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British Media tycoon Richard Desmond is in the lottery business now too

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By Clive Minchom and Einat Nahari 

In December 2012, the British Advertising Standards Authority (ASA) banned the English lottery organization, the Health Lottery from running a potentially misleading advertisement which, its critics alleged, seemed to encourage ticket purchasers to believe participation in the Lottery could solve their financial security problems, something denied by an official of the Health Lottery.

The Health Lottery has also come under fire from a number of charities, and some Members of Parliament, since its re-launch in 2011 under the control of the private business man Richard Desmond, in particular because it seems to devote a lower level – around 20% – of its revenues to specified “good causes” compared to the National Lottery which devotes a higher amount – 28%, and even higher amounts still for other small local lotteries with which it may be said to compete.
Richard Desmond is a British media tycoon, worth today an estimated $2 billion according to the Forbes magazine world’s richest men survey – ranking there in 804th place.

He was born in 1951 in North London to a Jewish family and left school at the age of 15, after his father gambled away his fortune, to become the family bread-winner. In his early years he worked in the advertising industry, opened a record store and played drums at night for a number of local bands.

His interest in music led to the start of his first consumer magazine International Musician. But it was obtaining the British rights to Penthouse in 1983 that first made him rich, He then followed up with the launch of a number of additional  x-rated magazines and, later, added a number of both adult and regular TV channels, as well as the weekly celebrity magazine OK! In 2000 he acquired the Daily Express and Daily Star, including their Sunday editions, which catapulted him to the rank of respectable English newspaper baron in a long tradition of such gentlemen.

As his wealth and scope of business activities grew he eventually sold off the adult magazines leaving his holding company, which has the rather strange name Northern & Shell, today a hugely profitable media octopus. As with many rich people, particularly those who are completely self-made, he pays a lot of attention to philanthropic efforts and has endowed a number of charities with large amounts of money and substantial amounts of his own time.

Which brings us back to the subject of lotteries, which are usually State-sanctioned gambling programs offering rich prizes to their few winners.  They tend to be strictly regulated to ensure adequate pay-outs to participants, to ensure a substantial proportion of their revenues goes to “good-causes” – i.e. projects approved but not directed by the State and, finally, usually providing the State with some general revenues as well.

In economic terms such lotteries are a form of “voluntary taxation”, which also tends to be regressive in so far as their ticket purchasers are usually on the lower socio-economic levels of the population.  But they remain nevertheless immensely popular with voters so few governments, in all parts of the world, can resist them – especially since they help fill up government coffers at the same time.

In Britain a law passed in 1698 banned all lotteries unless approved by Parliament. It took until 1934 for certain small lotteries to be approved and then, in 1994, the Conservative Government of John Major approved the National Lottery which is a large national lottery system, operated under licence by a private operator the Camelot Group.

Out of moneys raised through ticket sales 50% goes to the ticket winners, at least 28% goes to specified “good causes”, 12% goes to the government as general revenues, 5% goes to ticket retailers as commission and the balance of about 5% to the operator for overhead and profit.  The beauty of the 28% is that it effectively enabled the British government to provide money for, e.g., the Arts and Sports on a consistent multi-year basis completely outside the purview of the regular Government budget itself, and therefore beyond the axe of the Treasury when budget cuts were considered necessary.  The British success at last year’s Olympics for example was considered by many people to be significantly due to the money channeled to British sport over the previous fifteen years or so beyond the volatility of short-term control by Politicians.  Long may it continue!

The largest single prize so far awarded by the National Lottery has been over £160 million, so it is hugely popular. Until recently National Lottery tickets in England cost £1 each to purchase, though the operator Camelot has now recently raised the price to £2 each.  This may, or may not, encourage purchasers to spend more, if they only buy one ticket, or not affect them much if they simply purchase fewer multiple tickets.

In any case it has upset Richard Desmond who operates the Health Lottery as a parallel lottery of his own, which he took over in 2011 as one of the small local “society” lotteries previously sanctioned.  To everyone’s surprise he then bent the rules and expanded the scope of this lottery by re-organizing it as a group of 51 such society lotteries, still generally health related for the good-causes they promote, thereby making its’ prizes more attractive and saleable.  He also promotes the Health Lottery heavily in his own newspapers, thus today offering some robust competition to the National Lottery, though still of course much smaller.  He is today firmly asserting he is keeping his ticket price at £1 each, and we shall see how they duke it out against one another in the market place.  It even reminds one a little of newspaper pricing wars of old, before they all fell victim to the internet…..

Since Richard Desmond’s stated goals are to extend the benefits and reach of his charitable activities, to the extent that this is so it certainly moderates any criticism that may be directed towards him, of which currently there is a good deal.  Even today the self-made man in Britain is slightly frowned upon it seems, no matter how successful.




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