I'm a celeb, have a bet on me
By Kate Bulkley
Monday May 19, 2003
Reality TV shows such as I'm a Celebrity.... attract huge audiences - a potential market for interactive gaming. But can ITV and gambling giant Littlewoods persuade viewers to part with their cash? Kate Bulkley reports
In the past few years, reality television has changed the lives of many ordinary people and given a new lease of life to a bunch of C-list celebrities, but this summer its power for change could spread to the once all-powerful pools company Littlewoods. And ITV could do pretty well out of it, too.
Only a decade ago, any alliance between Littlewoods and ITV would have been highly improbable. At that time, ITV was still an analogue-only channel while interactive television was a glint in the eye of a few techies. Meanwhile, there were 50,000 Littlewoods pools collectors knocking on doors across Britain gathering in weekly cash that, at its peak, brought in £800m a year for the Liverpool-based betting company.
The advent of the national lottery in 1994 caused a massive slump in the pools business which means that today Littlewoods Gaming (owned by Littlewoods Retail until late 2000 when it was sold to the listed company Sportech) survives on less than a quarter of its massive turnover of the mid-90s. Over the same period, ITV has seen both its audiences and its advertising revenues decline.
Now an exclusive, five-year interactive television deal signed with ITV just over a year ago is about to change Littlewoods' fortunes and (ITV hopes) add some dosh to the television giant's bottom line. In fact, the deal marks a sea change in how Littlewoods will make its money. At least that is the plan. The gambling giant (which still gathers in 85% of all pools revenue in the UK) predicts that it will be reaping as much as half its total revenues from various interactive platforms, including television, by 2005/06.
For ITV, the financial impact of the deal is still cloaked in secrecy, probably because the unit that is set to drive interactivity on the channel was only set up last month. What Jane Marshall, controller of interactive content, can say right now is that she has identified a raft of 10-15 programmes that will add interactive elements over the next 12 months.
Although Marshall, who up to last month worked for Carlton Active, declines to name the shows that will add interactivity, she admits to "ambitious" plans focusing on the big audience-getters, such as sport and mass-entertainment programmes. She adds that daytime and the 16-34-year-old age-group is also in her sights and that drama does not have an obvious "hook" for interactivity. In fact, ITV has added some interactivity already. This season's Who Wants to be a Millionaire? has had an interactive play-along element every Saturday night, and The Brit Awards also has some interactive elements.
Beyond interactivity directly connected to programmes, Marshall also envisages a 24/7 gaming area that would sit two red-button clicks behind the ITV broadcast that would include everything from traditional betting to so-called "soft-gaming" services like daily quizzes.
"Not every programme is suitable for betting," says Marshall. "Significant revenues will come from the soft-gaming element and we do have financial targets, but we are not here to say that every show must have interactivity. Our plan is not that prescriptive." However, Marshall does admit that ITV is "ultimately interested" in having programme-makers bring forward programmes where interactive is a "key component".
As the traditional football pools business has continued to be eroded by the national lottery, Sportech's managing director Colin McGill has been keen to find new growth areas, launching an online business - Littlewoods Bet-Direct - three years ago and now moving into television. "In terms of being able to get to that exclusive mass market, we think that television is a much better medium than the internet," says McGill, a Scot who, before entering the world of gaming, was a corporate banker. "In a sense, one of the difficulties with the internet has been that the barriers of entry have been pretty low so there are a large number of competitors. What we are talking about with soft gaming is low-cost delivery, low-cost acquisition of customers and low-cost customer retention, and all of those are much easier to achieve on the television than they are on the internet."
For a company that has made its name collecting football pools money since the 1920s, the move online and on to TV is a metamorphosis of epic proportions. It is already exciting industry watchers, who anticipate that the forthcoming re-write of UK gaming and gambling laws, which will usher in more deregulation, will open more opportunities.
"The TV deal has enormous potential," says Paul Leyland, equity analyst at WestLB Panmure, the house broker for Sportech. "It is difficult to put a value on the broadcasting deal until we have some data back from some of the trials. But we can say that this sort of gambling spend is pitched at a more national lottery-style audience, by which I mean it's more entertainment than someone betting on the 3.15 at Lingfield. It's high-volume, low-spend gambling, which is a much bigger potential market."
Under the agreement with ITV in which the first real products could launch onscreen by the end of July, the broadcaster will use only Littlewoods as its official betting and soft-gaming partner for all its programming up until 2008, with an option to extend to 2010. That means that mass audience shows such as I'm A Celebrity..., Pop Idol, Champions League football, and whatever new shows are developed, will all become opportunities for Littlewoods to provide interactive gambling and games.
The deal is a revenue share that also includes a minimum guaranteed revenue stream for ITV that could bring the broadcaster £5m in additional revenue in the first year alone. Originally penned when Stuart Prebble was chief executive of ITV and before ITV had a deal with Sky to launch interactive services, the pieces are now in place to start launching games.
Results to be announced later this week of an experimental gaming product during the second week of the recent series of I'm A Celebrity.... will be the first indications of how successful the new relationship might be. Ahead of the announcement, ITV's Marshall would only say that the interactive usage on Celebrity was "extremely encouraging". In addition to the voting application developed by ITV, Littlewoods developed a game loosely linked to the show. Launched in the second week, Celebrity Temper Tantrums allowed viewers who stumped up the 50p entrance fee to "feed" virtual celebrities "celebrity food", such as champagne or chocolate, to win points. For another 25p, high-point earners could register for a daily prize draw of a DVD player. Littlewoods would not disclose how many people paid to play, but they did say player numbers were "significant" and that some players kept playing for as much as 40 minutes.
For Littlewoods, the deal with ITV is all about getting access to mass audiences so the company can tap the anticipated growth in interactive TV gaming and betting, a market that the consultant firm KPMG says will reach £2.8bn a year by 2006. "We believe that soft-gaming is really well suited to television and to being driven by popular entertainment programmes," says Sportech's McGill. "We clearly expect that with the mass audiences ITV gets we can command a reasonable percentage of the total [igaming] market and that is very much a commercial measure for the success of the partnership with ITV."
If McGill's vision turns out to be the reality for Littlewoods and ITV, then neither of them will want to activate any get-me-out-of-here clause on this deal.