall levels reached 75% across the 2021/22 fiscal year. In what was a clear push for positive PR, Camelot said 95% of those surveyed were either ‘satisfied’ or ‘very satisfied’ with the level of service provided.
In the report, Camelot attributed the continued growth of National Lottery sales, as well as the “steady increase in retailer satisfaction,” to a strategic review carried out in 2017. As part of the review, Camelot’s sales force doubled and £20m was invested into customer engagement. Camelot Retail Director Jenny Blogg commented: “Our 44,000 retail partners play an absolutely vital role as the face of The National Lottery for players in communities across the UK. So, it’s amazing to see all of the initiatives we’ve introduced in recent years to make things better for our retail partners are paying off. It’s particularly impressive in light of the ongoing challenging conditions retailers are experiencing.”
“We’ve been here before”
Camelot, of course, is wise not to simply throw in the towel. A key distinction is that, despite the presence of other bidders, the incumbent was named the Gambling Commission’s preferred underbidder. Effectively, this means Camelot is the Commission’s insurance choice were anything to go wrong with Allwyn’s bid. Perhaps even more importantly, this has actually happened before. Richardson guided us through a similar story from the history books on the GI Huddle: “We’ve been here before around 20 years ago when an Indian operator, Sugal & Damani, was named winner and Camelot as the underbidder. Yet Camelot successfully claimed they should be awarded the contract… and they were. So we don’t quite know where we are with things. We know there has been an appeal and we know this will go to the High Court; it will be interesting to see the grounds on which Camelot are claiming they should be allowed to retain the lottery contract.”
On whether Camelot deserves to win its licence back, Richardson remains unconvinced – naturally, this is why he underwent work for one of Camelot’s rival bidders during the process. He told Gambling Insider: “If I’m being brutally honest, it is very clear that Camelot is under threat, without any question. The fact can’t be ignored that they lost millions of regular players on draw-based games when things moved online. If you analyse Camelot’s online performance, it was inferior to many other lotteries of similar size around the world. Also, if you look at scratchcard segments, they were underperforming here, too, which is an important area. There were certainly warning signals that Camelot was under pressure. A properly prepared bid, which would improve these areas of underperformance and increase the amount of money generated for good causes, would always have put Camelot under threat.”
What comes next?
During a Parliamentary Select Committee on 26 April, there was avid discussion about what the UK public would like to see next for the National Lottery. Clara Govier, Managing Director and Chair of the People’s Postcode Lottery since May 2018, said that profit has in the past “overtaken” benefits to society. She added: “The Gambling Commission has already said there are developments within the digital space that I suspect the National Lottery will take advantage of going forward with a new operator.” Meanwhile, Donald Macrae, Promoter at The Health Lottery, said he would like to see a “more amicable relationship” between the new National Lottery franchise and society lotteries… “so that we spend less nervous time just dealing with the sniping from Camelot which doesn’t actually achieve anything.”
When we put Richardson on the spot at our GI Huddle booth at ICE London, meanwhile, he concluded that this could be one fight too many for Camelot. “I think it’s odds on that it will be Allwyn,” he asserted. “I think the process of the bid competition was robust; it was certainly extended once or twice, partly due to the pandemic. But I think it was a robust process overall, and certainly, from my experience, everyone knew exactly what was asked of them. I can’t think that any of the bidders didn’t believe they had ample opportunity to make their case. The bidding process was a scored exercise as you would expect, a lot of time and money were spent. At this stage, I would be surprised if the Gambling Commission reverses the decision away from Allwyn and back towards Camelot.
So the above gives you a feeling of the uphill task facing Camelot. It has survived losing its licence at the initial stage in the past – but perhaps it has run out of lives, given the frustration expressed at working with the organisation by various parties. Allwyn has put a lot of its eggs into the UK National Lottery basket. The brand name is unrecognisable from its original Sazka Group form, when it dominated the Czech Republic market. It should still continue to do so, as well as in the other markets it operates. But with the addition of the UK market, where Allwyn has pulled out all the stops, attracting big names like Sir Keith Mills and hiring ex-Sainsbury’s CEO Justin King as Chairman; purely on the basis of Allwyn winning the National Lottery licence bid (if that doesn’t signal confidence, what does?).
So will Camelot finally lose its National Lottery crown? We’ve effectively had all six balls drawn and it's looking likely. Only the bonus ball can save the incumbent now.