Camelot's jubilee relaunch is a £12m flop

Camelot's relaunch of the National Lottery has flopped, after it lost £12m on special jackpot draws to celebrate the Jubilee and its overhaul of the main game.

A £28m relaunch of the main lottery game, fronted by the comedian Billy Connolly, was unveiled six weeks ago, boosted by Camelot's decision to give away four extra jackpots worth a total of £22m.

The bonus prizes, which cost players nothing extra, culminated in a £10m bonus jackpot last weekend to celebrate the Golden Jubilee.

But the lure of an extra jackpot failed to increase sales at all, to the dismay of Camelot executives. Industry observers suspect this could be blamed on comments by Camelot's chief executive, Dianne Thompson, that players would be "lucky" to win any money on the main game.

Fears about the success of the relaunch had been raised on the weekend Camelot rebranded the main game as Lotto. For the first "Lotto" draw on 18 May, it gave away three extra £4m jackpots, as well as the normal main prize, but ticket sales only increased by £10m.

Overall, this meant Camelot only recouped £10m of the full £22m it used for the extra jackpots, most of which came from the "pool" of money for good causes, ringing alarm bells at the National Lottery Commission, the game's regulator, and among industry observers.

It is also embarrassing and worrying for Camelot's executives and shareholders, who staked part of their profits on the extra draws. In April, Ms Thompson claimed that "research has shown that our players like the concept of special one-off bonus draws."

Based on current sales, Camelot is set to make about £4.7bn this year – well below its claimed target. "This is an acute situation for them," said one industry source.

The company, which fought a bitter battle with Richard Branson to regain control of the game 18 months ago, is now relying heavily on two new games being unveiled this summer to reverse a five-year decline in sales.

Next month it launches "Hotpicks", a draw game with much lower odds on winning up to £7,000, and a midweek Thunderball draw. It also starts its first internet games this winter, and plans a large Christmas bonus draw.

Tony Jones, Camelot's group operations director, admitted that the Jubilee draw and the previous week's sales had been "less successful" than hoped. But he claimed that, overall, the relaunch so far had been "broadly similar" to its predictions.

Camelot believed sales will slowly rise, he added, since it took time for a relaunch to win over players. "We're looking at steady growth, we're not looking at just dramatic sales for a short period of time," he said. "The new games will enhance the overall appeal of the main games."

But Jane Taylor, the editor of the industry newsletter Lottery Monitor, said Camelot could be forced to completely rethink their sales and promotion strategy if the new games fail to rekindle sales.

"The performance on these big promotional weeks has been extremely disappointing. I feel both disappointed and much more pessimistic than I was six weeks ago," she said.

The slump will also alarm Tessa Jowell, the Secretary of State for Culture, and organisations such as the Heritage Lottery Fund and Sport England, who will have to cut spending projections.