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National Lottery
A Lotto Talent
Dermot Griffin, National Lottery CEO, talks us through the 2013 annual results, the continued rise of the scratch card and last year’s high profile competition for the National Lottery licence.
THE National Lottery achieved sales of €685.2m in 2013 in a challenging retail environment, according to their annual results, released at the end of May. This was a drop of 6.8% from 2012’s sales of €735.1m. Those figures alone, however, don’t tell the whole story. Scratch card sales, for example, continued to increase, up 2.5% to €167.7m, while Play Online sales increased by 30% to €11.2m, as the number of registered players increased to 57,000 by the end of 2013. Daily Million sales were up to €21.9m, from €10.8m in 2012, in its first full year. Total operating costs, meanwhile, were down by 6.5% to €96.6m, which included €42.1m in agents’ commission, which CEO Dermot Griffin describes as “a fair reward for our retailers, who are the main interface with the player.” The drop in sales is not just down to tough trading conditions, however, as Griffin explains. “The main reason we were down last year was the lack of significant jackpots on our two main games, Lotto and EuroMillions, which impacted on sales,” the affable CEO reveals. “The average Lotto jackpot in 2013 was 4.8% lower than the year before, and the size of the jackpot is a big driver in terms of increasing sales, so that certainly impacted on us. Likewise with EuroMillions, our performance, while down by 10%, exceeded the EuroMillions group, which was down by nearly 11% in sales last year overall, due to a lack of big jackpots, those over €100m.” When it comes to EuroMillions, €100m is a real watershed in terms of driving sales, Griffin explains, and EuroMillions enjoyed an exceptional year of jackpots in 2012, including a record jackpot of €190m. Scratching The Surface The success of scratch cards, he stresses, is independent of jackpots, which has been a big feature in their continued growth. Indeed, the National Lottery have worked hard to grow this side of their business. “We increased the range of scratch cards,” Griffin notes. “Our All Cash scratch cards are performing particularly well and we introduced a new All Cash Spectacular card, which sells for €10, and that has proved hugely popular. “We also find that we are attracting a younger profile of players to our scratch cards, with a big growth of players in their 20s. The fact that it is an instant win, and can be a significant win, really appeals. I
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National Lottery think people like the fact that for two or three euro, they could win enough money for a good night out, which is very attractive to players.” The last two years have seen the National Lottery installing 42-inch screens in over 2,000 stores, which account for more than 80% of annual turnover. “The fact that we are able to broadcast into those stores in real time allows us to promote things like our scratch cards at the point of sale,” Griffin notes. “Scratch cards are impulse purchases so this makes us very visible in-store. Every week, we highlight the winners from the Winning Streak game show and we dedicate a substantial proportion of our broadcast to scratch cards, particularly on days when we don’t have a Lotto or EuroMillions draw.” The digital screens also allow National Lottery retailers will soon be in receipt of new modern terminals, with vastly increased the Lottery to target specific memory capacity and optical reading technology as standard. campaigns to a particular symbol €94m and €12.8m. play is because they see someone else group or geographical area, tailoring play. So making it convenient for the message to the customer base. people to play, whether they’re in-store Online Sales Growth or online, is the right approach.” Returning to the online players, He points out that once you form surely the 30% rise isn’t exactly being a relationship with players, you welcomed by retailers with open arms. can remind them to play, you can Griffin disagrees, however. incentivise them and communicate “When you look at international directly to them, with all channels experience, and even our own benefiting from this approach. experience of those who play online, He cites the example of April’s Lotto they don’t pick one channel and play promotion, which saw a separate prize exclusively there. We have a lot