New Illinois Lottery operator unveils big plans

in Lottery

The British firm that just took day-to-day control of the languishing Illinois Lottery is promising a major new "lifetime" game, an increased focus on web sales and thousands of upgraded terminals and vending machines.

And it insists it's already on track to boost gross sales 3.5 percent, a bit more than projected.

In an interview, Colin Hadden, the new general manager for Camelot Illinois, said the company is "putting our marker down" on a lottery whose income has been "pretty much flat for the past four or five years" and which caught considerable legislative heat for underperforming. Camelot on July 1 replaced Northstar Lottery Group, which Gov. Bruce Rauner's administration fired in 2015.

"Our ambition is to create a modern lottery that attracts new players, instead of depending on a small group that plays a lot," Hadden said. The firm wants to "maximize financial returns to the state in a socially responsible way."

 In what likely will be the most visible change to consumers, Camelot plans to introduce a game that will pay a winner $1,000 a week for the rest of their life rather than a single lump sum. The game should be available "next April or May," and the company believes it will provide something new and different for customers who rarely if ever play now, Hadden said.

Potentially more significant, though, is what's happening behind the scenes.

All 7,600 terminals at stores will be replaced with new, easier-to-handle equipment, and thousands of vending machines will be replaced, too. In addition, the lottery's technical provider will change from a division of Gtech to a new Greek firm, Intralot. Camelot is not paying extra to legally enable it to make the change, Hadden said, even though Rauner aides earlier had suggested that as much as $56 million in penalties might be due. The lottery's spokesman said he did not immediately know how that issue was resolved.

Another top goal is buffing up the lottery's weak web sales. Hadden, who is coming to Chicago from handling similar chores running the Indiana Lottery, said the internet makes up just 1.5 percent of the Illinois Lottery's annual sales; Camelot wants to boost that to 15 percent.

Camelot overall has a 10-year deal with the state. It expects net annual income to Illinois to increase from $735 million a year now to $1 billion by 2027, Hadden said.

Gross sales for fiscal 2019 will be up 3.5 percent or so from last year, slightly higher than in the company's private management agreement with the state, Hadden said. The firm's compensation is "strictly incentive-based," he continued. "The only way we make money on this contract is if the state makes money." However, according to the lottery's spokesman, Camelot does receive a base management fee to operate the lottery, plus incentives based on actual sales.

Camelot at least for a while may have a fairly free hand. Acting Lottery Director Greg Smith resigned last week to take over as director of the Connecticut Lottery. A Rauner spokeswoman said a replacement will be named shortly.

Update— According to the lottery, the state will pick up the $35 million residual value payment owed to Gtech, now Camelot. The money will come from reduced state expenses under the Camelot deal, says a spokesman.

And, more details on Camelot's compensation: It gets a management fee of up to roughly $26 million a year, that slowly will increase over time—enough to cover actual operating costs, says the lottery spokesman. Camelot's operating subcontractors will get up to $139 million a year to start. Any Camelot profit will not be guaranteed but passed on performance incentives.