In 2018 the government reduced the maximum stake limit on all Fixed Odds Betting Terminals (FOBTs) from £100 per spin to just £2 in an attempt to decrease problem gambling.
It was seen that these machines were about as destructive as you can get in the industry and allowed people of all ages and backgrounds to wager obscene sums of money in a very short period of time. The limit has been designed to prevent people who may have a problem from being able to do too much damage.
But, whilst the reduction will help people from wagering large sums of money on FOBTs, the reality is that the majority of bookmakers who still operate on the high street are going to see a huge hit in the amount of money that they then make. After all, FOBTs were seen as the major reason why so many bookmakers still had high street betting shops, so these limitations could be catastrophic for the high street as a whole.
The reality is that each bookmaker have had slightly different takes on it. As we write this article, we are almost a year into the new regulation, so we are going to have a look at what different companies and even industry experts are saying on the new regulations and how they might affect the industry moving forward.
Horse Racing Levy Hit Hard
The first port of call comes from a sector in the betting industry that likely wouldn’t have paid an awful lot of attention initially to the limitations of FOBTs. But horse racing is a sport that has seen an immediate side effect of the new ruling.
Horse racing has a levy that is attached to the sport. This levy makes sure that bookmakers are able to invest back into the sport that they take so much money from. The levy helps pay for things like prize money, training, facilities, retired racehorses and lots more.
The levy that is paid is 10% of any gains that come directly from horse racing for sums over £500,000. All UK bookmakers have to pay it should they meet the threshold and, as a result, it coughs up tens of millions each year.
In 2017, new regulations came in that said the amount need to be increased to 10%. The following year it was reported that £96 million were to be paid into the levy. However, the following year (2018-19) this sum had reduced by a massive £17 million, with just £79 million being invested.
This is because the bookmakers are citing a huge downturn in the money they have made with the reduction in FOBTs being a big part of that for those that it relates to. Horse racing is still widely backed within betting shops and most have live races throughout the day on the screens within the shops. But, as fewer people enter the shops because they don’t want to use FOBTs anymore, fewer people are betting on horse racing.
This has been one of just a number of ways that the industry is being hit by the limitations that now come with FOBTs and how they have such a massive knock on effect with other sports and betting markets, as well.
Future Grim for Independent Bookies
One of the main areas that many people thought were going to have issues with the new regulations were the independent bookies that are on offer. These are smaller brands, often family run companies with fewer than 10 shops based across the UK, although usually segregated within one area.
In an interview with SBC, Paul Graham from Mark Jarvis Racing stated that “the impact on independent bookies has been hard” and cited that they are “still unsure on the full effect of the new regulations moving forward”.
The fact is that these guys are going to suffer the most. The bigger companies like your William Hills and Betfred’s whilst they will have to adjust, will be able to offset any costs with their online presence and if they were to shut down their high street shops tomorrow, would still be massively successful companies.
The independent companies don’t have the online presence, meaning that if the footfall ceases into their stores, this would be the end of their business likely. The other problem is that the businesses assets are the shops themselves, and as a result, very few bookies if any would likely want to take any new stores on until they can find some sort of workaround to replace the income of FOBTs.
Betfred Cite £40 Million in Losses to New FOBT Regulations
One of the biggest stories in terms of actually numbers at least, is that of Betfred. In June 2019, they stated that their losses for the year had hit £40 million, with the limitations to FOBTs being a huge part of that downturn.
Fred Done, the owner of Betfred, has said that the company could close as many as 500 of their current 1,650 strong line of betting shops over the coming months to limit losses. The losses were mainly written down to the decrease in value to the assets that the company own as a result of less money being taken within the betting shops.
Whilst this story is very similar to that of the Mark Jarvis Racing story above, the difference is that their EBITA (earnings before interest, taxations, depreciation and amortisation) rose some 43.3% over the same period. They also increased turnover during this time by 14.7% highlighting how the bigger companies were able to cope much better with the downturn than the independents.
Workarounds Quickly Shut Down
Almost before the games had been reprogrammed to limit stakes on the FOBT, bookmakers were looking at games that could be used in a similar manner but weren’t part of the terms of the agreement. Both Paddy Power and Betfred launched a Roulette-style game that allowed punters to still bet more than the £2 cap that had come into place.
The Betfred version included two cyclists who rode around a track that had numbers from 1 to 36, just like a Roulette wheel. Wherever the cyclist stopped was the point that you won after betting before the “race” started. Customers were able to bet up to £500 on these games. Whilst Paddy Power’s game was a £100 max bet, it still included the 1-36 numbers that you found on a Roulette wheel, which were very similar in both form and layout for that.
The pair came under huge criticism from the press and from problem gambling platforms as these were basically just games that were seen as “workarounds” for high stakes gambling. The Gambling Commission agreed and swiftly moved to inform both parties that they needed to be removed as they feel under the same category as FOBTs.
What’s interesting about this is how quickly the companies were to introduce these new games and how desperate they are to keep them going. The fact they knew they were workarounds and probably knew that they were going to have to be removed highlighted sheer desperation in their approach to the new regulations for FOBTs.
Light at the End of the Tunnel?
The future of the high street is uncertain right now. The early signs are not good though, with plenty of stores already being closed and this number likely to increase. The independent bookies will be hit the hardest from this, but it remains to be seen if the bigger players in the industry take them on or not. That being said, there is a ray of light that is shining pretty bright after all this and it comes in the form of BoyleSports.
BoyleSports are Ireland’s biggest independent bookmakers. They have been around since 1982 and they offer up a wide range of betting shops throughout Ireland. Their online presence is good and whilst they aren’t global starts like some other brands, they are certainly deemed as a “bigger” bookmaker industry for sure.
What’s unique about Boylesports is that they only have betting shops in Ireland and what is super-unique is that they have precisely zero FOBTs in their betting shops. Never have, never will. The exciting news for the UK is that they have just bought their first batch of 13 stores and have plans to increase this number to 100 stores within 12 months. This is massive growth, even for a larger bookmaker.
The key thing to take from this is that Boylesports know how to make money without the use of FOBTs. It’s going to be a model that many bookies will be looking very closely at and likely going to be copying how they work and essentially make money.
This is all probably the best news that the high street betting industry has had for some time now. It shows that a bookmaker is willing to take on the doom and gloom that surrounds the industry and also move forward into an exciting new expansion as a result. At the minute, it’s about as good as it gets in regards to moving forward without FOBTs, so it should be interesting to see where they end up and if or how others follow.