Clarification point 3 - Retention structure (chapter 15)

With respect to the net sales retention, Bidders must complete a separate Net Sales Retention table for each of the four types of game (draw-based games distributed through retailers; draw-based games not distributed through retailers; scratchcards; and interactive instant win games). 

Bidders may, if they wish, specify the same retention rates for each game type.  But to the extent that this results in differing incentives for particular game types (for example, because certain game types have higher variable costs or higher prize payout ratios than others), the Commission will expect this to be addressed in the Bidder’s commentary on the incentive structure (see section 15.4.2.1 of the ITA).  Bidders should also take careful note of the Commission’s views on the incentive structure, as set out in section 15.2 of the ITA).

With respect to the number of retention tables, if Bidders believe that there is a strong case for splitting one of the four types of game (draw-based games distributed through retailers; draw-based games not distributed through retailers; scratchcards; and interactive instant win games) into distinct sub-categories, and specifying separate retention rates and tranches for each sub-category, then they are encouraged to contact the Commission to discuss this further, in accordance with the process described in Section 4.5 of the ITA.

Before doing this, Bidders are encouraged to read carefully section 15.2 of the ITA, which sets out the Commission’s views on the incentive structure, and the paper The Licensee’s Retention for the Third National Lottery (this was distributed at the Bidder Briefing on 15 May 2006 and is also available on the Commission’s website), which summarises the main reasons why the Commission has adopted the approach set out in section 15 of the ITA.

For the Commission to agree to a proposed sub-division of one of the current game types, it would need to satisfy itself that there was a strong argument in favour of the additional split, and also that the proposed sub-division is one that is practical, implementable and robust.

Issue date: 22 August 2006