11 minute read
Lottery
from SBC Leaders Issue 14
by SBC Global
around, there might never be another licence competition as eventful as this one transpired to be.
Camelot entered the licence competition under a cloud of criticism, as both lottery ticket sales and the company’s public image had been deteriorating since it was awarded the first licence.
In 1997, three senior Camelot executives picked up six-figure bonuses, attracting criticism from Chris Smith - the new Secretary of State for Culture, Media and Sport..
During the bidding process itself, technical problems arose with lottery terminals supplied by American company GTECH Corporation. It was found that the issue may have accidentally caused winners to be paid incorrect amounts.
Due to this problem and the relationship between Camelot and GTECH, the NLC recommended that the lottery licence be awarded to the People's Lottery.
However, in August 2000, the NLC’s Chair Dame Helena Shovelton announced that neither bidder would be invited to run the National Lottery as both had failed to meet the statutory requirements. It was felt that the legal problems of the People’s Lottery were responsible for its bid downfall, while Camelot’s relationship with G-Tech was the reason it wasn’t invited to run the lottery.
Yet, by September, and despite a failure to meet the statutory requirements, the NLC decided to award the licence to the People's Lottery. As a result, Camelot initiated legal action, taking the NLC to the High Court for a judicial review.
Camelot won its case, with the High Court describing the NLC's decision as ‘conspicuously unfair’. The NLC reacted by dismissing the HM Treasury legal team that had been advising it. Dame Shovelton resigned shortly afterwards and was replaced by Lord Terence Burns.
November saw the NLC reopen the bidding process and both parties resubmitted their bids. In December 2000, the commission announced that Camelot would be awarded the franchise, with voting going 4-1 in favour of the operator.
The fallout of the licence competition continued as one member of the NLC resigned from the commission over the process, deeply unhappy that Camelot had been re-awarded the franchise.
Branson threatened to take further legal action, but due to the prospect of a lengthy and costly legal battle - one which could have resulted in the lottery’s games being suspended - he did not proceed. Camelot subsequently operated the lottery for the next seven years.
EVEN THOUGH FEWER COMPANIES WERE BIDDING FOR THE LOTTERY THIS TIME AROUND, THERE MIGHT NEVER BE ANOTHER LICENCE COMPETITION AS EVENTFUL AS THIS ONE TRANSPIRED TO BE
Third licence - 2007
In the years between the second and third licences, interactive instant win games were introduced by the lottery in February 2003, followed by the
launch of Euromillions in the same month the following year.
Once again, only two companies put bids forward to run the lottery - this time, a Branson-led company was missing. Camelot went up against Sugal & Damani, the biggest lottery company in India, to retain its title as the UK National Lottery operator.
However, the more things change, the more things stay the same, as Camelot was awarded the third
licence by the NLC in August 2007. This licence would be for 10 years starting from February 2009.
The NLC declared that Camelot was selected via a unanimous decision as it was the bid most likely to generate the best returns to good causes throughout the licence period.
In March 2012, this licence was extended through to 2023 on the condition that the operator delivered an additional £1.7bn in lottery funding to good causes.
During this licence period, Camelot
was taken over by Canadian pensions group the Ontario Teachers' Pension Plan in March 2010.
In that same year, the NLC confirmed its merger with the UK Gambling Commission (UKGC), handing over the regulatory keys of the National Lottery. The two commissions officially merged in October 2013.
The Future
Since the third licence was awarded, the National Lottery has launched a new Lotto with more prizes and raffles, has celebrated 25 years of operations and introduced the Set for Life draw.
In September this year, the UKGC will award its fourth National Lottery licence to an operator which will take charge of running the lottery from 2023 for the next 10 years.
Upon the announcement of the licence competition last August, the UKGC stated that the next licence holder must build on the success of the lottery by creating a framework that maximises the opportunities for players and good causes to benefit from innovation and creativity, whilst protecting the lottery’s unique status.
As previously mentioned, the three main contenders in the fourth National Lottery licence competition are current operators Camelot, Czech Republic’s Sazka Group, and India’s Sugal & Damani.
Later this year, the minimum age to play the lottery will also rise from 16 to 18, starting online from 22 April as the government plans to crack down on problem gambling.
However, more challenges for the lottery linger on the horizon. Declining player interest is still an issue that must be addressed by the next licence holder for the game to continue in the future.
The biggest hurdle the next National Lottery licence holder will have to face, therefore, is reinvigorating the lottery as a whole to encourage more people to play while, in turn, sticking to the lottery’s founding principle of raising more funding for good causes. •
WHY FANDUEL IS FOCUSING ON PRODUCT DEVELOPMENT
FOR FANDUEL CEO MATT KING, the key battlegrounds in the contest for US sports betting market share are technology and player experience, which is why his aim is to “continue to set the pace on product for the industry”
Under King’s leadership, the Flutter Entertainment-owned company has grown from a major player in the DFS market into the largest online realmoney gaming operator in the US, with the development of its sportsbook product one of the great industry success stories of the post-PASPA repeal era.
