Fixed Odds Betting Terminals (FOBTs)

FOBTs are probably one of the most controversial forms of gambling within the industry at the minute. They have come under huge pressure from many anti-gambling groups to decrease the number of terminals and also decrease the amount of money that can be wagered.

Whilst the concept of the games that are on the machines have been around casinos for hundreds of years, it’s the speed in which you can play games and ultimately lose money that many people are against.

What are FOBTs?

Before we move any further forward, it’s important to understand what a FOBT actually is.

Essentially, it’s an online casino in a box. The machine will include dozens of different games to choose from, including the likes of roulette, blackjack and slots. You place your bets just as you would at a casino and with it the RNG (Random Number Generator) spits out the result of that wager.

The RNG is the key attribute in these machines. They are essentially programs that give an almost random result for each spin that you make. We state the word almost, as it’s really just an algorithm that is used, which in theory could be worked out. The algorithm takes a prime number and then performs a number of mathematical equations on this number, including additions, subtractions, divisions and multiplications. Unless you know the prime number used and the mathematical formula used for each algorithm and games machine, the program would be impossible to crack.

The FOBT works in exactly the same way as any online casino would and often you will find that the game developers for these machines will also produce online casino games as well.

When did they first appear?

The machines were first introduced to the industry in 1999, with a pretty limited range of games and machines to choose from. But, it wasn’t until 2001 that the industry relaxed laws on which games could be included, before then allowing popular casino games including roulette and blackjack on the machines. This had a huge increase in their popularity and it was at this point where many betting shops started to really increase the number of machines in each shop. By April 2005, it was estimated that over 20,000 machines were in UK betting shops alone.

The 2005 Gambling Act had a massive effect on the machines and how they were used within betting shops. The status of the machines were now classed as B2 Gaming Machines, which ultimately allowed betting shops to increase their numbers even further. It is estimated that by 2007 the number had grown to over 30,000 terminals across the UK.

In 2018 a report carried out by the Gambling Commission indicated that there were now 32,956 B2 Gaming Machines in operation in Great Britain. Today bookmakers are limited to just 4 terminals per store and given that there are also 8,406 betting shops, it appears that the vast majority are taking full advantage of their allocated quota of FOBTs.

Below is a table of statistics collated from a report by the Gambling Commission in December 2018.

2017/2018 FOBT Statistics

Early legal status

When FOBTs first sprung onto the scene in 1999, they were not really classed as gaming machines, which means they weren’t officially regulated. The number in which bookies were able to add to a store and the amount of people who were able to wager were limitless.

It wasn’t until 2003 when the government stepped in expressing their concerns over the terminals that these laws were set to change. They argued that the stakes on offer and the speed of games were a huge reason behind that of problem gambling within society and as a result, got the likes of the ABB (Association of British Bookmakers) to make a formal inquiry about the effect that they had on potential problem gamblers.

The Gaming Board, who were brought in by the government to deal with the case, argued that these machines were identical to gambling machines and as such, should be treated as gambling machines. The ABB stated that as they were in a licensed betting office, they could set them up as they please.

A compromise was made in 2003, which included:

• A maximum of 4 terminals per betting shop
• Max prize of £500 and max stake of £100
• Only roulette allowed
• Restrictions on speed of play

The Gaming Act of 2005 changed the status of the machines from games machines to B2 machines by the then Secretary of State for Culture, Media and Sport, Tessa Jowell. Whilst this didn’t really change the agreed implementations above, it did make them compliable by law, which was seen as a win for the Gaming Board.

Continued controversy

The FOBT machines have never been particularly popular with anti-gambling lobbyists and this came to a head in 2013 when the Department for Culture Media & Sport (DCMS) published an extensive review of how these machines were effecting peoples lives and if anything, encouraging people with gambling problems to gamble more and at a faster rate.

