Suitors line up for lottery showdown

Camelot's contract may not run out until January 2009, but bidders are already limbering up to compete for the third national lottery licence.

The National Lottery Commission – the independent non-departmental body tasked with selecting a winner by the end of 2007 – has just hired Hill & Knowlton to ensure awareness of the licensing process. Last week the commission published a list of interested parties, which now have two years to campaign. In 2007 bids will be submitted, and two 'purdahs' – agreements with the good cause distributors and the commission that no more promotion will be undertaken – will come into effect. The hopefuls will have nothing to do but wait.

According to Camelot the lottery is played regularly by 70 per cent of British adults, generating £90m a week, not far short of its £100m peak in 1997. Ready for battle are the incumbent Camelot, Hilton Group, Littlewoods Gaming and Lehman Brothers. Ladbrokes and Sir Richard Branson's People's Lottery have not ruled themselves out.
The National Lottery Bill – currently at committee stage – stipulates that the licence can be extended from seven to 15 years. This would make the lottery far more attractive to investors, as well as simpler to run. The battle ahead promises to be the fiercest yet.

All about money
So what is the commission looking for? Its head of comms, Sarah Hanratty, says: 'Our priority is to encourage competition, because that's how we'll generate the most money for good causes.' The process is hugely complicated, so technical considerations and innovation will be at least as important as marketing. 'Our main concern is that the organisation is fit for the task. It will need to meet strict criteria even to compete,' she adds.

Yet for Harrison Cowley group creative and planning director Alan  Twigg, who worked on the Camelot consumer account for seven years, it is all about the 'buzz factor': 'Of course, the bidders have to be technically capable and financially credible,' she says. 'But the winner must prove it has serious marketing balls and is prepared to do something bold and different. It must show the commission that it will inject mass excitement, and must have expertise in advertising, media planning and PR.'

Camelot does not have to convince the commission of its ability to run the lottery, which it has done for 11 years. Dianne Thompson, the CEO who famously claimed to have 'balls of steel', remains at the helm.

'Regardless of the bid campaign, our main focus still has to be the robust promotion of the lottery itself,' says Camelot director of corporate affairs Mark Gallagher. 'It is this focus that has helped drive our PR performance from only 28 per cent positive coverage in 2002/03 to 80 per cent positivity in the past two years.

'This thing will not be won or lost in the campaign itself, but the strength and quality of the bid,' he adds. 'It would be a mistake to run an overtly "corporate" campaign. Crucially, all bidders must commit themselves to a good, clean, transparent campaign.'

This will of course be the lottery to help fund the 2012 London Olympics. Quintus Public Affairs MD Chris Guyver – who will represent a member of a consortium likely to bid – believes the London Olympics will be a critical factor in determining the bid winner. The lottery has pledged to raise £1.5bn, half from existing good causes funds and half from games dedicated to the Olympics. What's more, says Guyver, 'no Olympics have come in on budget'. The operator will have to work extensively in investor relations and corporate PR, and strike reliable partnerships with financial groups and tech firms.

To harness the power of the Olympics, bidders must be creative. 'It's not enough to promise they will raise the money, they need to do so in exciting ways that match the innovation of the many brands that will be involved in London 2012,' says Twigg.

The Olympic feel-good factor could benefit Camelot. As the current licensee, it will be able to promote the lottery – but not Camelot as a company – during the purdah period. This could be particularly powerful closer to the 2008 Beijing Olympics, which are bound to raise interest in London 2012.

However, some suggest a third Camelot win would be treated with suspicion in the media. Moreover, with lottery winners increasingly reluctant to go public, Camelot has had a hard time sustaining excitement. A new operator might have the advantage of adding fresh impetus.

Stakeholder relations
FourGritti MD Alun James, who worked on the London 2012 bid, says the commission's decision will be 'populist, in which media and PR will play a big part'. He adds that bidders must win over the tabloids ('the big headlines, the emotional response of popular sentiment') as well as the broadsheets – 'the more detailed, rational arguments, likely to be read by the decision makers'.

Bidders must also level complex public affairs campaigns, targeting influential groups from policy makers to lottery retailers. All of these stakeholders will need to be convinced that the bidders are up to the job.

What tactics will be used? Guyver says: 'We might see a return of focus on the not-for-profit approach. This is powerful in terms of the media, public and other stakeholders.' But Twigg warns: 'The problem with being worthy is that it can easily become boring. But the company that can talk about good causes in an exciting way could crack it.' And good causes can certainly have a powerful effect on public opinion. When the lottery celebrated its tenth anniversary last year with parties and awards centring on the causes that had benefited, positive coverage was significantly boosted.

Bidders must prove they can raise more money for good causes while fulfilling the funding commitment to the Olympics, which promises to be a tough balancing act. James says: 'There is tension between the Olympics and good causes, and it will be tough to convince the media that both can be satisfied.'

To keep everyone happy, the future operator will have to raise more money, while being innovative and super-efficient – or slash profits.