Michael Grade

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This is the edited text of a speech given by the chair of Camelot Group plc to Lottery Monitor’s 7th Annual Conference on 3 July 2003

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Nothing stands still, not least in areas where there’s an interface between politics and business, and where public preferences and technology are constantly reshaping the landscape. Camelot now faces challenges in three key areas. 

Growth
Seventy per cent of the adult British population is still playing one or more of our games on a regular basis. Total weekly sales of £85m are nearly £40m higher than they were back in the supposed golden age of 1994. But the pattern of play is definitely changing. The main Lotto game has been slowly declining for some time. It has meant that the overall portfolio has lost £20m a week since its peak in 1998. The clear challenge is to return to steady, long-term volume growth. Internationally, the lotteries which have been most successful in growing long-term sales are those that have been the most creative in refreshing their portfolio of games. That is also how we will grow sales.

It’s a strategy that is already well under way. Non-Lotto games now account for 25% of sales and are growing at over 20% annually. In May we announced a further programme of new games, with a range of different odds and prizes.

We are of course delighted that the government has asked us to play a central role in raising £1.5bn to bring the 2012 Olympic Games to London. It offers the kind of focus which I’m sure will be very attractive to the public as lottery players, knowing that the money it generates offer such real benefits to the nation’s sporting life.

Distribution
We have no role in distribution – and rightly so. But it does seem to me both sad and counterproductive that the public has such slight knowledge of what the lottery has achieved. The National Lottery contributed £170m to help stage the Commonwealth Games: but you probably didn’t notice. During the games we saw the logos of commercial sponsors all over the billboards and the athletes’ shirts – but no branding for the National Lottery. That’s not just strange, its positively perverse!

The same is true for thousands upon thousands of lottery-funded schemes, from sporting facilities to museums, from historic restorations to community initiatives and cultural schemes. There’s all too often the same total absence of any sign that the funds came from the national lottery. This must be wrong.

So what can we do to nurture and strengthen that crucial link between the National Lottery and the good causes it has funded? First, I am delighted that Tessa Jowell has supported the creation of a Joint Promotions Unit. Camelot has agreed to pay for 50% of the JPU’s running costs, in conjunction with all 15 of the lottery distributing bodies.

Second, the government has asked that National Lottery funded projects should now carry the famous crossed-fingers logo. Camelot has agreed to fund the first 10,000 of these new ‘lottery funded’ plaques so that we can get this new scheme off to a flying start.

Third, we are nearly six months into Camelot’s new commercial marketing campaign which – for the first time – uses recipients of lottery funding to promote National Lottery products and game messages. Not only have these adverts lifted sales performance, they have also measurably improved public perceptions of the National Lottery. And it is a great example of how Camelot and the distributing bodies can work in cooperation towards a common good.

Future licence
It’s my view that the specification for the third licence will have to take into account four vital factors:

1. It will need to understand and anticipate the environment in which the National Lottery will be operating by the end of this decade. The commercial environment is already changing fast. Liberalisation is encouraging a raft of me-too products. It is crucial to note that although the National Lottery is a monopoly brand, it has no inbuilt monopoly of revenue.

2. The model for the third licence must preserve the economies of scale that have been so crucially important in running the world’s most cost-efficient lottery. Play fast and loose with this, and you seriously undermine the good causes.

3. The licensing process must continue to attract competition to operate the National Lottery. Competition is a major stimulus for new ideas and efficiencies, and it would be quite wrong for an enterprise as big and important as the National Lottery to be closed to those benefits.

4. But the precise form that competition takes must avoid any unnecessary risks and discontinuities that would jeopardise the flow of funds to good causes. There has been a good deal of talk about competition for concurrent licences to operate different elements of the lottery. Much would depend on the detail of such a system, though I am clear that it could only work if each licence were capable of being run as a viable, self-contained business.

A key factor for continuity is the role of the core operation. I cannot stress too strongly how much damage could be caused if a changeover between IT systems, for example, were to go wrong. It might make much more sense to stimulate effective competition where it is more beneficial, and considerably less risky. There is clearly going to be a big debate on the future of the lottery during the next 12 months. Rest assured that it won’t distract us from our immediate priority to return the National Lottery to growth and to nurture that crucial link between the lottery and the good causes it supports. I hope everyone here will play their part in that great national endeavour.