eLBA: Irish lottery licence terms harming good causes

12 November 2019

The current licence terms for the Irish National Lottery are limiting the amount of funds raised for good causes in the country, with a new report by Dublin City University (DCU) suggesting that up to €43m (£36.9m/$47.4m) is being lost.

The report, commissioned by the European Lotto Betting Association (eLBA), said that the loss is due to the business approach of Premier Lotteries Ireland (PLI), which in 2014 paid €405m to operate the National Lottery for 20 years until 2034.

Entitled ‘An Analysis of Good Causes Funding Associated with the National Lottery and Factors Impacting its Long-Term Sustainability’, the report cites a number of factors impacting good causes funding in the Republic of Ireland.

One area of concern, according to DCU economist Tony Foley who authored the report, is an unprecedented level of unclaimed prizes returned to the operator. In 2018, €19m was returned in unclaimed prizes, with PLI able to retain these funds under current licence terms.

The report said other National Lottery licences do not operate this way, giving the example of the UK National Lottery, whereby unclaimed prizes are ring-fenced for contribution to the Good Causes Fund.

Elsewhere, the report cited a drop in good causes funding contribution relative to National Lottery sales. In 2009, this was 32.3% of National Lottery Sales, but by the end of 2018, this had fallen to 28.4%.

The report also flagged up how the value of National Lottery prizes has grown to a 56.3% of sales, above the minimum requirement of 50%. Foley said that a 2% reduction in prizes as a share of sales would yield up to an additional €13m in good causes funding each year.

Foley also raised concerns about the digital performance of the National Lottery, highlighting how online sales were responsible for 7.7% of total sales in 2018, approximately half the 15% target set when PLI took on the licence in 2014. The report said these lower-than-expected digital sales are having a negative impact on how much funding is going to good causes.

In addition, Foley made a case for online betting operators, saying that between 2014, when they joined the Irish market, and 2018, National Lottery sales grew 17.1%, with good causes funding up 17.5% in the same period. As such, the report said a ban on such operators would not boost good causes funding.

“The perceived threat of online lottery betting to good causes funding is in fact minimal in today’s terms, as indicated by the market share held by the licensed operators like Lottoland, especially in light of the robust sales performance of the National Lottery,” Foley explained.

“The reality is that issues such as the reduction in good causes funding as a percentage of National Lottery sales in recent years, the ongoing limited digital performance of the National Lottery, reduced player participation and the extent of the unclaimed prizes expected to be returned to the operator over the 20-year licence, are far more significant threats to the future of the good causes funding."

He added that there was little transparency around the lottery's financial performance, which he argued made it difficult for policymakers to address the issue.

“The National Lottery Regulator can support policymakers by ensuring that they have access to more detailed information than currently appears to be the case.  Better availability of information would contribute to ensuring that the right decisions are made to address the most significant risks to the long-term sustainability of good causes funding.”