- Government report into gambling industry due in October
- Crackdown on betting stakes would harm bookmaker profits
The future of the high street bookmaker in the UK is still extremely unclear as the industry continues to wait for a government report into fixed odds betting terminals (FOBTs) and their impact on problem gambling rates.
This report is expected to call for a reduction in the maximum stake allowed on FOBTs, and could also recommend machine numbers are cut significantly.
With these game terminals accounting for over half of high street income nationally, operators could face a devastating blow to profits that may even force the closure of high street betting shops, or push leading companies into alliances and mergers to stabilize their profits.
Industry braced to “endure upheaval” of FOBT reduction
The Association of British Bookmakers (ABB), the industry trade body, has described a reduction in betting stakes as ‘a price that should be paid’ – but only if there’s compelling evidence that problem gambling rates will fall as a result.
ABB chief Malcolm George told Casinopedia recently that up to half of the UK’s 9,000 high street betting outlets might face closure when maximum FOBT stakes are introduced – with a potential 21,000 jobs lost if the rate is set at £2.
The current maximum stake is £100.
The Gambling Commission’s 2015 figures suggest FOBTs account for as much as 56% of total high street gambling spend, but the industry is prepared to take the hit if it will reduce problem gambling rates.
“If there’s the benefit to problem gambling then this is the price that should and has to be paid,” said George in his recent interview. “Economic arguments against stake reduction in of themselves do not justify inaction.”
However, he also notes that tackling FOBTs alone will not solve the problem of rising addiction rates, and only an industry-wide strategy would prevent pushing problem gamblers off FOBTs and onto other forms of gambling.
Strong pressure makes FOBT decision almost inevitable
The government has faced a lot of criticism over the speed with which this review has been carried out, and there was outrage last month when a national newspaper suggested the report might be scrapped entirely.
Since then, the Chancellor has confirmed that the Department for Digital, Culture, Media and Sport will complete and publish their findings this year, though the release has been delayed until the end of October.
The media has called FOBTs the “crack cocaine” of gambling, and has singled the machines out for special focus due to the ability for players to stake and lose £300 per minute. While a degree of problem gambling can be attributed to the machines, the debate rages on about the extent of the problem they cause.
Both opponents and allies of the government have also called for swift action on FOBT stakes, suggesting a mandatory stake reduction to £2 per wager is necessary. With public opinion siding heavily against the machines, any decision not to act would likely be an unpopular one – regardless of the findings of the report.
Can high street bookies survive a stake reduction?
Right now, there is no certainty for gambling operators.
They can only plan for the worst case scenario, and hope for the best.
However, some bookmakers would be hit harder than others if the suggested stake reduction was implemented.
Those who have strong online and traditional bet lines might be able to weather the losses, but those who rely hugely on FOBT incomes may well be shutting down premises and handing out redundancies.
High street betting outlets are already struggling to compete with the demand for mobile betting, as more consumers opt for the fast and easy online option rather than visiting a physical premises.
According to a Times report last month, William Hill, Ladbrokes and Coral stand to lose the most from shackles being placed on FOBTs, while Paddy Power Betfair is among the operators making more away from the high street – so if a limit is imposed, Paddy Power Betfair is better placed to ride out the losses.
Indeed, its outgoing CEO Breon Corcoran was not particularly troubled by any limits on FOBTs – knowing that his firm’s exposure to them was much smaller than his rivals.
Bookmakers look at options ahead of decision
For those operators who make most of their money from FOBTs, the upcoming decision could be a catastrophe. However, delays in publishing the report, and inevitable further delays during the voting and amendment process, give those operators time to prepare. Diversifying into online markets or expanding online offerings could help high street outlets recover lost FOBT profits, as can increased marketing of traditional bets.
Improving public opinion of gambling may also go some way to win back punters. The debate around FOBTs has put problem gambling in the spotlight and focused heavily on the pitfalls of gambling, while recent advertising complaints have highlighted a disconnect between gambling companies and their audiences. By showing a more positive and socially responsible image, the gambling industry could widen its market and mitigate its losses.
Ladbrokes Coral merger back on the table?
Ladbrokes Coral could be sold to GVC, in a reviving of the merger deal talks that emerged earlier this year, reported the Sunday Times. The possible £2 billion deal would continue the trend of consolidation in the market.
A Ladbrokes Coral statement made clear that the merger is still extremely uncertain, and that “the timing or terms of any such agreement” are also unclear at this stage.
A deal has never been struck, despite many talks, in part due to restrictions set by the Competition and Markets Authority in 2000.
The temptation towards consolidation will only get stronger as the regulatory environment in the UK continues to show signs of tightening up.
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