The thin line between a winning formula and a losing streak

Halfway through my interview with the National Lottery boss, Dermot Griffin, I ask if he thinks playing the Lotto is gambling. It's a loaded question but a legitimate one. Buying a lottery ticket is a fixed-odds bet, akin to spinning the roulette wheel. The only difference is the chance of winning. In the case of roulette it's 35 to one; in the case of the Irish lottery it's 10.7 million to one.

The colossal difference seems to blur the connection for many people, allowing mass-participation lotteries sell themselves as purveyors of harmless fun, separate from their more socially destructive bookmaking and casino cousins.

For Griffin the dividing line seems to come down to stake – small in the case of lotteries, potentially big in the case of sports betting – and to the money raised for good causes. “The National Lottery differs from other forms of gaming in that it is based on many players wagering small stakes. It was also set up with the express purpose of raising funds for good causes,” he says.

Since its inception, in 1987, the franchise has raised more than €5 billion for good causes, channelling money into hundreds of charities and community organisations. “And, unlike bookmakers, we don’t play against our players. We say, here’s the percentage that’s going into the prize fund, and that will be won, it’s just a question of who wins it.”

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Valid though his points are, they're more like mitigating factors. The National Lottery's newly revamped website has about 20 flashy instant-win games that wouldn't look out of place on a traditional gambling website, and would equate to what addiction experts view as trigger points for problem gamblers.

Nonetheless, Griffin says the business has endeavoured to be responsible in opening up its online portal, placing strict controls on how much time and money players can spend online.

The last time I met Griffin, in February 2015, he was a harried man. The lottery had for the first time in its 27-year history been forced to postpone its Wednesday- evening draw following a technical blowout that downed ticket machines in shops across the Republic.

The newly privatised business, which is now run by Premier Lotteries Ireland instead of An Post, had just switched to a new technology platform that appeared to be malfunctioning. Griffin was getting it in the neck from disgruntled punters, out-of-pocket retailers and the business's new principal owner, Ontario Teachers' Pension Plan, known to be a fearsome taskmaster.

The incident, coming on the back of problems with new in-store ticket terminals, had put the business in the eye of a storm like never before, and prompted allegations that it had skimped on technology to recoup the €405 million spent on the Irish licence.

Griffin, however, lays the blame squarely on Telefónica, the lottery's telecoms provider, and a freak event, which saw the telco's Madrid exchange go down and a lightning storm knock out its back-up routers. A report to the lottery regulator has never been made public.

“When you’ve no telecoms you can’t take the wagers. By the time we got [the system] back up we felt there wasn’t enough time for everyone who wanted to get into the draw,” Griffin says, insisting the lottery’s new gaming technology was not at fault.

The €10 million draw, the largest in 10 months, took place the following night amid recrimination about the new operator’s integrity. Greater resilience has since been built into its telecoms network.

Griffin sidesteps a question about how difficult this period was for him personally, or how close he came to getting the chop, insisting the privatisation process and the move to a new technology platform have been a success and have given the business a long-overdue facelift.

Either way, Griffin is more chipper than he was back then. Not only are the company’s technology woes seemingly behind it, but he’s just delivered a rosy set of annual accounts for the business and its new owners.

They show that turnover – effectively revenue from ticket and scratch-card sales – rose by 12 per cent, to €750 million, in 2016, the highest level in nearly a decade. Sales through its interactive channels also jumped, by 77 per cent, to €40.7 million, while the number of players registered online has leapt to 387,000. This was achieved alongside a near 10 per cent rise in offline sales despite fears that opening up the online channel would cannibalise the retail business. The franchise also delivered €213 million – about 30 per cent of turnover, up from €193 million in 2015 – for good causes.

Perhaps most significantly for Griffin, he has also delivered a €16 million operating profit, up 121 per cent on the previous year, for his Canadian bosses, seemingly justifying their faith in sticking with him.

Standing still in the fast-moving gaming industry is inviting trouble, however, as is overplaying your hand when you have a winning formula.

