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As a child one of my tasks was to fill in the weekly Pools coupon before the man who collected it arrived at the door. Years later, one legacy of this is my desire to put a cross in a box every time I see the words Queen of the South or Hibernian. The other is a friendly feeling towards Littlewoods Gaming, which I associate with home, childhood and the possibility (sadly never realised) of winning shedloads of cash.

This trusted brand status, rare in the arena of gambling and gaming - in which the Department for Culture, Media and Sport believes there is an estimated 1,700 'remote gambling' web sites - gives Littlewoods Gaming a valuable leg-up when it comes to the highly competitive digital market.

"If you play a Littlewoods game, you know your money is safe and you will be paid," says Peter Cuffe, director of interactive at Littlewoods Gaming, which was bought by Sportech in 2000. "That helps us in the crowded and noisy digital gaming environment. We want to be seen as the betting and gaming company that you will let into your home."

The company, founded in 1923, still runs a door-to-door collection network along with more than 11,000 retail outlets, but it has also developed a raft of interactive products, made available through digital channels such as the internet, WAP and interactive TV. And the greatest of the three, at least for Littlewoods Gaming, is iTV. The company announced a five-year agreement with ITV earlier this year as part of the channel's drive to boost interactivity.

Under the agreement, Littlewoods Gaming becomes the exclusive betting and soft-gaming partner for all programming until 2008. A gaming service is set to launch this month, sitting two red button clicks away from the ITV broadcast, and Littlewoods Gaming will also be offering interactive gambling and games linked to programmes such as Champions League football and Pop Idol. It has already run a game alongside this year's I'm a Celebrity Get Me Out of Here, in which viewers paid 50p to feed virtual celebrities foods such as Champagne or chocolate in order to win points. The highest scorers could then pay an additional 25p to be entered into a prize draw.

As part of the recent ITV deal, Littlewoods Gaming is launching a new site (www.gameon.com), which will be promoted on ITV and other media.

The firm's existing site (www.littlewoods gameon.com) will continue to run, but will focus on GameOn.tv.

It is not often that a company prioritises iTV above the internet, but there are clear reasons for doing so in the case of Littlewoods Gaming.

"TV is the big driver for us because it delivers a synchronised mass audience," explains Cuffe. "The internet is important as a support channel for that, but our main focus is on television." Littlewoods Gaming decided to partner ITV as a result of the perceived brand-fit between the two companies and because of the mass audience that ITV is able to deliver. Although the channel did not have any interactive elements in place when the agreement was signed, it has since set up a unit to drive interactivity forward and identified a raft of programmes that will gain interactive elements over the next year.

"Like Littlewoods, ITV is a brand which is accepted in your home," points out Cuffe, who joined the company in 2000 as its first interactive media director. "We had to go to a major broadcaster because you cannot do the kind of games we want to do without a critical mass of viewers."

To promote its launch on ITV, Littlewoods Gaming is offering viewers the chance to win a prize of £2 million, the largest amount ever offered on interactive TV and something which should get the new service noticed.

"You need to have a reasonably aspirational prize. With a small audience there is the risk of not making the revenue to justify the prize," continues Cuffe. "If we had gone to a marginal digital channel, we would be looking at an audience of 200-300 people, but with ITV a big audience is 10 million or 15 million people."

As well as the brand-fit, however, is the simple fact that betting and gaming companies are two-a-penny on the internet at the moment. With no real barrier to entry, market competition is rife on all sides, whether it be lottery-style games, soft-betting, sports-betting or online casinos, all of which Littlewoods is currently engaged in.

"The barriers to entry online are very low, so it is difficult for us to make a splash there in the long run," admits Cuffe. "As soon as you come up with a game, it can be copied all over the internet. However, this is not the case with interactive TV and we are hoping that our deal with ITV will give us the opportunity to define what betting and gaming is like on that platform."

As a company, Littlewoods Gaming is used to controlling its channel of distribution - its door-to-door network - and it believes iTV offers more control than the internet in terms of 'owning' the channel. But Cuffe believes that the agreement is also beneficial to ITV. "So far, interactive TV has been about voting, but that has to reach some sort of plateau," he points out. "In fact, participation in voting for no personal benefit is already levelling out, as we can see with this year's Big Brother. We bring the opportunity for personal gain, which is a natural extension of the voting mechanism."

However, Lisa Griffin, gaming analyst at stockbroker Robert W Baird, believes that Littlewoods Gaming is getting more out of the deal than the broadcaster. "It's more important to Sportech than it is to ITV ," she suggests. "Littlewoods has a good consumer brand, though not an untainted one. The Pools is slightly dated and needs a bit of a shake-up." But Griffin does believes that the trustworthiness of the gaming brand will work in Littlewood's favour. "It is a safe brand, which is important if you are asking new punters to punt," she adds.

