I thank the committee for inviting us here today. The national lottery was established in 1986 and its legislative base is the National Lottery Act of that year. An Post was awarded by the Minister for Finance the very first ten year licence to operate the national lottery and it established a subsidiary company, the An Post National Lottery Company, NLC, to do so. Sales commenced on 23 March 1987.
An Post holds 80% of the issued share capital of the company, with the remaining 20% held by the Minister for Finance. NLC is currently operating the national lottery under the terms of a seven year licence which was issued by the Minister for Finance in December 2001, following a formal EU-wide competitive tender process.
Our mission statement states:
The purpose of An Post National Lottery Company is to generate funds for the designated beneficiaries, while operating the National Lottery in accordance with the highest standards of integrity, credibility and security.
The national lottery, as operated by NLC for the past 18 years, is generally acknowledged as one of the success stories of Irish marketing history. It has also been one of the success stories of State-sponsored bodies in Ireland. We have successfully operated the national lottery in a delicate and ambiguous space where the worlds of commerce and public service intersect.
In an international context, the Irish national lottery is regarded as one of the world's top lotteries, not only in terms of per capita sales and revenue generated for good causes, but also in terms of style, game philosophy, record of innovation and adoption of industry best practice. We are one of only two State lotteries in the world with ISO 9001 accreditation.
For the past 18 years the national lottery has operated efficiently and effectively while generating over €2.2 billion for good causes. The current activity level of the national lottery involves the sale of some 4 million lottery tickets each week, a massive task by any standards. Accountability, integrity, openness and fairness are the mainstays of a lottery. NLC's adherence to the highest standards in all these regards should not be surprising given its parentage, ethos and record of success. As a Government regulated activity, the national lottery must be developed and operated in a way that fully satisfies the requirements of the regulator, the Minister for Finance.
Over the past 18 years NLC has a proven track record of successfully developing and managing Ireland's national lottery. We launched the national lottery in 1987 and have achieved continuous growth in sales every year since but one, increasing steadily from a turnover of IR£I02 million, €130 million, in 1987 to €578 million in 2004. The exception was the year of the conversion to the euro. The amount of money raised for the Government to distribute to beneficiary projects has exceeded all expectations, with €191 million raised in 2004 alone, and a total of over €2.2 billion raised to date for good causes. This success has been achieved through ongoing product innovation and a solid understanding of the Irish marketplace and consumer.
NLC has succeeded in building a brand that is familiar to 99% of Irish consumers. Today the national lottery is as well known as many other long established Irish brands such as Guinness, Jacobs and Jameson, which are more than 100 years old.
NLC has succeeded in developing a high level of confidence in its operation, brands and corporate image. This confidence and respect is evident across all key groups with which the national lottery interacts: its players, its 3,500 strong retail network and the media. With over 50% of all Irish adults now playing national lottery games on a weekly basis, and an average weekly player spend of €8, NLC has succeeded in making the national lottery a normal, accepted and popular part of Irish life.
Market research has repeatedly shown that the characteristics and demographics of the average national lottery player substantially match those of the adult population in general. There is no evidence of any significant variation from the population average in respect of players' sex, age, geographic designation, work status, social status, education or income.
NLC has in place an excellent network of 3,500 retail outlets giving full and balanced population and geographical coverage. All agents sell scratch cards, and 2,200 agents have lotto terminals offering all on-line lottery games.
NLC operating costs have been kept to a minimum. In 2004, the operating costs were 8%, excluding retailers' commission and bonuses of 6.2%, which compares very favourably with international lotteries with equivalent population bases. On a comparable State lottery basis, the number of staff employed is among the lowest and, on a revenue per employee basis, is among the highest in the world. In 2004, of each €l spent on national lottery games, in broad terms, €0.53 was returned in prizes, €0.06 in agent commission, €0.08 in operating costs and €0.33 to good causes.
When the National Lottery Company was established in 1987 its first task was to launch the concept of a national lottery in Ireland and develop the market for instant games from a "green field" situation. This was successfully achieved against a background of little or no experience of instant games in Ireland, or in any other European country. NLC then developed the on-line infrastructure for the lotto game in 1998 and was the first company in the EU to implement a fully on-line system. This was successfully achieved and the system subsequently became the model for many EU states, including the UK. Instant games have since been developed by extending the choice of price points and the number of games simultaneously on sale. Lotto has been developed by progressively extending the matrix from 36 numbers to 39 to 42. New on-line games such as Lotto 5-4-3-2-1, TellyBingo, LottoPlus and EuroMillions have also been added.
