Transcript Regulating the National Lottery

A Lottery for the future
Robert Foster – National Lottery Commission
Mark Harris – National Lottery Commission
Ben Davey – NM Rothschild
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
22 June 2005
City briefing
The Lottery Environment
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 licence
Establishes 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 Board
Permanent Chairman of the Project Board
Independent assurance
External review
Commissioners make the final decision
22 June 2005
City briefing
The Lottery Environment
We have appointed advisers to support the
process:
Lead / Financial / Commercial
Technology / IT
Economics
Legal
Assurance
22 June 2005
-
Rothschild
HEDRA
NERA
Freshfields
Cornwell
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 services
A reputation for being highly competent and with
high integrity
22 June 2005
City briefing
The Lottery Opportunity
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)
£244 £45 £15
£641
£15
£78
£351
£3,225
Lotto
Lotto Extra
Scratchcards
Daily Play
Thunderball
Christmas Millionaire Maker
Hotpicks
EuroMillions
Source: NLC discussion document
22 June 2005
City briefing
Overall sales and proceeds for
good causes
Total sales and NLDF primary contribution (£bn)
6
5
£4.8bn
4
3
2
£1.2bn
Sales
22 June 2005
2004-05
2003-04
2002-03
2001-02
2000-01
1999-2000
1998-99
1997-98
1996-97
1995-96
1994-95
1
0
NLDF Primary Contribution
City briefing
Overall sales
Total sales 2002 – 2005 (£bn)
4.8
4.7
4.6
4.5
4.4
2002-03
2003-04
2004-05
Sales
22 June 2005
City briefing
The Lottery Opportunity
Camelot P&L 2003/2004 (£m)
Lotto
Other draw-based games
Scratchcards and interactive instant win games
Gross ticket sales
Lottery duty
Revenue
Cost of sales
Prizes
National Lottery Distribution Fund
Retailers' commission
Terminal and data communication costs
Gross profit
Administrative expenses
Other operating income
Operating profit
3,225
749
641
4,615
(554)
4,061
(2,294)
(1,216)
(242)
(101)
208
(164)
1
45
Source: Camelot annual report 2004
22 June 2005
City briefing
The Lottery Opportunity
Profitability of Camelot (£m)
240
200
160
120
80
40
0
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 innovation
Technology
Routes to market
Game portfolio
Financing
Others?
22 June 2005
City briefing
The Lottery Opportunity
Regulatory environment
There is room to innovate, but some activities are out
of bounds:
Sports betting
Rapid draws
Games of skill
Bingo
Sales through street vendors and certain licensed
premises (such as bookmakers)
22 June 2005
City briefing
The Lottery Opportunity
Branding /
marketing
Gaming /
leisure
Technology
THE
OPPORTUNIT
Y
Communications
network
22 June 2005
Financing
Distribution
City briefing
The Lottery Process
The Lottery Process
We published a discussion document in January.
Key issues for discussion:
Levelling the playing field
Reducing costs for bidders
Aligning incentives
22 June 2005
City briefing
The Lottery Process
Provisional timetable:
Statement of Main Principles
Draft Invitation to Apply
Final Invitation to Apply
Select preferred bidder
Commencement of new licence
22 June 2005
Autumn 2005
Spring 2006
Late Summer 2006
Early Autumn 2007
1 February 2009
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
22 June 2005
City briefing
And now it’s your turn…
Questions