National Lottery: It could be who?

The lottery commission had six months to decide

By media correspondent Nick Higham

News that the National Lottery Commission rejected both bids is the latest twist in the selection process to run the Lottery.

Selecting the next operator of what is the world's biggest lottery was always going to be a lengthy process.

At stake was the licence to run the UK lottery for seven years from October 2001.

Since the closing date for applications at the end of February, the five members of the National Lottery Commission have ploughed through 9,000 pages and two million words of written submissions from the two bidders, Camelot and Sir Richard Branson's People's Lottery.

They have carried out checks with regulators and law enforcement agencies around the world on the probity of 360 individuals and 100 companies.

Commission members subjected both bidders to intensive questioning on several occasions, in person and in writing, scrutinising everything from their security systems to their proposals for new games.

They have also visited lottery operations in Norway, Florida, Arizona, Indiana and Massachusetts.

World's biggest

The lottery raised £1.4bn for good causes lin 1999

Last year the present operator, Camelot, turned over more than £5bn, and raised more than £1.4bn for good causes and a further £611m for the government in tax.

The commission had been looking for the bidder likely to raise the most for good causes - provided the commissioners were satisfied the lottery would be run with "all due propriety" and in a way that protected the interests of players.

This was a licence for which frauds, crooks and incompetents need not apply.

In the event the process took even longer than anticipated.

An announcement was originally expected by the end of June. But the Commission extended the timetable "to allow both bidders to improve their proposals" - without specifying publicly what it had in mind.

Play safe - or gamble?

Sir George Russell: Camelot chairman keeps his fingers crossed

The Commission essentially faced a simple choice. It could play safe and stick with Camelot, an operator with an almost unblemished record of efficiency and technical competence.

Or it could opt for a new licensee who promised to reinvigorate the lottery with an injection of new ideas and a new not-for-profit ethos.

Both bidders pledged to raise £15bn for good causes over the seven-year licence period - half as much again as Camelot expect to raise in the current licence.

It's a tough target, given that the present lottery's sales are slipping, as all lotteries' do as they mature.

In addition, both had to promise to install new terminals for the main twice-weekly online game in 35,000 retailers, and to develop ways of playing the lottery on the internet, on mobile phones and on interactive television.

But there the similarities ended.

The rival bids

Camelot proposed to keep the existing main Saturday and Wednesday game, in which players have to match six numbers out of 49 to win the jackpot, along with the existing Instants scratchcards and Thunderball game.

The People's Lottery planned to scrap the main game and replace it with one in which players match six numbers out of 53, making it harder to win the jackpot but producing more rollovers (eight double and two triple) every year to stimulate extra ticket sales.

It also promised to create a "millionaire a day" - twice as many as Camelot - thanks to a new game guaranteeing every jackpot winner a £1m prize.

The Branson factor

Sir Richard Branson: Hopes his number comes up

Alongside this new games strategy - a calculated appeal to the greed which motivates all lottery players - the People's Lottery added "the Branson factor" and an appeal to players' altruism.

It exploited Sir Richard Branson's image as a Robin Hood-figure in the hopes of luring back some of the millions of Britons who have played the lottery in the past but no longer do.

Not only was the Branson team critical of Camelot's past performance and supposedly lacklustre marketing, but it also promised to channel any profits to good causes rather than to shareholders, citing surveys which showed that would make people play the lottery more.

The danger, as Camelot privately pointed out, was that some people might end up playing more than was good for them, or spending more than they could afford.

Nonetheless, Camelot was forced to respond to the Branson initiative.

Camelot's battle

Sensitive to its reputation for paying "fat cat" salaries, it announced that its new chief executive, Dianne Thompson, would be paid £330,000, much less than her predecessor Tim Holley (though much more than the £200,000 earmarked for the People's Lottery chief executive, Simon Burridge).

It also said it would cut its directors' bonuses, and its profit margin - from a penny in the pound to a halfpenny, though falling sales and increasing marketing costs cut profit anyway last year to three-quarters of a penny.