of of a Mercedes car with each draw. “It players who play online who, if they can be hard to promote special events are in a shop, will buy the ticket in like this above-the-line in the press, but that shop. But if they have forgotten if you have a relationship with players, to play in-store and it’s five minutes to you can highlight that to them and draw-time, they can still play. You are encourage them to play,” Griffin states. creating a relationship with the player and making it easy for them to play.” In Ireland, there are 2.2m people Competition Time who consider themselves as National Of course, the really big news for Lottery players. When there are big Ireland’s National Lottery in 2013 Lotto jackpots, take-up is almost 100% wasn’t the sales results, but was the of these players. “The difficulty is result of the open competition for the that week in, week out, we have 1.5m new 20-year Lottery licence, which players, with the other 700,000 players was won by Premier Lotteries Ireland, dipping in and out,” Griffin stresses. a consortium of An Post, the Ontario “If we make it more convenient for Teachers’ Pension Plan (the owner them to play, they will continue to play of the Camelot Group, who operate and that is good news for everyone, the UK Lottery) and An Post Pension including retailers. That has been the Fund. experience elsewhere: the UK are now While An Post National Lottery had up to 15% online sales and its retail previously been involved in two licence sales have continued to grow. bids, the difference this time around “We want to give people the choice was that the Government required to play whenever and wherever suits an upfront payment of €405m, which Other highlights from 2013 included them,” he adds. “The number one will be used for a number of national players sharing winnings of €382.7m reason why people don’t play the projects, including the building of the representing 56% of sales, which Lottery isn’t because they don’t have new national children’s hospital. The doesn’t take account of last year’s two the money to play: it’s because they upfront payment meant that National big EuroMillions jackpot winners of forget. The number one reason they Lottery and its parent company, An
“Retailers are a very important stakeholder in the business. We have an agent council, which is very important to us in terms of getting feedback on initiatives. We will be utilising that council right through the transition period and we will leverage the knowledge and expertise of the retail community through that agent council.”
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National Lottery
Lucky couple Carol Loran and Kevin Geoghegan from Mullingar, Co. Westmeath scooped a massive €10,651,567 Lotto jackpot in May 2013.
Post, had to “team up with somebody who had the financial muscle to win the bid”, Griffin explains, going on to describe the result as “a strong consortium that gave us the best of both worlds, in terms of bringing the required financial muscle to win the bid, but also being able to maintain the expertise within the business and leverage that knowledge and experience that has helped to grow the business over the last 27 years.” During the licence competition, there was a separate unit operating within the National Lottery, assisting the Department of Public Expenditure and Reform to run the competition process. The challenge was to ensure that the process was handled in a clear and transparent manner with no conflict of interest. Dermot Griffin is delighted with how the process worked. “Internationally, I don’t know of any other competition that didn’t end up in the courts and delayed, but the process here was run really well,” he says. “It was extremely transparent
Dermot Griffin, Chief Executive of the National Lottery (right), congratulates the staff of Staunton’s Costcutter Express, Castlebar, Co. Mayo, who sold a EuroMillions jackpot winning ticket worth €15m for the draw on April 1, 2014.
and generated a good price, at the end, which means that the new children’s hospital will be built, along with a string of other projects, which will be rolled out in the coming year.”
What Will It Mean? For the National Lottery itself, it’s pretty much business as usual. “The operation of the National Lottery will remain a standalone business with
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National Lottery
The new National Lottery terminals will be rolled out to retailers in the coming months.