The challenge facing FanDuel now is how to maintain its status as market leader, while simultaneously scaling the business as legal sports betting and igaming becomes available to an ever larger proportion of the US population. Technology is a central part of King’s plan to make that happen.
“My view is that product and tech will eventually determine who wins or
loses the category,” he explained. “We have a great product today and we want to make sure that we maintain our product leadership position. That requires significant investment in product and technology.
“We have a very robust roadmap of innovation for the next two or three years that we’re super excited about.”
The end goal for much of this work is to develop an offering that matches the expectations of the digital natives who make up an increasingly large share of the potential market for both sports betting and fantasy sports.
“If you look at the through line of everything that we do, we effectively make sports more exciting for people,” King enthused. “Our products are a way for sports fans to engage with sports in the way that they’ve become accustomed to engaging with other digital products.
“If you think about the growth of just video gaming in general, people want to engage. If you think about the growth of social media, a lot of that’s around personalisation and engagement. What we’re doing is delivering products that help sports, frankly, come into the 21st century.”
This approach is partly driven by King’s self-proclaimed status as a “sports media geek” and his belief that the US betting industry has a lot to learn from the experiences of sports broadcasters and publishers.
“Sports is really interesting to track through the disruption that’s going on across the media landscape,” he explained. “For instance, a lot of people talk about ratings being down and instantly equate that to young people not caring about sports.
“I would take the opposite view, which is I think people of all generations care about sports. The way that younger generations want to consume sports, the way they want to watch, it is just very different. It’s shorter intervals, it’s different platforms, it’s not sitting in front of a TV in a passive way for three hours.
“That’s one of the places that’s really interesting in terms of how a company like FanDuel can fit into the ecosystem, in terms of helping connect sports fans and create experiences for those younger generations of sports fans
that they’re not going to get through a traditional kind of TV viewing experience.”
While innovation is central to the culture of FanDuel, the aim has not always been to achieve radical leaps in product development. In the period immediately after the repeal of PASPA, the focus was on keeping things simple for customers.
“In the early days of any market, the biggest product innovations are the basic stuff. How do you make it easy to sign-up for an account, easy to place a first bet, easy to understand what’s going to happen,” said King. “We were really educating customers, so some of the innovations were not sexy, but they were really important in terms of making it a good first-time experience.”
From there, the FanDuel team set about developing products that appealed to the armchair sports fan, rather than just the serious sports bettor. One of the most successful has been the same-game parlay, which King described as “much more of an entertainment product, which we’ve seen a lot of users gravitate to”.
This idea of sports betting as an entertainment experience is another central pillar of King’s approach to driving growth in the business. His belief in the importance of giving FanDuel’s customers a great experience stretches as far as thinking that it was not that important for the company to make money on Super Bowl Sunday.
King explained: “The historical stereotype of a sportsbook is that you are a trading operation, that your job is to effectively take risk on from bettors. You make money over time by just making sure that your risk management is better than somebody else’s and you’re effectively a trading house.
“Our view is that we’re an entertainment business. At the end of the day, we need to build a product experience where we deliver a good value for somebody’s dollar. So if I think about the Super Bowl, it’s really less about ‘do we win or lose’ and more about ‘do we deliver a good product experience for people’, because that is the day of the year when we’ll probably have the most active players.
“If we deliver a great experience, I
know that they’ll come back over time, in a way that will eventually turn out to be kind of good value for us as the sportsbook. But at the end of the day, it’s really about delivering good entertainment value day in and day out.”
The belief that most bettors are as interested in the overall experience as they are in the financial transaction means that King is optimistic about the prospects for FanDuel’s portfolio of retail sportsbooks. While the nature of society may be increasingly digitalfirst, he expects the operator’s sites at high-profile locations such as Meadowlands Racetrack in New Jersey, Detroit’s MotorCity Casino and the newly rebranded FanDuel Sportsbook & Horse Racing at Fairmount Park, Illinois to thrive once the pandemic eases.
“I don’t think you’re going to see the end of retail sportsbooks. I think they need to evolve the same way that any retail experience needs to evolve, but online is not a full substitute for the retail [sportsbook] experience,” said King.
“The reason that sports is such a powerful force in our culture is the ritual around it and one part of that ritual has always been gathering with your friends and your family. PostCOVID, I think you will see people bring back some of those rituals and that means that they will go back to retail sportsbooks.
“That gives us a leg up relative to a department store, where I would argue that the online shopping experience is a much better substitute than online sports betting is for people who want the retail experience. You can clearly deliver a great sports betting product experience online, but we can’t deliver the entire social experience that a lot of people are looking for when they go to a retail sportsbook.”
What FanDuel can do though is to offer bettors in a number of states a choice of experience.
“A lot of our users do both,” added King. “They like to bet on the app during the week, but on the weekends, their ideal day is to go to the sportsbook and hang out with their friends. I think people will go back to that.” •
The full version of the interview with Matt King is available in the debut episode of the SBC Leaders podcast.
