New licence shake-up

300 new staff to develop interactive games In-house sales force enlarged New software developed 25,000 new terminals installed Profit share reduced

In a fractious battle Camelot fought off a rival bid from Virgin boss Sir Richard Branson to clinch the new term, which it enters with a new chairman - the former head of Channel 4 Michael Grade.

But it also faces a substantial challenge to reverse four years of declining sales.

Though it raised over �10.5bn for good causes in its first licence period - well up on the �9bn it had promised - interest in the twice weekly draws and scratchcard games has declined.

Last November it was announced Camelot's half-year profits were down 27.3% on the year before after ticket sales fell 6.9% to �2.1bn.

Court battle

Lottery sales traditionally go down once the initial public excitement has worn off, but Camelot has also been distracted by the chaotic race to win the licence.

It seemed to have lost to Sir Richard's People's Lottery bid, only to win after a court battle and a change of chairman at the Lottery Commission.

Sir Richard Branson's People's Lottery lost bid.

Camelot originally said it would raise �15bn for good causes in the new licence period - a 50% increase - although the Commission said that was too optimistic.

There is further uncertainty ahead with the looming deregulation of gambling, which could tempt punters to have a flutter elsewhere.

Camelot is pinning its hopes on a substantial relaunch planned for the spring, with a new look, new games and a heavy marketing campaign.

But charities remain concerned that declining Lottery spending will hit their funding.

Gerald Oppenheim of the Community Fund, which distributes Lottery money to good causes, said there would be more specific targeting in future.

"It's worrying not just for us with potentially less money to distribute but it's also worrying for the charities and voluntary organisations that want to apply to us for their projects," Mr Oppenheim told BBC News.

"It will be very interesting to see as Camelot start their new licence what new games they come up with which may re-energise people to play more."