A case in point is Premier Lotteries Ireland’s UK sister company, Camelot, also owned by Ontario Teachers’ Pension Plan, which appears to have damaged its business model by chasing bigger and bigger jackpots, which typically bring in more players, bolstering ticket sales. Two years ago, much to players’ annoyance, Camelot added 10 numbers to its original 49-number matrix, reducing the chance of winning the jackpot from one in 14 million to one in 45 million.

Before the 10 extra balls were introduced punters scooped the jackpot 61 times in just 12 months, but the top prize has been claimed only 39 times since the rule change. In January last year the jackpot hit a record £58 million, but it was only after 14 rollovers and serious “jackpot fatigue” among punters. The changes have backfired, triggering a significant fall in ticket sales for the first time in more than a decade.

The Irish lottery took a more modest approach to change, deciding to tweak the format by adding just two numbers to its 45-number matrix while upping the price per line by 50 cent. Although this reduced the chance of winning from one in eight million to one in 10.7 million, it has resulted in bigger jackpots and higher ticket sales without alienating punters.

Since the rule change 23 jackpots of between €5 million and €10 million have been won, 10 per cent more than under the previous format, and five of €10 million, 12 per cent more than previously.

Perhaps surprisingly, the new format has yet to deliver a jackpot bigger than the record €18.8 million scooped by a syndicate in Carlow in 2008. Griffin and his team, however, are confident of hitting a €20 million prize before 2020. “You need to get the balance between the numbers, the price and the prize right,” Griffin says, noting that although creating exciting jackpots is part of the business, too many rollovers can deter players.

Despite what you might think, big city-centre shops, not tiny west-of-Ireland village stores, generate the most jackpot winners, with the GPO, on O’Connell Street in Dublin, topping the rankings. “It’s simply a product of footfall,” says Griffin.

Opening the business to an online audience, one of the carrots of privatisation, has obviously been a boon, but it has coincided with the emergence of an Uber-style assault on the business. Websites like Lottoland and Jackpot. com are now offering consumers the chance to select numbers both for the lottery here and, perhaps more enticingly, for the monster draws in the US, where jackpots frequently hit $1 billion, without buying an actual ticket: if a player hits the right numbers, the companies pledge to pay the equivalent prize money, relying on a complex formula of hedging and insurance.

Lottoland has upped the ante by offering a price of €2 per line to play EuroMillions, compared with €2.50 through the National Lottery. The normally soft-spoken Griffin doesn't hide his venom for the new buccaneers of the trade. They are, "in effect, parasites trying to jump" in on top of the lottery's jackpot. "The reason the lottery was set up was to raise funds for good causes, and these firms pose a threat to that," he says, pointing out that the firms are based offshore and are not regulated like the lottery. Although they have yet to make much of an impact here, they've grabbed market share in the UK and Australia. The longer they exist the greater the foothold they get, he says.

Surfing the privatisation wave appears to be a theme in Griffin's career. Before becoming the lottery boss he was a commercial director for Vodafone, having made the transition from Eircell, Telecom Éireann's former mobile arm, which was sold to the UK telco in 2001, a process not altogether dissimilar from the National Lottery's recent privatisation.

He took over at the company in 2006, when it was operated by An Post, and was appointed chief executive of Premier Lotteries Ireland as part of the privatisation process, in 2015. “This is the second time I’ve moved from the public to the private sector,” Griffin says. The key lesson from both processes, he says, is planning.

The first thing jackpot winners are told when they are presented with their cheques at the National Lottery headquarters is to do nothing for at least a period, presumably to guard against rash undertakings. It’s not a luxury afforded Griffin, who knows that players’ appetites can change on a whim and that today’s winning formula can be tomorrow’s losing streak.

CURRICULUM VITAE

Name Dermot Griffin

Age 55

Position Chief executive of Premier Lotteries Ireland, operator of the National Lottery

Lives Sutton, Dublin

Family Married, with two daughters and two sons

Something you might expect As operator of the State's favourite weekly flutter, Griffin is forbidden from playing. But, he says, buying a lottery ticket is the first thing he does when on holidays abroad

Something you might not expect Unusually for an accountant, he claims the most enjoyable part of his job is handing over fat cheques

* This article was amended on the Tueaday, 3rd October, 2017.