The ITV deal is not Littlewoods Gaming's first foray into iTV. It has been running a site on Sky Active's walled garden service since November 2002, and Cuffe even suggests the firm has been engaged in interactive TV since 1960 when ITV first began broadcasting the Pools results on television.

"Interactivity is not just about technology. People who fill in their coupon as they watch TV are interacting with the broadcast," Cuffe claims.

"And you're going to pay far more attention to the results of a match between Hibernian and Queen of the South if the result is important to your Pools score than if you were just watching."

The ITV deal will allow viewers to access Littlewood's existing games.

"The Pools is still our main product," says Cuffe. "It went through some difficult times when the National Lottery launched, but new channels are giving it new life, taking it to a younger audience and making it easier to enter." Littlewoods Gaming is considering multiple-entry channels for the Pools - not just coupons but mobiles, internet, SMS and even MMS.

Although Littlewoods Gaming is not neglecting the internet, it is nowhere near the top 10 UK gambling web sites by market share, according to Hitwise, which places Littlewoods' casino site at number 121 and its soft-gaming site at 127 in the rankings (see graph, p32). The company has its fingers in a number of online pies, such as its sports betting site Bet Direct (www.betdirect.net), which launched as Bet 24/7 in 2000, its online casino run from the Isle of Man, unveiled in October last year (www.littlewoodscasino.com), and its current main site (www.littlewoodsgame on.com), which contains a raft of games, including a lottery on the National Lottery.

"The law does not let anyone bet on the outcome of the National Lottery, but we can run a lottery on it," says Cuffe. Under the law, a lottery sees players contributing to a pool of money, which is shared among the winners, while betting legislation applies to games offering fixed odds (see box, p33). Littlewoods Game On also offers interactive scratchcards whereby winning numbers are revealed during games such as Space Invaders, which punters pay £1 to play. "Entertainment can enhance the betting and gaming experience, while betting and gaming can enhance the entertainment experience," adds Cuffe.

To promote its internet activities, Littlewoods Gaming relies heavily on affiliate marketing and recently signed a deal with TradeDoubler to extend its affiliate network beyond the 300 web sites it currently uses.

"If you are creating a gaming portal, you either invest in developing a destination site in a very crowded market or you develop great products and take them to where the consumer already is," points out Cuffe.

Despite all of its interactive activity, and the fact that Littlewoods Gaming predicts that it will be reaping as much as half of its total revenues from interactive platforms by 2005-06, Cuffe doesn't define Littlewoods Gaming as an interactive firm. "The bulk of our revenue is currently not from interactive," he says. "We are interacting with our customers, but we are not a technology company." And Robert W Baird's Griffin notes: "Littlewoods is using more traditional revenue to underpin more forward thinking models, which is attractive to investors."

Cuffe himself has a strong background in interactivity, though not in betting. Before joining Littlewoods, he had never placed a bet in his life. He set up new-media division Blue Marble at advertising agency the D'Arcy Group, which he joined in 1993. Blue Marble worked with clients such as Coca-Cola and Royal Mail, but disappeared after D'Arcy was folded into Publicis in 2002. Prior to that, Cuffe ran his own interactive company, which was launched in the 1980s and specialised in the production of CD-Roms for companies such as Eurotunnel. While he was at Blue Marble, one of Cuffe's clients was Littlewoods, and, he says, he had an epiphany.

"A real light came on in my head. I realised that betting and gaming is the perfect product for interactive media because it is pure logic - not selling physical products but opportunities," he says. "Technology has to be about adding value, not about interactivity for its own sake. I don't think anyone, including ourselves, has really got that right yet, but our deal with ITV puts us in a real position to do it."

While its deal with Littlewoods will drive ITV's foray into revenue-generating interactive gambling and betting, the channel has a long way to go before it catches up with rival Sky digital. Skybet, BSkyB's wholly-owned betting business, saw revenues from interactive betting rise 104 per cent in the six months to 31 December 2002. Meanwhile, the total number of bets received through TV grew by 160 per cent.

Sky digital's gaming section, Sky Winzone, includes games, sports betting and instant jackpots. Viewers access it by pressing the 'interactive' button on the Sky remote control. The sports-betting section has services from Blue Square (now owned by Rank Interactive), Ladbrokes and Sky's own Skybet service, while the games section contains Skybet Millions, Arcade Horse Racing and Diamonds Are Forever. Littlewoods Game On, including the Pools, instant wins and lotteries, is part of the Instant Jackpot section, but it is competing with Betting Corp's Play Monte Carlo, Rank Interactive's Fancy a Flutter and Skybet Vegas, which launched in March this year.

