The last few years have shown what can only be described as flaccid growth for the U.K. gambling industry. According to the Gambling Commission, total gross gambling yield was £14.4 billion (US$18.1 billion) in 2017-18, up a meager 5.88 percent from 2015-16, when the first statistics that include online appeared.
A key trend has been the shift in channel from land-based to online, with online market share increasing to 37.3 percent from 33 percent. This is more dramatically reflected by the 35.7 percent drop in U.K. gambling jobs from 167,839 to 107,940 over the same period.
Receipts from gambling taxes have increased by 7.3 percent over the same three years to £2.86 billion (US$3.59 billion). What is significant is that given the amount of public debate about the supposed growth of gambling over this period, there has been little statistical evidence to back this up.
Looking forward, the deadline for leaving the European Union (March 29) is hurtling towards us like a runaway train. Any question about the future of the U.K. must include an understanding of its implications. While the biggest constitutional change in postwar British history—and in this view, the biggest act of national self-harm—will have relatively little direct impact on the British gambling industry, as practically no EU laws impact it, the forecast economic turmoil that it will bring will indirectly affect the industry as revenues will undoubtedly drop.
The question on every gambling CEO’s lips will be, by how much and for how long? This all depends on what kind of Brexit we will have, and with less than three months to go at the time of writing, no one, not even the Prime Minister, knows the answer to that one. So, hold on to your hats. This roller-coaster ride will undoubtedly be messy, but unfortunately, the long-term structural trends for the industry are even worse.
FOBT Fixes
As with much to do with British political life at the moment, Brexit has sucked the very oxygen from everything else. This may well be why the adoption of the Gaming Machine (Miscellaneous Amendments and Revocation) Regulations 2018 on December 20, 2018 has passed so many people by.
This is the secondary legislation that reduces the stake of fixed odds betting terminals (FOBTs) from £100 to £2 and in one foul swoop critically injures the British retail betting market, puts thousands out of a job and will see the closure of thousands of betting shops.
And no one, apart from the bookmakers, seems to care. This political decision is symbolic to the argument that 2018 has been a turning point in the politics of British gambling, and that the end of the FOBT story has opened a Hellmouth of ever-increasing regulation and taxation that may never, in the short to medium term, be reversed.
For those of you in a blissful state of ignorance, let me get you up to speed on this cautionary tale. FOBTs are electronic gaming terminals that offer roulette among other games, but roulette is their main product. Developed in the late 1990s, they were offered in betting shops as automated betting machines, the argument being that roulette is simply a series of fixed odds bets on a random outcome. This was challenged by the then gambling regulator in 2004, the Gaming Board for Great Britain, who argued that roulette, as a casino game, could only be played in casinos.
Both arguments were valid under different laws, and it was agreed that the courts should decide. Unfortunately, this would not be the case, probably because both sides realized the potential legal costs, but it was later agreed that as long as the bookmakers limited the number to four per shop and kept stakes limited to £100 and prizes limited to £500, they could remain, as the soon-to-be-passed new gambling legislation would sort out the legal gray area. The Gambling Act 2005 was passed on the April 7, 2005, and it categorized FOBTs as B2 gaming machines and kept the quota per betting shop and stakes and prize limits the same.
By the time the new legislation came into force, October 2007, there were more than 30,000 FOBTs rolled out across the country in Britain’s 8,800 betting shops, making an average gross gaming yield of £33,420 (US$41,998) each. As the financial crisis of 2007-2008 hit the high street, they would make betting shops one of the few growth stories, with the number of shops increasing—by 2012, FOBTs would be the most profitable part of retail bookmaking, taking in more than over-the-counter bets.
High Street Hurdles
As with all successful gambling products to have been introduced into Britain throughout the last 150 years, with success comes notoriety, and with notoriety comes condemnation.
At first, it was the trade association representing the slot arcades, arguing that FOBTs in betting shops were stealing their customers. Then came the Labor Party politicians complaining about the number of betting shops “clustering” the high street due to the demand for the machines. Then came key casino industry members attacking FOBTs for purely ideological reasons, emphasizing the pan industry distaste for the product, and finally came the post-truth pre-Trumpian form of anti-gambling campaign group, the ironically named Campaign for Fairer Gambling (CFFG).
Set up by a highly litigious casino games salesman, Derek Webb, who had been rebuffed by the bookmakers in favor of FOBTs, Webb would pour millions into his campaign. According to Philip Davies, MP (and thus under parliamentary privilege), Webb “has spent millions trying to get these machines out of betting shops for no other reason than vindictiveness; that is the long and short of it. He set up the Campaign for Fairer Gambling on the back of this issue.”
What made the CFFG different from previous anti-gambling groups was not its willingness to use false statistics, twist academic research and collaborate with militant academics; they had all done that previously. It was the full-time employment of staff, the use of a professional marketing agency and the willingness to contribute tens of thousands of pounds to various politicians to garner support. Their argument was FOBTs caused problem gambling and their maximum stake should be reduced to £2, which would kill the product dead.