They enlisted the help of the likes of the Gambling Commission, who themselves created an independent report into the situation, outlining the following issues for these terminals:

• Machines were an increased risk to people with gambling problems
• The way the games were set out not only targeted those with gambling issues, but could also harm those who were not diagnosed with gambling issues, due to the speed and the size of games.
• The potential of massive loss and wins, were “well within the bounds of probability”
• Problem gamblers target these games to get quick fixes

However, the report also stated that the often banished number of the machines earning up to £18,000 per hour was “astronomically impossible” given the limits in stake and also time between each possible game.

Whilst it was the Gambling Commission who had reported these findings, other authorities within the industry such as Responsible Gambling Strategy Board and even the government echoed much of what the report had found.

Campaigns

As you can imagine, there are a number of people who are gunning for government to ban these machines all together.

The majority of proposals has been to get the maximum stake for these machines reduced and to also decrease the speed in which the games are run, which has been fronted by the Campaign for Fairer Gambling.

There had also been calls for the number of terminals to be reduced per betting shop once again, from 4 to just a single machine, with these machines having a limited number of games.

But, the ABB fought back in defence of the machines. Their main argument is that reducing the stake on the machines would destroy the industry, cutting 20,000 jobs and costing millions in tax for the government. They also state that there is still no firm evidence that shows reducing the cost stake in these games will help tackle problem gambling.

Some key facts that the ABB put forward included:

• The average amount spent per customer was £11 per hour on a B2 machine
• 74% of players play once a month or less
• Percentage of problem gamblers playing these machines actually reduced by 20-25% from 2007 to 2010.

Despite the best efforts of the ABB, in 2018 the government announced that the maximum stakes on FOBTs will be slashed from £100 to as little as £2. With plans to also increase tax for online casinos by 5% to make up for the tax payment shortfall they would have  otherwise received from retail shops.

Some high profile discussions took place as to when the changes would be implemented but in 2018 the government announced that changes will come into action as of April 2019, which will undoubtedly change the landscape of the gambling & gaming industry forever.

The growth of the bookmaker

There is little doubt that the high street bookmaker is a dying industry. There are half as many betting shops on our high streets today as there was 20 years ago, mainly down to the rapid progression of online and mobile betting.

The fact of the matter is that the 8,406 shops that are left are heavily reliant on these B2 Gaming machines. It’s estimated that they equate to over 50% of each shops’ margin year on year, which is a staggering amount given that there are only 4 machines per shop.

What we have found is that betting shops are so keen to increase their exposure of these games is that they are willing to open other shops within a few hundred meters of each other. You can literally see a Coral bookmaker for example have two shops on the same street. Why? Because instead of 4 FOBTs in that area, they can increase this number to 8 with 2 shops, massively increasing their margins.

A BBC news story that broke in 2013 highlighted a street in Newham, East London that had a staggering 18 betting shops on it. It’s averaged that each shop would take around £200,000 per year from the machines alone, surpassing that of over the counter bets that are taken.

The future of FOBTs

It’s unlikely that FOBTs are going anywhere anytime soon. Protests and controversies have surrounded these machines for almost 20 years and despite the growing pressures from areas of both the media and public, a total ban of the terminals from high street bookmakers is still unlikely.

The top and bottom is that the machines bring in millions of pounds as tax for the government. If no one was kicking up a fuss about them then the government certainly wouldn’t be getting involved given how lucrative they are for all involved.

But, they undoubtedly have a tainted reputation and something that does need addressing in the coming years. Eventually pressure from anti-gambling groups and the likes of the campaign for Fairer Gambling are going to get their voices heard. There are already a plethora of articles surrounding the issue from mainstream media, which again, adds pressure for the government to act.

In 2018 the government confirmed that the growing pressures from both the public and media had indeed become too much and as previously mentioned, stated that the maximum stake on FOBTs will in fact be reduced from the current £100 limit to just £2 in an attempt to combat the issue of problem gambling.

Once the changes swing into action in April 2019 it’s likely that they will change the landscape of the gambling industry as we know it today. Speculation continues to grow on the amount of high street bookmakers that may be forced to close down, whilst there is also question marks on how lucrative FOBTs will remain following the maximum stake reduction and whether or not the terminals will incur a total ban from high street shops at some point or if they ultimately phase out further down the line still remains to be seen.