It is obvious that iTV is an important channel for betting and gaming companies. Rank, which launched its joint-venture bingo-style games channel Fancy a Flutter in May, claims that nearly 35 per cent of its Mecca Bingo customers also subscribe to Sky digital, so it was an obvious move to target a channel specifically at them. The gaming giant owns 28 per cent of the venture, with the rest held by technology company NDS, a News Corporation company.

Rank is providing its fixed-odds bookmaker permit, use of the Rank and Mecca brands, and marketing and customer service expertise. Meanwhile, NDS, through its subsidiaries Orbis and Visionik, delivers the iTV technology, account management, and design and application development.

"This joint venture is taking advantage of the considerable crossover of Mecca Bingo players who are Sky subscribers, forming the foundation to build this channel," says Dr Abe Paled, chief executive and president of NDS Group.

Mark Smith, chief executive of Rank, adds: "We believe that the combination of Rank's brand and NDS technical innovation will give us a real advantage in the increasingly competitive interactive gaming landscape."

The channel offers four games, based on titles already available on Rank's web site Rank.com. Viewers, who must be aged over 18, can register on the site or the channel, and gain the chance to win up to £500,000 from a minimum payout of 20p. Winnings are credited to registered debit or credit cards.

Interactive TV is clearly the key to gaming and betting companies, many of whom cite the demographic fit as the main factor driving their adoption of this channel. Broadcasters such as Sky digital and ITV are obviously just as keen to harness the revenue-generating and interactive enhancement opportunities offered by gaming companies.

Sky digital has already established itself as the home of iTV gaming, particularly since it published a code of best practice for its own platform, which the gambling charity GamCare hopes will be adopted by the whole industry. It remains to be seen whether Littlewoods' agreement with ITV will enable the broadcaster to catch up with its satellite rival.

Legislation for remote gambling is eagerly awaited

With the gambling laws delayed, probably until the 2004-05 parliament session, the draft Gambling Bill is currently being looked at.

"The government has been talking about updating the betting regulations, which didn't envisage interactivity, for some time," says David Zeffman, partner at law firm Olswang. "Under current legislation, a lot of things are fuzzy and grey." It is expected that the existing Gaming Board will be replaced by a Gambling Commission. The Department of Culture, Media and Sport published in April 'The Future Regulation of Remote Gambling', which laid out the role of the Commission in licensing 'remote gambling'; designed to include mobile, iTV and web, and any future technology. The paper also tackles safeguards to protect kids and payment methods.

It says the Commission should issue codes of practice and a kitemark for operators' home pages. There will be three categories of 10-year licence: gaming, betting and lotteries.

Suggested safeguards include warnings that kids cannot play; a prohibition on anything that obscures the PC clock and a 'reality check' every hour to remind players how long they've played. It also calls for more stringent registration and that games should be held on a server located in the UK.

In terms of self-regulation, BSkyB has published a 'code of best practice' for firms offering betting services on Sky digital. Those complying can display a kitemark.

Camelot to introduce online entry for Lottery players

Those who once dreamt of winning the Pools probably now dream of winning the lottery, making Camelot the main rival for Littlewoods in the mass-market arena.

It took The National Lottery operator a while to get to grips with digital, but it now offers a raft of interactive products, having invested £45m in interactive media.

Online entry to the Lottery is planned for the end of 2003, with a launch on Sky Active by Spring 2004 and mobiles by Summer 2004.

Camelot's recent launches include a dedicated National Lottery channel on MSN and interactive instant-win games such as Pluck A Duck and Holiday Bonanza through the site (www.national-lottery.co.uk). The games, promoted in a three-month online promo this year, were created by Publicis with media buying by Tribal DDB.

As a government-backed initiative, The National Lottery needs to show best practice in all its activity. The National Lottery Commission acts as a regulator in this area to protect vulnerable players and make sure the maximum amount of money is raised for good causes.

"Although people rightly have concerns about online gaming, technology provides control," says Brian Pomeroy, chairman of the National Lottery Commission. "A 16-year-old could walk into a shop and buy a Lottery ticket, but they cannot online. All players' details are checked at the point of registration by data company Experian."

Players can opt to limit the games they play. Payment is via a Player Account, charged with funds from a bank account. There are limits on the amount transferable (£100) and no game costs more than £1 to play. Prizes of up to £300 are paid into the Player Account and those over £500 by cheque.