The UK National Lottery is set to experience a significant shift as Allwyn, the incoming operator, prepares for a potential decrease in sales during its first year of operations. This projected decline could lead to a reduction in charitable funding, according to internal forecasts.

Allwyn, owned by Czech billionaire Karel Komárek, (pictured above), will take over the lottery’s operations from February. This marks the first change of operator since the lottery’s inception in 1994. Allwyn secured this role, one of the UK government’s largest procurement contracts, by promising to rejuvenate the lottery with new games and draws aimed at attracting younger users and boosting revenues from the first year.

However, Allwyn’s first-year projections indicate a potential dip in annual lottery sales from prize draws and scratch cards. The company expects to generate ￡7.8 billion, a decrease from the last reported annual sales by incumbent Camelot of ￡8.2billion for the year ending March 2023. This anticipated drop in sales, also expected for Camelot’s final year of operations, has raised concerns among company insiders about potential reductions in funding for the lottery’s 12 associated charities.

Allwyn purchased Camelot last year to ensure a smooth transition of operations after a six-month delay due to legal disputes over the procurement process. Since then, tensions have escalated between long-standing Camelot management and Allwyn executives, leading to an expected exodus of senior managers next month.

Legal disputes and delays

The transition to the new operator has been marred by legal disputes and delays. 

The Gambling Commission, the UK’s gaming regulator, last week cut the estimated value of Allwyn’s 10-year licence and adjusted it from nearly ￡8.2 billion to ￡7.9 billion “based on updated estimates of sales forecasts”.

The regulator also said that 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 in a statement that 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.

Lucrative contract

The lottery contract is the fourth-biggest procurement contract awarded by the UK government in the past decade, according to data provider Tussell. The National Lottery, which was launched in 1994, has raised more than ￡43 billion for good causes, such as arts, sports, heritage, and community projects, and has paid out over ￡76 billion in prizes to more than 5.8 billion winners, according to its website.

The lottery is also a significant source of tax revenue for the government, as it collects 12 per cent of the ticket sales as lottery duty, plus 20 per cent value added tax on some of the games. In the 2020-21 fiscal year, the lottery duty amounted to ￡980 million, according to the Office for Budget Responsibility.

The new operator faces the challenge of maintaining the lottery’s popularity and relevance in a changing market, where online gambling and gaming have become more prevalent, especially among younger consumers. Allwyn has promised to introduce new games and draws, as well as invest in technology and innovation, to attract and retain players and younger people.

The success of Allwyn’s tenure will depend on its ability to deliver on its ambitious pledges, overcome the legal and technical hurdles, and balance the interests of the players, the government, the good causes, and its own shareholders. The stakes are high for all parties involved, as the National Lottery is not only a lucrative business, but also a vital social institution.

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