As a vertical, lottery has never really been the focus of much attention in the iGaming world. With low initial sales and the fact that all of the major lotteries are run by or on behalf of government bodies, the general consensus has been that there are limited opportunities in lottery.
While that point in itself is up for debate, what isn’t is the fact that the number of lottery opportunities is certainly on the rise. In 2012 full year global lottery sales increased by 7.7% as Asia, Africa and the Americas lead the way. In contrast, the European lottery market showed its more mature nature with growth of just 1.6%.
But while Asia, Africa and South America all represent interesting opportunities, as is often the case in online gambling, it’s the United States that appears to be living up to its moniker as the Land of Opportunity.
After more than 30 years of lotteries being run by state government departments at a leisurely pace, more and more US states are now turning to privatisation in order to reap the benefits from the most common form of gambling.
This fact has not gone unnoticed by lottery companies from outside of the United States who have years of running what are, in most cases, successful lotteries. The likes of Intralot, Lottomatica, Jumbo Interactive, Speilo and GTECH have all registered their interest at one stage or another.
Of those who have made advances toward state lotteries, Camelot Global Services – part of the Camelot Group that operates the UK National Lottery – are among those best qualified. Having already bid for two private manager contracts at state lotteries and come close to doing so in Indiana, they are yet to take charge of any lottery in the US. Of the many setbacks that have befallen the company, most have been out of their control, begging the question of whether Camelot is to become the nearly men and women of US lotteries.
Their first attempt at becoming a US state lottery private manager came in Illinois where the first contract of its kind was handed out. All in all this was a bidding process which was handled pretty terribly and there are still significant investigations taking place today.
The previous lottery administration had been put in charge of the bidding process and weren’t too keen on the idea of bringing in a private manager – effectively they were hiring their replacements. As such the bidding criteria were so ridiculous that most of the 12 or 13 initial bidders dropped out.
Current Illinois Lottery Superintendant Mike Jones (who wasn’t in charge at the time), explains what a shambles this bidding process was.
“The only people that stayed in were those that had to be in because they had existing contracts and they didn’t want new ideas of thoughts to be made up and have to compete against them,” he said at the end of last year.
“You wound up having a collection of the lottery’s existing vendors who are usually highly competitive combining to become Northstar and then you have Intralot being kicked out for reasons that are now under litigation.
“Then you had Camelot who were the only private company to be involved and if they had dropped out as we all thought that they would the whole thing would have collapsed on itself.”
Jones diplomatically describes the entire process as ‘highly controversial’ and despite Camelot’s impressive credentials they still didn’t get the contract. That went to Northstar and the state’s current lottery vendors came in to manage the whole operation. After almost two years the company is still not hitting targets and last week was hit with a $20 million fine for poor performance.
More recently the Global Services arm of Camelot had some success in Pennsylvania where they did win the contract to run the state’s $3.5 billion lottery. This seems less impressive when armed with the knowledge that Camelot where actually the only company to submit a bid despite a seven month period in with PA lottery officials invited companies to throw their hats into the ring.
Things were looking good for Camelot; they were finally going to have a chance to showcase their operational ability within what is potentially the biggest gambling market in the world. But as is often the case in US gambling, things weren’t quite that simple. PA’s Attorney General Kathleen Kane deemed that the deal was illegal as the Governor didn’t have the authority to grant the contract which he did.
As a result the deal was initially blocked before news came out of Harrisburg last week that the Governor Tom Corbett would revise the contract in order to allow the deal to gain Kane’s approval. This revision may have to incorporate significant changes as Kane said state law did not allow for the privatisation of the lottery or the expansion of gambling that could potentially take place.
At the time of writing this situation is very much in limbo but it’s not just been Kane who was opposed to Camelot’s potential takeover.
What certainly doesn’t work in their favour is the fact that Camelot is commonly known to be a UK company. Even though Northstar, who are the Illinois Lottery’s private managers, are owned by Italians Lottomatica they are thought of as an American company.
In the mouths of the more vocal politicians and therefore in the eyes of the citizens, putting Camelot in charge of a lottery is like outsourcing it to another country. From a government-run lottery to a private lottery run by a non-US operator for profit is proving to be to big a step.
It also doesn’t help that Camelot is actually owned by the Ontario Teachers’ Pension Plan. In order to reassure citizens of the KeystoneState that allowing Camelot to take control of the lottery would not result in money leaving the state, the company released a statement last month.
It read: “Camelot has indicated it would headquarter in Pennsylvania, pay all taxes required of any commonwealth business, and keep all lottery jobs in the state.”
Even if they do succeed in this little PR challenge, that will just be one of the many hurdles that Camelot will have to clear if it wants to be a major player in the future of the US lottery market.