The Fourth National Lottery licence has been in the spotlight since the competition (“4NLC”) was announced in November 2018, with the Gambling Commission reporting “a healthy level of interest from a range of different parties”.

A false start…

However, the 4NLC faced criticism in February this year, when delays to the competition process were announced as a result of the Covid-19 pandemic. The main concern of potential bidders was the fairness of the competition and the perceived disadvantages they faced against existing licensee, Camelot. These included, increased costs and reduced scope for delivery as a result of an uncertain timeframe and potentially shortened transition period between the third and fourth licence. In response, the Commission reiterated that:

  “…[we are] focused on running a fair and open competition to find the right operator… ensuring that all potential bidders are on an equal footing is very important and we will welcome as many bidders as possible to the competition…”

Where are we now?

The Gambling Commission was also quick to reassure that its below dates are indicative and therefore, also subject to change.

• August 2020 to October 2020: First stage – Selection Questionnaire
• October 2020 to July 2021: Second stage – Invitation to Apply (“ITA”)
• September 2021: Preferred applicant announced
• October 2021 to July 2023: Transition period
• August 2023: Expiry of third National Lottery licence / commencement of fourth licence 

After a three-month delay and the initiation of 4NLC on 28 August 2020, the competition is still in its first stage, with the deadline being 24 days after the launch date. Therefore, potential bidders have until midnight on 1 October 2020 to complete the Selection Questionnaire before the Gambling Commission proceeds to the second stage, the ITA.

What to expect?

In Future of the National Lottery, the Gambling Commission outlines seven key changes to the Fourth National Lottery licence. The overarching themes all reflect the Gambling Commission’s statutory duties on propriety, player protection and returns to good causes, and include:

• A more outcomes-based approach, which is in line with the Gambling Commission’s approach to regulating other gambling licences.
• Innovation (commercial and technological) which reflects the updated context in which the fourth licence holder will operate.
• Increased emphasis on the licensing objectives of fair and open and socially responsible provision of gambling.
• Development of the National Lottery brand without compromising fairness or integrity.

Key changes to the licence

1. Increased player protection
2. Fixed 10-year licence
3. Focus on performance
4. Further incentivising returns to good causes
5. Commercial and technological innovation
6. Protecting the National Lottery brand
7. Safeguarding key features eg, guaranteeing at least one draw-based game, with life-changing prizes, every week

Commission Chief Executive, Neil McArthur reinforced this by adding:

“In line with our outcomes-focussed approach to regulation, we want the next licensee to have greater autonomy to meet the needs of players in 2023 and beyond, whilst ensuring there is clear accountability for the performance of the National Lottery.”

A marathon, not a sprint

The key changes have also impacted on the proposed financial structure of the National Lottery licence operations. This follows criticism in recent years that Camelot’s returns to good causes have not been proportional to their profits. For the period 2019/2020, ticket sales increased by nearly 10 percent to £7.9 billion, of which £1.85 billion went to good causes. Therefore, in an effort to ensure that returns to good causes remain central to National Lottery licence operations, the fourth licence holder will be required to give a fixed sum to the relevant funds for distribution to good causes, as well as a percentage of any profits made. The fixed sum will be established as part of the bidding process.

Consequently, the finish line for bidders extends beyond securing the contract to hold the licence. One industry executive quoted in the Financial Times, called the move a “radical shift”, which would result in the fourth licence holder running the risk of becoming leveraged if they failed to make the requisite sales to deliver the fixed sum. Nevertheless, as the fifth largest lottery in the world, the tender for the National Lottery licence remains one of the UK’s most lucrative public sector contracts.

Raising the bar

In line with the continued regulatory, political and public drive towards safer gambling, it is currently expected that the renewal of the National Lottery licence will coincide with raising the minimum playing age from 16 to 18. The proposed measure was raised by former Digital, Culture, Media and Sport minister, Tracey Crouch in 2018 but did not gain traction. However, Camelot CEO, Nigel Railton, has since agreed that “For 25 years, the age has been 16, so it is probably a good time to look at it.”

Additional details of the 4NLC, including scope and indicators, may be found here.