By 2014, the CFFG efforts garnered the support of the opposition political parties, many of the main newspapers, and were becoming a serious pain for the government, which was trying to retain an evidence-based approach to policymaking—as there was not, and still isn’t, any evidence that FOBTs cause problem gambling. There is, however, a lot of anecdotal evidence that problem gamblers like to use FOBTs, and the emotive stories of their self-destructive escapades were much used in the campaign. Many were wheeled out to meet MPs and tell their tales of woe.
Bookmakers’ Malaise
A major reason why the anti-gambling brigade garnered such political traction was the ineptitude of the bookmakers’ political response. At first they did very little, thus allowing zombie memes to arise. They’re called zombie memes because they are very difficult to kill. People would be repeating the accusation that you could lose £15,000 per hour in a machine for years, however practically and statistically impossible that it was. This meant that when the bookmakers finally started to respond, an anti-FOBT folklore was well-established already.
Hard as it was to defend against the CFFG attacks, it was not helped by the fact they did it in the most tin-eared way imaginable. Their argument was that if there were to be any restriction on FOBTs this would mean the closure of betting shops and the consequential loss of jobs and tax revenues. All undeniably true, but not a good argument against an opponent that is suggesting that your products cause suicide, harm and misery. What this approach succeeded in doing was losing what support the bookmaking industry had in Parliament or the press.
The knock-on effect of this was that when the government could no longer resist the pressure from the anti-FOBT campaign any longer, and had to decide what level to reduce the FOBT stake limit to, they were forced to ignore the recommendations of their own regulator, the statutory policy advisor on gambling, who had specifically stated that any limit apart from £2 was recommended. They went with £2 as they knew they would lose the vote in Parliament if they went for anything higher, such was the parliamentary disdain for FOBTs.
Then, as if to rub it in, the proposed enforcement date of October 2019 was brought forward to April 2019 due in part to the resignation of the gambling minister, Tracy Crouch, MP, whose resignation speech included the completely spurious assertion that FOBTs were the cause of two suicides per week. Complete victory to the anti-FOBT brigade was based on little more than anecdotes and lies. The industry could and should have done better.
Online Gaming Next?
What is increasingly evident is that the FOBT story has seen ministers, parliamentarians, civil servants, regulators and members of the industry ecosystem all captured by the anti-gambling lobby. The anti-gambling sentiment wasn’t just about FOBTs; most of these stakeholders didn’t even know what they were. They just saw a bad smell about gambling and have taken an increasingly anti-gambling stance ever since, with online gambling the next sector in the firing line.
The last year has seen fake news about children gambling emanating from the Gambling Commission, and a national newspaper arguing that because it was technically possible for underaged players to play online slots in free play mode (and therefore not gambling) this was creating a generation of problem gamblers. The year also saw a member of Parliament suggesting that just because a football jersey had a gambling brand name emblazoned on it, the same thing would happen—an unprompted political campaign was implemented against gambling advertising in football by a supposedly neutral charity called GambleAware—the Advertising Standards Agency suggesting that it is concerned about the normalization of gambling.
To top it all, the killer blow has already been put on the roadmap by the regulator in the form of affordability —the concept that somebody will choose an arbitrary limit for players to deposit, and it will be up to the players to prove they can afford to gamble more. All of which suggests that the British gambling industry is politically approaching the fork in the road that determines whether gambling becomes like alcohol—some restrictions but tolerated—or like tobacco, massive restrictions and not tolerated. And unless drastic action is taken quickly, it’s the tobacco route.
What can the industry do? First, we need to gain permission to speak. What this means is that currently, the gambling industry is considered “rapacious capitalists” with no interests in anything but profit, and anything we do will be just be ignored.
Take the recent self-imposed ban on TV advertising during football matches. This was responded to with just a “they should do that anyway.” Currently, the U.K. gambling industry could donate £1 billion to problem gambling and it would be met with just a shrug. The industry needs to gain permission to speak by proving to Parliament, Whitehall and Fleet Street (Parliament, government and the press) that we are good citizens worthy of their attention.
Of course, it comes down to money. It always does. But unlike donations to charities, which just exist as statements on company accounts, the industry should invest in tangible stuff that provides ongoing evidence of the industry’s good intentions—£5 million setting up a residential treatment center for problem gamblers, and £5 million setting up a fund to provide funding for grassroots sport. These will provide the stories that will regain the industry’s permission to speak.
Once that is achieved, the industry has to have something to say more coherent than it provides jobs and taxes. It needs to create a narrative of how gambling is part of the country’s cultural recreational tradition and how it is happily indulged in by the 99 percent majority.
To do this needs foresight and an understanding that unless drastic action is taken now, the road to tobacco becomes very short. Unfortunately, there are few gambling CEOs out there who seem to understand this, so my predictions for the future of the U.K. industry are not good.
