First year operations could fail to meet budget by a whopping A$226 million
The Australian media are speculating on the possibility that Intralot’s Aussie subsidiary may have its state licence pulled after estimates suggesting that its first year operational figures wll likely be shockingly lower than budgeted expectations.
The company launched its state lottery in Victoria last July, and documents under the microscope in the press suggest that Intralot is likely to fall $226 million short of its first-year sales target of $293 million. More than 200 of its 769 Victorian agents lost money between September and January, while 196 agents collected less than $22 a week, it is claimed.
The Victorian government has warned the company it has until the end of June 2009 to turn around its sales figures before a mid-year review that has the power to cancel its 10-year licence.
Reports are that Intralot has tried to rev up its marketing by engaging with former football star and marketing guru Sam Kekovich to turn its fortunes around by giving it a “human touch”. “Slammin’” Sam Kekovich (58) is an Australian media personality and former Australian rules football player famed for his controversial behaviour, both on and off the field, and most recently for his series of satirical advertisements as the spokesman for Meat and Livestock Australia (MLA) to promote the lamb industry.
The keno, scratchie and bingo operator has also embarked on a massive shake-up, according to the Topix blog, with Intralot’s head of Australian operations, John Katakis, sacking Melbourne public relations doyen Mike Smith and advertising firm, George Patterson Y & R. Industry sources claimed that the company had spent up to A$3 million on advertising since launch.
However a senior industry source remarked that this was about a quarter of the amount spent by lottery rival Tatts.
“That isn’t nearly enough to take on a brand like Tatts,” the source said. “To crack them you need to spend and invest in the product but they just don’t get it.
“John Brumby [Australian Labor Party politician and the 45th Premier of Victoria] couldn’t have come up with a better way to curb problem gambling. Not even the worst of addicts wants to play their games.”
Topix claims that Intralot is also considering severing ties with former ALP state treasurer and Intralot director Tony Sheehan. The Herald Sun last year reported that Sheehan had secured a $1 million deal for helping Intralot win its 10-year Victorian lottery licence, a claim on which Intralot has so far declined to comment.
The situation was sufficiently serious to prompt a visit to Australia by Intralot’s global chief Constantinos Antonopoulos in late February, holding discussions with the Victorian Gaming Minister Tony Robinson. He was apparently warned that the government would revoke Intralot’s licence and impose other punitive measures unless there was a marked improvement in performance, and this threat has added momentum for major changes in marketing the ailing business.
There were high hopes for the initial deal between Victoria and Intralot, with the Herald Sun reporting early in 2008 that prizes of up to A$1.5 million would be offered, and that the Victorian government expected to accrue additional revenues of up to A$1.5 billion over the ten year licence period from lottery and scratch card sales.
The projections were that punters would gamble $292 million on instant-win scratchies and lottery games in the first year alone. Second-year sales were anticipated at $395 million, and Intralot was free to expand the sale of gambling products to all retail outlets, including service stations, supermarkets, bottle shops, convenience stores, pharmacies and post offices. Marketing plans envisaged the use of traditional advertising tactics as well as more new media approaches involving text messaging and Internet promotion.
In terms of the agreement between state and lottery company, for every A$1 spent on a lottery ticket, the Brumby government would take 36c, 60c was to be returned in prizemoney and 4c accrued to Intralot as the operator.
Intralot sales outlets, which were expected to number over a thousand throughout the state, were to receive a 9 percent commission on top of the forecast sales figures, adding an estimated $400 million to the lottery gambling spend.
The way things are panning out at present, Intralot has not presented competitive pressure on the former sole lottery provider Tatts, which forecast lottery sales of more than $11 billion during its own 10-year licence extension.
The Herald Sun reported last year that the licencing for the Intralot deal had been delayed for more than 12 months after the emergence of undisclosed probity matters. A leaked report, compiled by Solicitor-General Pamela Tate, revealed Intralot was denied natural justice in probity assessments conducted by the VCGR, which had allegedly named Tatts as its preferred tenderer by suggesting it met higher standards of probity.
