Sales slump hits lottery cash for good causes

Camelot, the lottery operator, has been forced to cut at least £2bn from its promise to raise £15bn for good causes over the next seven years, after a slump in lottery sales.

Camelot executives admit privately that the £15bn target, which was the centrepiece of their campaign last year to keep control of the National Lottery, will not be reached, despite plans for a major relaunch of the game starting later this year.

The gravity of Camelot's problems is underlined by an analysis of the latest sales figures. In the week before last, the company endured its worst-ever sales in the National Lottery draw since launching the midweek game in 1997. Its sales fell to just £70m, compared to an average weekly sale of £95m in late 1997.

One director said that this slump, competition from other forms of gambling and problems getting new television games off the ground had caused a rethink of income targets. "It's making it look very tough. We will probably have to revise where we go," the executive said.

In an expensive attempt to arrest a long-term decline in overall sales, Camelot will launch its first millionaire scratchcard game tomorrow. It will also start a national "roadshow" taking in 16 shopping centres in towns such as Birmingham, Watford and Glasgow, in an attempt to revive flagging public interest. It is also revamping its logo and corporate identity to promote a more "caring" image.

This campaign has come at a critical time for Camelot. The Home Office is expected to liberalise Britain's gambling and bingo laws after Lord Budd completes his review on gambling regulations within the next few weeks. This is expected to draw people away from the lottery.

At the same time, Camelot's plans to use new third generation WAP mobile phones to launch a series of interactive lottery games has been hit by the collapse in public interest in the technology, and unexpected technical hitches.

The lottery distributors that spend the good causes income also fear that moves by the Government to step up its direct use of lottery money will stoke accusations that the lottery is another stealth tax.

Camelot executives blame the slump in sales on the series of legal battles with Sir Richard Branson for control of the game last year, and last month's public relations disaster over attempts by Martyn and Kay Tott to claim a £3m jackpot prize after they lost their ticket.

The slump greatly complicates Camelot's attempts to increase sales by 50 per cent after the next licence starts next February. That ambitious target was set when their sales were 10 per cent higher than at present.

Despite the launch of four new draws since 1997 average weekly sales on all lottery games have slumped by 15.9 per cent since their peak in the winter of 1997.

Average weekly sales on the National Lottery draw have fallen further, by 21.6 per cent in that period. This is expected to cost Camelot up to £1bn in lost revenue this year, cutting their income to £4.5bn.

Professor Ian Walker, a lottery expert at the University of Warwick, said Camelot's main hope of greatly increasing sales would be from launching a pan-European lottery game with increased odds but larger prizes. He said Camelot would be "lucky" to get much more than £11bn to £12bn for good causes. "Camelot will have to work harder," he added.

The crisis has deepened the tension between Camelot and the game's regulator, the National Lottery Commission. Camelot has told the Commission that it will have to cut its £15bn forecast.

Sue Slipman, Camelot's director of external affairs, insisted the £15bn target was achievable, but added: "We need the active support of our partners to reach these targets."