its own business structure. We will operate, in terms of our values and our vision for the business, in the same way,” Griffin explains. “The main difference is that we will have different shareholders.” Will that bring different pressures? “The good thing about this new licence is that it is structured in a way that is very much aligned with how the Lottery has been run. The model is that good causes get 65% of gross gaming revenue (sales minus prizes), so there is an incentive to make that number as big as we possibly can, so the good causes and the operator benefit. It is a fair system and one where the good cause fund is aligned very closely with the Premier Lotteries Ireland return, which can only be good.” Griffin feels that the fact that the licence was granted for 20 years, instead of the previous seven-year licences (with three-year extensions) is hugely beneficial in terms of investing in infrastructure. “Towards the end of a licence period, you have no time to get a return on any investment, so you delay investing. This is a far more sensible period in terms of the licence,” he reveals. Most of the existing National Lottery staff will move over to Premier Lotteries Ireland, aside from a small number who are taking voluntary severance or early retirement: “ “We have never had a scheme like that before, so there was a pent-up demand for it,” Griffin notes. New Technology From a retailer perspective, the National Lottery are introducing new state-of-the-art technology into stores in the coming months. “Because the current licence dates back to 2002, the technology in-store is over 12 years old,” Griffin says. “Computers have moved on so much in that time, so the new terminals are modern, with vastly
increased memory capacity, optical readers and indeed, less moving parts, which means that they don’t break down. They will provide a big advantage to retailers.” The National Lottery have surveyed all retail outlets and will have an eight-week period where the new terminal is in situ with the existing terminal prior to changeover. “We have found a novel way of linking the two machines under our brand hood, so the changeover will be easy for the retailer,” the CEO
insists. Indeed, the company’s relationship with retailers is “very positive”, according to Griffin. First and foremost, the retailer margin of 6% is enshrined in the licence and will remain intact going forward. Indeed, Griffin is hugely cognisant of the role retailers play in the National Lottery’s success here. “Retailers are a very important stakeholder in the business,” he says. “We have an agent council, which is very important to us in terms of getting feedback on initiatives. We will be utilising that council right through the transition period and we will leverage the knowledge and expertise of the retail community through that agent council.” Evolving Product Range From a consumer point of view, the brand won’t change. “The ticket they get from the new terminal will look the same. Our scratch cards will look the same. I think the player will see the benefit as we build up our customer relationship management and we are able to provide a more tailored approach to customers,” Dermot Griffin says. “We will also continue to innovate and evolve our games: that is the cornerstone for successful lotteries.” To that end, they are working with the EuroMillions group on a EuroMillions scratch-card game, where instant millionaires could be created in-store, possibly as soon as 2015. He also points to the possibility of a world lottery draw in coming years. “There is huge potential both in the EuroMillions and in our own portfolio of games, including Lotto, Daily Millions and Telly Bingo, where we will continue to make them as exciting and innovative as we can,” he reveals. “We do a lot of market research on our games, finding out which games, what features of a game, appeal to players
and we then try to incorporate them into the games. We will continue to do that, going forward.” The fact that their new shareholders run the UK lottery will also be of benefit, as they will “be able to leverage the knowledge of Camelot as a sister company and learn from the things that work and don’t work for them”. The Challenge Ahead Having been at the helm of the National Lottery for eight years, Griffin has overseen a period of big change, and surprisingly, rates last year’s competition as just another in a long list of challenges. “There is always something different happening in the lottery business,” he smiles. “Since I’ve come in, we’ve changed our Lotto game, we changed our master brand, we’ve introduced digital signage, we’ve had the additional EuroMillions draw, so each year there have been major projects happening within the business and last year was no different. We had the licence process, but the year before we had a major EuroMillions game change, which was a huge project in terms of IT and marketing. This year, we have our commercial changeover and in many ways the secret of our success is that players won’t notice the changeover.” Looking to the future, he is extremely upbeat. 2014, he insists, has begun very well for the National Lottery. “Our scratch cards are up again on this time last year; our Lotto and EuroMillions are performing a little better than last year. We’re happy with the progress so far,” he maintains. “From a business and an economy point of view, it does seem that things are improving. The experience elsewhere in terms of lotteries is that it takes a little bit longer to be hit by a downturn but it stays down a little longer than most other sectors. But I think we can see light at the end of the tunnel in terms of an upturn. When we get into this new licence period, we will be very conscious of growing the funds raised for good causes and doing anything we possibly can to achieve that, and for our shareholders as well. Things are looking a lot healthier going forward and the 20-year licence allows us to start planning things for the longer term.” The National Lottery Annual Report 2013 is available on www.lottery.ie.