New National Lottery Operator Braced for Drop in Revenues
Projected decrease in first year of sales under Allwyn threatens a reduction in charitable funding
LONDON, U.K. (January 24, 2024) — The incoming UK National Lottery operator is bracing for a decline in sales in its first year of operations, threatening a reduction in charitable funding, according to internal projections.
The Financial Times reports Allwyn, which is owned by Czech billionaire Karel Komárek, will from the start of February take over the running of the lottery — the first change of operator since its launch in 1994 — after making big promises to beat out rivals to win one of the UK government’s biggest procurement contracts.
In its winning bid, Allwyn pledged to rejuvenate the lottery through new games and draws, helping to attract younger users and increase revenues from year one. But in its first 12 months, annual lottery sales from prize draws and scratch cards are expected to dip, according to two people briefed on internal forecasts. Allwyn is expecting to generate £7.8bn, compared with the last reported annual sales by incumbent Camelot of £8.2bn in the year to the end of March 2023.
Sales for Camelot’s last year of operations were also expected to show a year-on-year drop. Company insiders fear the loss of revenue could reduce funding to the lottery’s 12 associated charities, which totalled £1.8bn in the year to the end of March 2023.
Allwyn bought Camelot last year to smooth the handover of operations after the 24-month transition period was delayed by six months because of legal disputes over the procurement process. Since then tensions have mounted between long-standing Camelot management and Allwyn executives, and an exodus of senior managers is expected next month, Oliver Barnes reports
The new operator is expected to run the lottery at a loss for several years, according to the two people. The Gambling Commission, the UK’s gaming regulator, last week cut the estimated value of Allwyn’s 10-year licence from nearly £8.2bn to £7.9bn “based on updated estimates of sales forecasts”.
In its update, the regulator said Allwyn had agreed to continue using IGT, Camelot’s tech provider that runs the platform underpinning the lottery’s 40,000 retail sales terminals, for at least six months instead of bringing in a new company as planned. IGT had challenged the decision to award Allwyn the 10-year licence in court but dropped the case earlier this month.
Allwyn said it in a statement it remained committed to doubling annual funding of good causes by the end of the 10-year licence in 2034. “The only change to our plans is to the timing, due to delays caused by the unsuccessful legal action brought against the Gambling Commission by others,” it added.
The commission said that forecasts for lottery sales were kept “under review” and “updated in light of numerous variables including the general economic outlook, operating cost increases, consumer price index rises, and player numbers and average spend changes”.
Changes to anticipated revenues had been examined to ensure they were in line with Allwyn’s application, the regulator added. The lottery contract is the fourth-biggest procurement contract awarded by the UK government in the past decade, according to data provider Tussell.
BY: Oliver Barnes
SOURCE: The Financial Times.