Magazine article Marketing

How Branson's Bid Hit the Jackpot

Magazine article Marketing

How Branson's Bid Hit the Jackpot

Article excerpt

It's been an emotional week for the National Lottery bidders, with Branson feeling jubilant and Camelot downcast.

It was the decision everyone had been waiting for, but the result no one was expecting. As the National Lottery Commission announced that both bids for the National Lottery licence had been rejected, mutters of shock and disappointment could be heard from those convinced that the day would bring to an end the tiresome deliberation over the decision. Photographers launched themselves over chairs to get the pictures of Commission chairwoman Dame Helena Shovelton, and journalists suggested the word 'fiasco' to the Commission.

The surprise, however, turned into confusion when it emerged that the nil-nil result was actually indicating a win, albeit cloaked, for Branson's People's Lottery. The consortium, which includes J Walter Thompson, Kellogg, Compaq and US lottery giant AWI, has been given a month to rectify the faults in its bid. If successful, it will hold the lottery licence for seven years from October 1, 2001.

The new negotiations will deal with a sum of [pound]50m that Branson has pledged as security if anything should go wrong with the lottery, to protect winners' prize money and cover ticket refunds. The Commission wants to see it in a committed form before it awards the licence.

J Walter Thompson's Simon Burridge, chief executive of the People's Lottery, believes the month's delay is just down to a misunderstanding over the format of their submission and will be resolved. He says: "We already knew a few details needed fixing, but thought we would be able to fix them when we became the preferred bidder. We didn't want to have [pound]50m sitting in a bank for seven years, so we're negotiating to find a form to put it in. It's just legal niceties."

As proof of its confidence JWT threw a party the day after the announcement, attended by Branson, where the possibility of failing to resolve the hitches was not discussed as an option. The mood was jubilant, and Branson, Burridge and JWT chief executive Stephen Carter made speeches of thanks to the teams and each other.

Personal pledge

Branson has even pledged to dip into his personal fortune to ensure the licence doesn't slip away from him a second time, after his failed bid in 1994.

When the People's Lottery gets its hands on the licence, it will face the tough task of turning round a national institution that has increasingly failed to capture the nation's interest. Often labelled as a poor man's tax, the operation has dragged itself through a mire of embarrassments, and been tarnished with a fat cat reputation that has made people reluctant to part with their pounds.

Giving Camelot control for a further seven years would have done little to generate fresh interest in the games, which have suffered declining sales. Instants have performed the worst, with sales plummeting from [pound]44.4m in 1995 to about [pound]14m. Perhaps not surprisingly, research by the People's Lottery showed that 90% of people felt the lottery needed a relaunch.

One fatal flaw has been Camelot's relationship with GTech, the supplier of the software system. GTech became embroiled in scandal after concealing a glitch that left winners underpaid. The Commission said Camelot could be fined for breach of licence because of the US company's failure to inform it, and Camelot, of the fault.

However, the People's Lottery will come in with new technology by AWI, and there are no guarantees that its system will run smoothly for seven years. Camelot is frustrated that its downfall is the technology that has provided a service since 1994. A spokeswoman says: "At least we have a proven track record People's Lottery is unproven."

But Burridge argues: "We have more sophisticated terminals that are far superior, with a system that is capable of three times the amounts of transactions that will ever happen. …

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