The breakdown of sales in 2004 was: 28% instant games, 68% lotto family, namely Lotto 5-4-3-2-1 and LottoPlus, 3% TellyBingo and 1% EuroMillions, our most recent game. NLC has consistently described its game and sales strategy and approach to operating the national lottery as striving for "responsible growth". This involves optimising funds for the good causes rather than maximising such funds.
NLC has a number of major sub-contractors who provide services and facilities to the national lottery. It has always been, and will continue to be, NLC practice to put all its major contracts out for competitive bidding on a regular basis in accordance with Government guidelines for public procurement. In this way it can be sure of receiving the best possible service at the best possible price.
The key to NLC's success has been its games, their design, prize, structures, mix and, most importantly, underlying game philosophy. Over the past 18 years, NLC games have been imaginatively designed and developed specifically for the Irish market. Through regular market research NLC has kept abreast of Irish player tastes and preferences and, through its affiliations with its suppliers and the European and World Lottery Association, NLC is well placed to monitor international lottery trends and developments.
NLC has invested in developing national lottery brands, which include some of the most recognisable in Ireland. Brands such as Lotto and Winning Streak are valuable properties that have been endowed with the highest values of integrity, fairness and fun. The current marketing mix has been arrived at after years of practical evaluation of various combinations associated with a variety of marketing campaigns and objectives. Successful marketing is about finding ideas that have the correct tone and mood in sympathy with the times, and developing them in line with societal developments.
The distribution of the national lottery fund to good causes is not the responsibility of NLC. However, NLC has played an active part in promoting the good causes which have benefited from the Government allocations by financing appropriate advertising campaigns on television, radio and press. Good causes include health and welfare, arts, culture and heritage, sport, youth recreation, amenities, and the Irish language.
NLC plans to offer Irish players access to national lottery games via a range of new media options. Players will soon have the opportunity to play new and existing national lottery games via the mobile phone, interactive television and the Internet. The company is fully aware of the implications of introducing these new media channels and will ensure that the facilities incorporate the required checks and controls to guarantee that the integrity of the games and the best interests and welfare of the players are fully protected.
NLC has security systems and procedures in place to cover physical access, personnel, computers and terminals, draws, game products, and prevention of fraud. NLC security procedures are based on best practices observed in successful State lotteries worldwide. NLC recently received the World Lottery Association Security Standards award.
State lottery operators must develop a number of important relationships of confidence. The Government, through the regulator, the Minister for Finance, must have confidence in the lottery's operation, game strategy, security, accounting, reporting and control systems. The players must have confidence in the honesty and integrity of the lottery's games and draws. The retailers must have confidence in the accounting, control, reporting and support systems of the lottery. The media must have confidence in the honesty and accountability of the lottery.
Finally and obliquely, the confidence of non-players must also be established to ensure that they, as citizens, accept the bona fides of a national institution such as the national lottery, even if they do not actively partake in its games. After 18 years of operation, the NLC can claim to have successfully developed strong relationships of confidence with all its audiences.
The development of its corporate and game brands mirrors the development of confidence. After 18 years of operation, the NLC has accumulated significant knowledge of the value and utility of national lottery game and of corporate branding. Our corporate brand and the image of the beneficiary fund allocations, the game brands, the value of the television game shows and the company's approach to advertising and public relations form a composite web of interrelationships that are drawn together in the company's unique overall communications strategy.
As the gaming market in Ireland and Europe becomes more competitive and exploited, it is increasingly important to emphasise: the unique role played by state lotteries in this market; the extent of their regulatory framework and licences; the fairness and accountability of their games and activities; the security and integrity of their operations; and the extent of their contributions to governments for good causes make national lotteries unrivalled and unequalled operators in the overall gaming sector. These ongoing characteristics will underpin the future development of our games and facilities so that the Government and the public will continue to support and realise the fullest benefit from Ireland's national lottery.